About That Jobless Recovery...

First of all, the very idea of a recovery without new jobs is just stupid.  I mean, think about it - our economy is something like 70% based on consumption, which means people buying stuff.  If you don't have a job, how much buying are you doing?  Zippo, or as close to it as possible.  So, the key to our economy is jobs, and an unemployment rate fast approaching 10% isn't exactly a ringing endorsement for this supposed recovery.

But, a look at history shows us some other very interesting things:

Columnists and reporters need to fill daily news quotas. Thus, each ebb and flow of the stock market, the GDP, the data on housing starts, and so on receive massive discussion. Historians, however, care more about long-term results, and it's too early to discern any pattern for economic recovery in the Obama administration. Yes, housing prices are up slightly this month, and GDP is now up as well. But unemployment is still trending downward, and the uncertainties on taxes, health care, cap-and-trade, and sensitive foreign diplomacy all make short-term reports of limited value.

Many have compared the current economic crisis to the Great Depression, and it is useful to study FDR's statistics on recovery to understand the problem with relying on short-term data. Unemployment, for example, was 21.4 percent in May 1934 and dropped to 13.2 percent by May 1937. That impressed many pundits and voters. But in May 1939, unemployment was back up to 20.7 percent. Why? FDR had raised taxes, introduced a new corporate tax, enacted a minimum-wage law, and granted unions unprecedented federal support to organize during the late 1930s. When those government interventions took hold, the economic recovery was thwarted. In fact, capital goods in May 1937 had almost returned to 1929 levels, but in May 1939 capital goods stood at a mere 59 percent of 1929 levels.

The key issue here is economic philosophy. FDR believed that massive intervention (followed by high taxes) would lead to economic recovery. Obama has a similar belief. They are wrong, and thus any short-term recovery we see during 2009 and 2010 is likely to be ephemeral. By contrast, Ronald Reagan and Calvin Coolidge believed that cutting tax rates and reducing federal intervention was the recipe for economic recovery, and both saw economic recoveries during the first terms of their presidencies. Economic growth during the 1920s and 1980s was, in fact, spectacular. When people are unshackled and allowed to be free, they can accomplish much. When that belief takes hold again in the United States, we will likely see a serious recovery.

Unfortunately, that will be a long time coming, and you can bet it won't ever happen while Barack Obama remains in the White House.  His governing philosophy is antithetical to this kind of progress and policies that actually prompt recoveries.  It's great that there are signs of recovery - they're more a tribute to the hard work of the American people than anything the White House or Congress is doing.  In fact, the policies the White House and Congress are implementing will stifle, strangle, and essentially kill any hope of a real, significant, and lasting economic recovery.

Rush Limbaugh spoke about this GDP number on his radio program earlier in the week, and it helped put things into perspective:

Look, you can try to cover up 10% unemployment all you want with a phony GDP number of 3.5%, you can go out there and say you saved the economy, but there are no jobs.  Obama is gratified, but by his own benchmark his economy is still failing.  Now, let me see if I can put this GDP number into context for you, 'cause it's phony.  It is a fake number.  Gross domestic product needs to be understood as the sum of three things:  consumption by consumers, investment by business, and spending by government, CIG.  Consumption, investment, spending by government.  So they say the total GDP went up 3.5%.  But was there any new consumption by consumers?  No.  Was there any new investment by business?  No.  Was there spending by government?  Yes.  That's the G.  The increase is in G, spending by government. 

There was no investment in business.  There was no consumption by consumers.  You've seen all the numbers.  Home sales down; consumer spending down.  There was no economic growth.  What happened here, you had the Clash for Clunkers fiasco and now the Edmunds.com bunch estimates that that program cost taxpayers $24,000 for every car sold, and then there was that first time home buyers fraud, all kinds of government spending which was government borrowing.  So the government spending sector goes up, and they, oh, the economy grew by 3.5%.  It did not.  Government grew.  All that's happened here is that money has been shifted from taxpayers today and tomorrow into Obama approval ratings today.
BREAK

RUSH: I want to take another stab at this GDP thing, because checking e-mail during the break, "What do you mean, Rush, you have never said that gross domestic product increases in the past were fake.  You're just anti-Obama."  No, no, no, no.  I am anti-Obama, but don't you find this suspicious right before some elections hit next week?  You know that this number is going to be revised downward later this month and nobody is going to pay any attention to it.  But folks, there is no economic growth, at least in the private sector, and that's what everybody cares about.  The private sector is where you and I operate.  The private sector is where you and I test the waters.  It's where we pursue the American dream.  Gross domestic product equals the sum of consumption by consumers, investment by business, and spending by government, so the total goes up by three-and-a-half percent, it seems like growth, but all the increase is in G, spending by government, financed by an increasing deficit.  It's fake. 

