Nearly five years into the rollout of President Obama’s economy, America’s economic portal still isn’t functional. Factory orders have gone down. The housing market is glitchy. The employment numbers resemble either a spinning beach ball or an hourglass.
The Federal Reserve’s Beige Book quantifies the mood of business leaders, economists, investors and others about the state of the economy, and it’s grim. Manufacturing limped along with a bare 0.1 percent growth in September, down from the unimpressive 0.5 percent of the previous month. The housing industry sputters, even though the Fed pumps $85 billion a month into the market. The monetary stimulus artificially lowers interest rates to the point that borrowing is effectively free, and even this isn’t enough to mask the harsh reality that demand for housing isn’t there. Americans just aren’t making enough to afford to buy a house.
Most of the jobs created this year are part-time jobs. This is a result in no small measure of Obamacare’s imposition of mandates and penalties on employers who offer full-time jobs to more than 50 employees. A businessman won’t hire a new worker if that puts him over this artificial restraint.
With fewer jobs and lower pay becoming the norm, taxpayers find it harder to afford a monthly mortgage bill and save for a down payment. The U.S. economy is adding new households at the rate of 700,000 annually, half of what it was during the peak of the housing boom.
This adds up to the slowest and least perceptible economic recovery since World War II.
Predictably, Democrats blame the bad economic performance on the government shutdown and spending cuts, as though failure to spend money we don’t have is the source of what Jimmy Carter famously called “malaise.” Federal employees, as Harvard economist Jeffrey Miron points out, were paid in full for their time off during the shutdown. So, at most, the shutdown caused a one-week shift in timing of their spending. There is considerable evidence that government agencies were able to absorb the very modest cuts from sequestration. A $42 billion slowdown in federal expenditures will put hardly a dent in a $16.6 trillion economy.
Washington’s mode of governing is contributing to the private-sector crash by creating what Robert Higgs of the Independent Institute calls “regime uncertainty.” The private sector has had to deal with costly regulations with uncertain benefits and opaque implementation. This creates a guessing game, with employers wondering what the government intends to do next. The Democratic Senate and the president have blocked enactment of a budget over the past five years, trying to avoid being pinned down by the “line by line” budget negotiations that would give congressional Republicans the ability to defeat unpopular spending programs.
Instead, Washington has been running on “all or nothing” omnibus spending bills and continuing resolutions to postpone difficult choices about the underlying spending problem. These bills are passed at the last possible minute, creating a nightmare for businesses that rely on investment and long-term planning to thrive. When entrepreneurs can’t plan, they hedge, and the result is stagnation.
Both Capitol Hill and the White House have to address the long-term issue of restoring fiscal sanity by reducing the burden of government. If not, there’s no realistic hope of returning to growth and prosperity.