The Obama economy is weaker than previously forecast and darker days lie ahead. If you think the feeble economy under this administration is bad, wait until next year when the Congressional Budget Office says it could fall into another deep recession if there’s no year-end deal to forestall nearly half-a-trillion dollars in income tax hikes and spending cuts.
Among the revised forecasts in CBO’s report, released Wednesday, the economy in the first half of 2013 would see a severe 2.9 percent contraction in the gross domestic product, “similar in magnitude to the recession of the early 1990s.” By the second half of next year, CBO thinks the economy would be limping at 1.9 percent growth, weaker than it previously had forecast. These are much gloomier forecasts than CBO reported in January, but the forecasting arm of Congress now says it thinks the nation’s underlying economy is weaker than they had earlier estimated. No kidding.
“The magnitude of the slowdown we’re discussing next year is significant,” says CBO director Douglas Elmendorf, if the administration and Congress are unable to prevent the government from tumbling over the “fiscal cliff” that looms menacingly at the end of this year. The president’s remedial inability to foster strong growth is a significant factor in the soaring budget deficit that CBO says will be more than $1 trillion for the fourth year in a row. “At 7.3 percent of gross domestic product, this year’s deficit will be three-quarters as large as the deficit in 2009 when measured relative to the size of the economy,” CBO says. That will further feed a grotesquely obese federal debt that will be 73 percent of our entire gross domestic product by the end of this fiscal year.
President Obama’s job-starved economy has been in steep decline since January when its growth rate tumbled to barely 2.0 percent in the first quarter, then nose dived to a barely breathing 1.5 percent in the second quarter. Unemployment has been more than 8 percent for 43 straight months, and it has begun climbing once again, rising to 8.3 percent in July. That’s the national average — the real jobless rate is around 15 percent if you add in those underemployed and the discouraged workers who have just given up looking for work and aren’t counted by the Bureau of Labor Statistics.
Last week, the bureau released the state-by-state jobless rates for July, which showed that unemployment has risen in 44 of them — a shocking statistic that the nightly news shows all but ignored. If you are looking for things to get better under Mr. Obama on the job front, forget it. “The unemployment rate will stay above 8 percent for the rest of the year,” CBO says.
Have you noticed that when the network news shows report on the economy and jobs, it never mentions Mr. Obama in its reports? It is as if his economic policies have nothing to do with unemployment or the economy during his administration. Those policies have everything to do with where we are now in the economic life of our country. This isn’t the “new normal” the administration’s supporters want us to believe. There’s nothing remotely normal about it.
In the fourth year of Ronald Reagan’s presidency, after one of the severest recessions since the Great Depression, the economic growth rate was a stunning 8.5 percent in the first quarter and 7.9 percent in the second quarter. Compare those growth rates to Mr. Obama’s pathetic record of 2.0 and 1.5 during the same period in his fourth year.
Mr. Obama’s policies are anti-growth, anti-capital investment, anti-business and anti-wealth creation. This is an economy that has uncertainty written all over it. Businesses, investors, entrepreneurs and the financial sector can’t plan for the future, engage in risk-taking and make strategic, long-range decisions because they don’t know what is coming at them in future years in terms of higher taxes, regulations and, yes, the possibility of a recession. His battle against extending the 2001-03 Bush tax cuts is a critical obstacle to future growth. Mr. Obama and the news media want us to believe the Republicans in Congress are to blame for this policy fight and the economy’s weakening performance. Mr. Obama wants to raise the two top income tax rates from 28 percent to 36 percent and from 35 percent to nearly 40 percent, and allow the rest of Mr. Bush’s middle- to lower-tax rates to remain in place. Those higher rates would hit a large number of small but struggling businesses (whose owners pay taxes as individual filers) at the worst possible time in our economy. They are barely holding on under present tax rates. Higher rates will only worsen their plight and force them to lay off workers or go out of business.
Those are not the only taxes Mr. Obama would raise right now in this down economy. He wants to raise the capital gains tax on investors (and retirees who live off their stock dividends and capital gains) at a time when the economy is underinvested and starved for start-up and expansion capital. Republicans argue that with a crippled economy limping along as it is, it is insane to be raising taxes on any part of the business community. Republicans aren’t the only ones saying this. Democrats are telling Mr. Obama the same thing. Former President Bill Clinton told CNBC in June that we should “avoid doing anything that would contract the economy now.” Asked if this means continuing all of the Bush tax cuts, even for the top-income brackets, Mr. Clinton said, “They will presumably have to put off everything until early next year.”
This is what the dividing line in this policy battle is all about. There is no school of economic thought that says you raise taxes in a high unemployment, weak economy teetering on the edge of recession. That’s what Mr. Obama and the Democrats want to do against the advice of Fed Chairman Ben S. Bernanke, GOP leaders, most economists and Mr. Clinton.
Think about this before you cast your vote in November.
Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.