Look at it this way.  It's called the Keynesian fallacy.  If I buy a refrigerator, that's a real transaction.  It counts toward C, consumption.  If I own a business and I buy a new machine tool or a forklift or whatever, that's real also.  It counts toward I, investment.  Real recoveries are led by consumption and investment, and there ain't any of that going on, I'm sorry.  I wish there were.  Now, the Keynesian fallacy is based on the multiplier theory -- I've done my economic homework on this -- and it is that government spending causes growth.  That's what Obama believes, that's what all these liberals believe, the government spending, that's the engine.  They think government creates jobs.  They think government does all these wonderful things.  The private sector is where all the fraud takes place.  The private sector is where all the cheating goes on, the private sector is where the real people get cheated by the big shots on Wall Street and ExxonMobil and Big Oil, Big Pharma, big whatever.  They think government is the engine.  And so when it grows, ooh, baby, we're smoking, cool.  That's the Keynesian fallacy. 

Now, government spending could cause growth if the money is spent on certain things like infrastructure and keeping us safe.  But then the growth that it causes comes from the consequences later that increase in consumption and investment.  Now, this growth that they're talking about here today, this GDP number, is just an accounting trick.  Suppose I borrow $10,000 on my credit card, and then I tell my wife, "Look, honey, here's the $10,000, I just got a raise."  And then I go out and I spend that income on a new car or boat or whatever.  You know, my wife, my girlfriend, whatever, would hit me with a chair.  Borrowing money and spending it is not increased income.  It's sort of like baseline budgeting, if I can remind you of that lecture.  Let's say you go and buy a car, you're looking at buying a car, and you want to spend, oh, $70,000 on a car. 

So you go to some dealerships, start kicking the tires, look around.  You go to Mercedes, you go to Ford, go to Chrysler, go to GM.  And the car you end up liking costs $50,000, not 70.  And you tell your family, we just saved 20 grand, when you didn't.  You just spent 50.  It's the same thing here.  You borrow $10,000, you go spend it on something, and you tell yourself you got a raise, your income went up.  That's what's happened here with this GDP number.  This 3.5% growth is all in government, and as we know government doesn't have any money.  Government's printing money.  We're running a deficit of $1.4 trillion this year.  We don't have any money.  So this growth is fake, it is fraudulent, it is phony, it doesn't exist, there is no growth, and Obama himself even admitted it out there. 

Charles Krauthammer offers a similar diluting of this 'good news':

...let's look at one of the factors. About a point and a half of the three and a half is from autos. And a lot of that is from the "Clunkers" program, which, of course, was a one-time gimmick which stole demand from the future into the present.

 

And we know that because when it [the "Cash for Clunkers" program] ended, September saw a collapse of auto demand. Which means that if you increase it [demand] artificially, as we did -- [increase] demand in the summer for autos -- it [demand] will be lower in the fall, lower in the winter, lower next year. Which means that the point and a half added to this year is probably going to be zero added in the next year, or even that autos will be a drag on the economy.

 

So even though it is a healthy number now, it doesn't tell us if it is going to remain healthy.

 

The larger issue is that, again, a lot of this [growth] is from the billions sprinkled on the economy out of Washington. Ultimately, it creates debt that ultimately has to end up being repaid -- either in higher taxes or in inflation and then higher interest rates -- which means we're going to have a drag on the economy.

 

And the longer you wait [to reduce the debt], the higher the inflation and the bigger the drag.

…

 

And the parallel is the second worst recession since the Great Depression, which was in the early '80's in Reagan's first term where he insisted on huge tax cuts. So even though unemployment hit almost 11 percent, when that [recession] abated, there was a huge spike in employment and in growth, almost 6 percent…

 

And that's unlikely to happen because instead of tax cuts and incentive for employment, what we're doing [today] is sprinkling all kinds of stimuli which are going to expire and dissipate, and I'm not sure what we're going to have left at the end of it except a huge hole in the federal deficit.

 

[And] there will be a lot of sprinkling next year, especially as Election Day approaches, you can be sure of that.

The only real hope for a lasting, genuine RECOVERY is to get those Dems out of power and end their economy-killing policies as soon as possible, and let some genuine conservatives begin the restoration project.  There's only so much of this sort of 'recovery' that this nation can take.

There's my two cents.