The media has been crowing about how the recession is now over. But for many Americans the economic situation is not at all a good one, nor has it returned to what they would call normal. The difference between a technical definition of recovery and what regular people would call ending the recession is often ignored in media discussions, but it is a critical distinction. And given the results from Tuesday’s elections, the pace and breadth of the recovery in popular opinion will be an important factor in next year’s Mid-Term elections and the balance of political power.
Personal economics play a major role in how people vote. While scandals and crises may be considered, the historical perspective shows time and again that economic troubles most often cause political control to change. This was the case when the Democrats gained control of Congress in 2006, when the Republicans gained control in 1994, and many times before.
The chief difference between the technical definitions used by economists and how regular people see the economy, comes from employment. If you have lost your job or are worried about losing your job, that will naturally be your personal focus, and you will be unlikely to support anyone for office whose policies appear to make your life harder, whether in terms of finding a job, keeping your job, or in the taxes you have to pay. If you are not able to save money or pay your bills on time, the same effect will occur. The important point to note here is that you do not have to actually lose your job to feel the effects of that condition. During the Great Depression of the 1930s, on average three out of every four people who wanted to work had a job, but no one felt comfortable about the economy. Problems with banks and credit, government control which had no apparent benefit, and a general lack of confidence all combined to prolong the effects of the depression. While no one could reasonably pretend that the present recession is that serious, it is important to recognize that the same psychological elements are present here, with serious concerns about credit, bank stability, the actual effect of government actions and the simple need for people to be able to make a living. The official unemployment rate is now above ten percent, but even that unhappy number does not address the number of under-employed workers, fears of job stability among Americans, and worries among business owners about how they can keep the doors open.
The Obama Administration chose to play politics with the economy, using the Stimulus Bill to give favors to friends and alter the process by which American business operates. This is most obvious in the egregious seizure of the GM and Chrysler corporations. The Bush Administration was wrong, in my opinion, to offer tax money to these companies through TARP in order to stave off bankruptcy, but the Obama Administration was far worse, as the President violated shareholder rights and the public trust in his takeover of the corporations. Obama paid off unions, leftist special interest groups, and campaign supporters, but in so doing he doomed GM to bankruptcy and a futile strategic plan, and Chrysler to a similar fate. Obama’s management of the credit crisis is hardly better, as banks continue to resist assistance to homeowners and small business, despite a flood of money from the government. The housing industry remains in crisis, along with automobiles, banks, and manufacturing. If the massive takeover of healthcare passes Congress, there is no reason to imagine that industry won’t also be made worse instead of better.
But it all comes down to jobs. Despite the countless plans and programs from government at every level, the overwhelming source of new jobs is from private employers. This is due not only to the capacity of millions of business owners to provide much greater opportunity than the government can, but also due to the fact that government agencies invariably follow scripts and protocols; they are stale by character and intent. The forces which bring job growth about, innovation and ingenuity, can only come from a wellspring of such diverse perspective and thought that no government could possibly match its range and scope. None of the great products of the past century entered the marketplace because of a government office or program.
Job creation is actually pretty simple for the most part. Company owners want to make money, and they need employees to make their products, to sell the products, to perform the service that the company sells, or to provide necessary support for the products or services. The company needs more employees as it grows and expects growth. Optimism therefore leads to job creation. And therefore, all job growth theory comes down to finding ways to raise optimism, of both business owners and consumers. No matter what the statistics say, it really comes down to finding ways to encourage buyers and businesses. So the only sane policy for economic growth is a business-friendly policy.
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The Obama Administration has actually conducted its affairs in a manner clearly hostile to business. Company owners and executives are publicly mocked and harassed, several high-profile corporations have for all practical purposes been seized by the government, and sound policy has been replaced with frivolous policy focused on whims and fantasy. The Obama Administration officials have either only theoretical knowledge of the industries they are trying to direct, or worse have no relevant knowledge whatsoever, in which case political theory is used in place of economic reality. This is why the Stimulus Bill failed to control the rise of Unemployment, despite President Obama’s false promise that it would do so; the bill’s promised effects, even if they happen as described, will not begin to take place until late 2010 through 2013. The costs, however, began almost immediately so it is not difficult to recognize that increased costs with no benefits for 2009 would inevitably result in job loss and economic damage. Anyone who would deny this flunked second-grade math. The good news for the Obama Administration from this fact, is that the present economic condition does not automatically prevent the Stimulus Bill from achieving its intended effects, al though whether that is correct is in serious doubt among economists and accountants. The bad news for Obama’s party, however, is that the inescapable short-term damage from the bill was denied, in an absurd attempt to hide reality, which damaged his credibility and calls into question his ability to make sound policy with regard to the economy. The present difficulty with China regarding the weak dollar and the trade balance comes in part from the fact that China has begun to mistrust the President’s ability to understand his own economy, and therefore his promises to major nations in that arena are in serious doubt.
The only rational government approach to job creation at this time would be to lower taxes on businesses and corporations, simplify oversight and regulation to reduce compliance costs and streamline effective implementation of necessary rules, and to put aside the poisonous and hostile policies of cap and trade and eco-hysteric mandates. It remains to be seen if the lawyer from Chicago who has paid so much attention to his buddies and so little to the fundamental structure of the economy, can finally lay aside his fantasies and direct his efforts to encourage the economy through private job growth.