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Michael Barone: Job-Killing Policies Could Doom Democrat Hopes
“The level of unemployment is unacceptably high and will, by all forecasts, remain unacceptably high for a number of years.”
Who do you suppose said that? A Republican political operative? A Fox News political analyst? One of those several hundred thousand Tea Partiers who assembled in Washington on Sept. 12? No, it was Lawrence Summers, the director of President Barack Obama’s National Economic Council and, by common consent, one of the world’s leading economists.
Summers made this gloomy forecast in the course of arguing that our economy is headed to “sustained recovery.” While it sounds like self-protective political rhetoric, it is also in line with the thinking of Democratic economists who bemoaned a “jobless recovery” during the first Bush term.
They argued then that a variety of factors — big increases in the incomes of high earners, the crowding out of wage increases by the fast-rising costs of health insurance — prevented the rapid job growth that followed previous recessions. There was something to these arguments.
But it’s also true that job creation accelerated in 2004 and kept going for another three years. Perhaps, although Democrats wouldn’t like to admit it, the Bush economic policies had something to do with that.
And perhaps the rather different policies of the Obama administration and the Democratic Congress may help Summers’ gloomy predictions come true.
Tax policy is one example. The Bush tax cuts are scheduled to expire next year, and the Democratic Congress surely will allow income tax rates on high earners to go up to 39.6 percent again, or even more if it enacts the administration’s proposed policy of limiting high-earners’ charitable deductions.
These increases will produce revenue that the government needs to reduce the enormous budget deficit, though surely not as much revenue as static economic models indicate. But they also will depress economic growth to some nontrivial extent, and thereby depress job creation.
Then there’s trade protectionism. A week ago Friday, late at night, the Obama administration slapped import tariffs on Chinese tires. The Chinese retaliated by imposing tariffs on auto parts and chickens — take that, United Auto Workers and Tyson Foods! Upshot: American consumers will pay more for tires, and auto-parts and chicken-processing jobs will be at risk.
More of that may be in store. “The smell of trade war is suddenly in the air,” The Wall Street Journal wrote, and Global Trade Alert reports that 130 protectionist measures are ready to be implemented by countries around the world. Are we seeing a repeat of the job-destroying protectionism that followed the Smoot-Hawley tariff of 1930? It’s starting to look like it.
Then there are the additional burdens on the private-sector economy that would be piled on by the congressional Democrats’ health-care bills and the cap-and-trade legislation passed by the House in June. In the job boom of the middle years of this decade, these policies looked like something we might be able to afford. They look less like that now.
Meanwhile, it’s plain that consumers aren’t going to spend money anytime soon at the rates they did when their house prices were bubbling up and that the $787 billion stimulus package passed last February was not — how to put this? — optimally designed for job creation.
The Obama administration, along with the Federal Reserve, deserves credit for stabilizing financial markets. But administration policies have put us on the path to increasing the national debt from 40 percent to about 80 percent of gross domestic product — a level we haven’t seen since the years just after World War II. Interest rates are low now, but when they rise it’s going to take an uncomfortably large chunk of federal revenues just to service this debt.
“After the health-care debate ends, and whatever its outcome may be,” wrote William Galston, deputy domestic adviser in the Clinton White House, “the administration and congressional Democrats would be well advised to turn their attention back to the economy and ask themselves whether there is anything more to be done to jump-start job creation.”
Good advice, but why wait? The Office of Management and Budget now projects unemployment at 9.7 percent, the same as last month, in the fourth quarter of 2010, when the off-year elections take place. Maybe the administration and congressional Democrats should consider job-creating rather than job-destroying policies right now.
— Michael Barone is a senior writer for U.S. News & World Report and principal coauthor of The Almanac of American Politics. Click here to contact him.
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» on 09.17.09 @ 07:17 AM
They should let the tax cuts on the richest Americans expire. Trickle down economics has never worked. It did not work during the Bush Administration if you look at the anemic job growth and the flat lining of wages for 95% of the population during that time. Towards the end of the Bush Administration we experienced a severe recession which nearly became a depression. Even with the return to 39.7% as the top bracket, it will still be historically low, much lower than during the Eisenhower and Reagan days.
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» on 09.17.09 @ 07:55 AM
Local, for God’s sake will you stop being the quintessential MoveOn sock puppet! The article is on job killing policies and your response is take more money from the wealthy to give to the government. Geeze what a dope!
I agree with Michael that some policies are job killers, but the example he gives on trade policy is a bad one. Our trade policy is the job killer. Free trade is a nice concept if and only if all markets can compete fairly, they can’t. Lunatics on the left hammer our local manufacturing with excessive unionism and environmentalism, some of the toughest on the planet, but require no reciprocation on the part of importers. The result is we make everything somewhere else. Our trade policies and unfair regulatory policies made Japan rich, then Korea and now China. Problem is when you don’t make your own stuff you don’t make wealth. America has been on a borrowing binge to make up the difference. Well that’s over now, ponzi scheme is revealed and now we are going to have to earn our way from here on.
Of course, with folks like Local, still suffering the dementia of liberalism, you have this notion that you can just steal someone else’s wealth rather than make your own.
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» on 09.17.09 @ 10:11 AM
AN50, once again the name calling being resorted to. Not surprising when you only put forth theories that have been shown to be bogus. Unfortunately, your entire discussion is off as usual. It is not the unions that drove manufactoring overseas. It was the desire of multi-national corporations to not only find the absolute cheapest labor but to operate in countries that have no environmental, work standards, health or other rules. This and their ability to hide taxable income through shell companies in places like the Cayman Islands led to not only jobs leaving the U.S. but tax revenue. If you add the burden of employer sponsered healthcare in the U.S. fueling the competitive disadvantage you create the perfect storm.
