- The Washington Times - Thursday, December 24, 2009

ANALYSIS/OPINION:

President Obama still insists we can “spend our way out of this recession” to create jobs, and Democrats are pushing another spending stimulus in a vain attempt to do just that.

What is being called “son of Stimulus” on Capitol Hill is essentially the same snake oil remedies in the nearly $800 billion Stimulus One: billions more for highway, bridge and other infrastructure projects; tax incentives to persuade people to make their homes more energy efficient; and limited tax breaks for small businesses that still keep the tax rates where they are as these businesses await the bigger Obama tax increases to come.

With unemployment stuck at 10 percent, 16 percent if you count millions of jobless Americans who have given up looking for work, it is now clear Stimulus One isn’t working. Remember, the definition of “crazy” is doing the same thing over and over again and expecting a very different result.

Mr. Obama said earlier this year that his spending stimulus would bring the jobless rate down to 7.8 percent, but unemployment continued to rise, and nearly 4 million more Americans are looking for work. Clearly, ever more borrowing and spending aren’t going to work, either.

“I think it’s a really bad idea if they do more of the same. The fact is the administration is crowing about having created say 640,000 jobs, but if you look at how much money they’ve spent, that’s $1.2 million per job. If they had just taken the stimulus money and hired people at the average U.S. wage, they would have created 21 million jobs. And so, where is the multiplier? It’s gone,” economist Kevin A. Hassett told a House Republican jobs conference earlier this month.

A number of reports lately have said we won’t see a significant improvement in the jobs picture anytime soon. The American Institute for Economic Research, a leading economic forecasting firm, said the economy remains weak and “the recovery may be unsustainable.”

“We have witnessed and chronicled many recessions. And in our studied opinion the economy today is not on the mend - it has instead registered what the medical community calls a ‘false positive,’ ” said AIER’s latest report.

Many of the nation’s top economic forecasters are saying we are in the very early stages of a recovery but it will be weak for quite some time to come.

“We have a recovery, but it is going to be a slow one,” David Wyss, chief economist at Standard & Poor’s in New York, told the Associated Press.

Federal Reserve Chairman Ben S. Bernanke sees modest growth next year and continued high unemployment. The Fed’s latest jobs forecast said unemployment was expected to hover between 9.3 percent and 9.7 percent in fourth quarter of 2010. Economists at Moody’s Economy and Wells Fargo think the jobless rate will remain above 10 percent for the rest of next year.

The jobless rate fell last month from 10.2 percent, not because of Mr. Obama’s stimulus program but because 291,000 more adults just stopped looking for work and thus were not counted in the monthly figure.

“Though job losses were trimmed, the footprint of the $789 billion stimulus package was not to be found. Construction, despite an uptick in housing starts, shed 27,000 jobs, and governments added a paltry 7,000 new workers,” said economist Peter Morici at the University of Maryland School of Business.

“American workers face a jobless recovery and more stimulus spending won’t fix what’s broke,” Mr. Morici said in a recent analysis. In the House last week, Democrats were voting for more safety-net spending programs as their answer to the nation’s brutal unemployment numbers - when this economy cries out for policies that will unlock private capital investment, encourage entrepreneurial risk-taking and boost the bottom-line business profits through lower taxes.

But this Democratic-controlled Congress stubbornly opposes tax cuts that would spur investment, economic growth and new jobs, as it did in the 1960s, the 1980s, the late 1990s and at the start of this decade.

Instead, Mr. Obama is hurling antitrust lawsuits at corporations like Intel and preparing to raise taxes on businesses across the board. He would be better advised to follow the examples of some of our allies who are pushing pro-growth capital investment policies and moving away from stimulus spending.

“In Germany, Chancellor Angela Merkel’s now right-of-center coalition is pushing tax reduction proposals,” the International Economy magazine reports. France’s Nicolas Sarkozy “continues to reject the more liberal policies of his predecessor,” and Canada is preparing a new campaign to promote its more “capital-friendly” policies in global markets.

Capital formation and wealth creation are not to be found in Mr. Obama’s economic vocabulary. He still sees government spending as the essential driver of the economy, because if it works he gets the credit. But it’s not working, and $200 billion more in spending - which Democrats in Congress are now contemplating - will not change that.

That’s why we are likely in for a long, slow, anemic recovery and many months, if not years, of persistently high unemployment.

Donald Lambro is chief political correspondent of The Washington Times.

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