Time for another group of stories chronicling the current state of our economy:
Eating out is considered to be a leading indicator of leisure spending, which only occurs in significant amounts when consumers feel that they can afford to spend money on non-essential items. When restaurant sales decrease, it is usually a sign of decreasing consumer confidence in the economy. And restaurant sales are down.
This is interesting, considering that the President signed an executive order in January stating that our regulatory system must, among other things, protect job creation. While the EPA does consider factors like regulatory compliance costs, they are not determining the net impact that new regulations will have on job creation. Considering the negative impact of the Obama Administration’s offshore drilling bans on both employment and oil prices, this seems par for the course.
The “spending multiplier” is a concept from Keynesian economics that attempts to quantify the amount of economic growth that occurs based on each dollar of government stimulus spending. A multiplier of 1 is parity; that is, no growth. A multiplier greater than one suggests positive economic growth. But what happens when the multiplier is less than one? A recent comparative study between 1930’s government stimulus programs and contemporary efforts reached the conclusion that “the current (2009-2010) multiplier in the states would be around one or less for
personal income, which includes transfer payments, and smaller for other
measure of income.”
As a nation we are more dependent today on government assistance than ever before. In fact, 2010 marked the first time in our nation’s history that cash handouts by the government exceeded household tax revenue. Unemployment has been stuck at 9% and is on the rise again, because the Obama Administration has done everything totally bass ackwards in terms of real job creation. On top of that, we now know that most of the stimulus money appropriated to “create or save” jobs went directly to state and municipal governments, and then only into the pockets of public sector employees.
Closing out this roundup of lower consumer confidence, flat job growth, and failed government stimulus is yet another strong sign that our economy is stalled and may even be headed for a double dip recession — home prices have now dipped below the previous record low period in the spring of 2009. Banks are glutted with foreclosures, with bank-owned properties making up over 1/3 of the real estate market nationwide and as much as half of the market in Minneapolis. With credit still extremely tight and no government incentives on the horizon, experts predict that housing prices will remain weak for the foreseeable future, resulting in more homeowners with underwater mortgages and an nationwide decrease in household net worth.
Unfortunately I haven’t seen any policy initiatives from the government that will make the economic situation any better this summer. In fact, in response to rising gas prices and overall price inflation that has especially plagued consumers during the last six months, the Obama Administration has proposed very little, with the only notable exception being a proposal to end tax breaks for oil companies; the cost of which would undoubtedly be passed on to consumers, resulting (‘unexpectedly’, I’m sure) in even higher gas prices.
As we say again and again here at Wizbang, 2012 can’t come soon enough.