Trickle down has never worked. Name one situation. I will remind you that even Reagan and Eisenhower had much higher tax rates on the rich. Also, today eventhough the U.S. has relatively high tax rates on corporations their pay rate is far below most countries due to the numerous tax loopholes they utilize.
Well An50 used asked for it so stop being the quintessential FoxNoise puppet. During several decades we operated without a budget deficit, Eisenhower and Clinton. During those periods of time the job growth and the overall economy was far healthier than today eventhough the tax rates on the rich were much higher? Geez Mr. Wizard explain? The fact is the well off do not need a tax break. The middle class does because for the first time in decades their standard of living dropped under Bush, your hero.
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» on 09.17.09 @ 05:00 PM
“But it’s also true that job creation accelerated in 2004 and kept going for another three years. Perhaps, although Democrats wouldn’t like to admit it, the Bush economic policies had something to do with that.”
The so called job boom was similar to the Reagan economic boom. The net job forecasts continued to show meager growth against job losses. The cooked books that started under the previous Bush president removed several factors from their reporting including those numbers of people who gave up looking for work.
The numbers also included jobs of private contractors and others involved in the two wars that are still going on. All this is paid for by the tax payers in the form of credit. President Clinton was no different in the application of the cooked numbers; his saving grace was the boom of employment caused by Bush “41” increasing taxes to save the country. Mr. Bush saw the reality of the situation and made the hard choices. Even President Reagan had to raise taxes at one point.
I’ll never understood the economic philosophers who never ran a business promoting the love of tax cuts for job growth. The reality is supply and demand determines the need to increase the input of new labor.
The same is true if the supply of labor is scarce, the value of labor goes up. If the labor pool is plentiful, the value of labor goes down. These are the realities of true capitalism.
When you give people with substantial disposable income more money, they stow it away in places where it does not help the economy. They will never throw it away on more labor unless that labor is subsidized by the government.
We can all see the practical value of tax cuts in our daily headlines. We are seeing the results of that fallacy today.
Dennis M. Francis
DiDArticles.com
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» on 09.17.09 @ 07:23 PM
Dennis, you are wrong about capital. The rich don’t stuff mattresses full of money. They invest it. Just like the insurance companies Local loves to hate, they invest their wealth right along with everyone else. You sound like most bitter liberals, so envious of others success they must find a way to tear it down.
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» on 09.17.09 @ 07:27 PM
By all means, let 50% of the population pay no tax at all while taxing the crap out of “the rich”. It is precisely this mentality that has led California to the brink of bankruptcy.
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» on 09.17.09 @ 09:25 PM
“But it’s also true that job creation accelerated in 2004 and kept going for another three years. Perhaps, although Democrats wouldn’t like to admit it, the Bush economic policies had something to do with that.”
The so called job boom was similar to the Reagan economic boom. The net job forecasts continued to show meager growth against job losses. The cooked books that started under the previous Bush president removed several factors from their reporting including those numbers of people who gave up looking for work.
The numbers also included jobs of private contractors and others involved in the two wars that are still going on. All this is paid for by the tax payers in the form of credit. President Clinton was no different in the application of the cooked numbers; his saving grace was the boom of employment caused by Bush “41” increasing taxes to save the country. Mr. Bush saw the reality of the situation and made the hard choices. Even President Reagan had to raise taxes at one point.
I’ll never understood the economic philosophers who never ran a business promoting the love of tax cuts for job growth. The reality is supply and demand determines the need to increase the input of new labor.
The same is true if the supply of labor is scarce, the value of labor goes up. If the labor pool is plentiful, the value of labor goes down. These are the realities of true capitalism.
When you give people with substantial disposable income more money, they stow it away in places where it does not help the economy. They will never throw it away on more labor unless that labor is subsidized by the government.
We can all see the practical value of tax cuts in our daily headlines. We are seeing the results of that fallacy today.
Dennis M. Francis
DiDArticles.com
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» on 09.17.09 @ 09:36 PM
If the rich were so helpful to the economy why are we in the shape we’re in after six years of tax cuts to the very wealthy? Where are the manufacturing jobs? What happened to the surplus?
Why have we experienced the continuing erosion of the middle class when the economic royalists had their chance to make the country great?
As a business man, I deal with reality. As a business owner I live with the world as it is not the fantasy of economic theory.
Give me the opportunity to get more customers and I’ll pay the damn taxes any day. It is the patriotic thing to do for my country.
Those who are scared of everything under the sun from the president to the terrorists need to grow a pair and start rebuilding our country. That is what we should be focusing on after eight years of stagnation and rising debt.
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» on 09.18.09 @ 08:09 AM
An50, I am a retired millionaire so much for your theory. I know it is hard to believe that some people actual rise above your simplton philosophy of I got mine and do the right thing. Many of the proposals I and others talk about would cause me to pay MORE taxes but it is the right thing to do in terms of our society. I know it is tough to think beyond yourself and your pocket book but you should try it.
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» on 09.18.09 @ 01:53 PM
Ideologues like Barone are amazing.
De-regulated, free market administration policy under Greenspan-Gramm-Cheney-
Paulson-Bush led directly to the largest GDP crash and job loss since the Great
Depression.
Yet those people were all pursuing fiscal, economic, and market policies Barone says he totally supports.
No matter what happens during Obama’s presidency, it would be hard to imagine a
poorer economic result for the country (or the Democrat party) than what we got from the Bush group, as they tried to cater to Barone’s “expert” recommendations.
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