Monday, March 03, 2014

Living the Worst Economy Since Great Depression

The Democrats gained control of Congress in 2007. On January 1, 2008, as the Great Recession began, 138,365,000 Americans were working out of a population of 302,786,000, or 45.7%.

On the first day of January 2009, the fourth month of a steep economic decline and also the month Barack Obama became president to complete Democratic control of government, only 133,976,000 Americans were working: 43.9% of a 305,529,000 population. Bad times.

Under Obama, we have undergone a far too slow recovery.  This past  January 1, the job count stood at 137,386,000, but population had increased to 317,298,000, meaning that during “recovery,” the working population share fell further to only 43.3%.  If employment had merely kept pace with population growth since Obama took over, we would have had 1.94 million more people working. But if the economy had recovered to the 45.7% share of population working when the recession began in 2008, then 7.6 million more people would be employed!

As for real GDP under Obama, it fell -2.8% in 2009, grew by 2.5% in 2010, only 1.8% in 2011, and rose 2.8% in 2012. In 9 previous post-World War II recessions (excluding the brief 1980 recession), the GDP recovery rate 3 years from the recession's start averaged 9.5%, with no recovery less than 5.3%. But 3 years after the current recession began, recovery stood at -0.8%!

Now we have learned that real GDP grew at an annual rate of just 2.4% in the fourth quarter of 2013, 80 basis points below January’s +3.2% estimate. That means last year’s real GDP rose only 1.9%, a drop from 2.8% in 2012. Our GDP growth rate is actually stalling, falling to just 1.2% above population increase.

Why don’t we grow? Joe Rego at the conservative Wall Street Journal writes the Keynesian economists who dominate Democratic Washington are fixed on demand, explaining that high post-recession unemployment and slow growth stem from weak demand for goods, producing weak demand for labor.

But Rego looked elsewhere for an explanation, quoting University of Chicago economist Casey Mulligan, who
studies the supply of labor and attributes the state of the economy in large part to the expansion of the entitlement and welfare state, such as the surge in food stamps, unemployment benefits, Medicaid and other safety-net programs. As these benefits were enriched and extended to more people by [Obama’s] stimulus, he argues in his 2012 book The Redistribution Recession, they were responsible for about half the drop in work hours since 2007, and possibly more.
there [may have been] "a general lack of awareness" and economists simply didn't realize everything that government was doing to undermine incentives for work. "You have to dig into it and see it," Mulligan explains. "[Obamacare]'s not going to come and shake you out of your bed and say, 'Look what's in me.' "
Rego is less charitable than Mulligan, guessing liberals prefer the public remain ignorant of how government is growing our dependent class.  And speaking of our lower class, Robert Samuelson at the Washington Post writes
the official poverty rate is a lousy indicator of people's material well-being. It misses all that the poor get -- their total consumption. It counts cash transfers from government but not non-cash transfers (food stamps, school lunches) and tax refunds under the [Earned Income Tax Credit]. Some income is under-reported; also, the official poverty line overstates price increases and, therefore, understates purchasing power. Eliminating these defects, economists Bruce Meyer of the University of Chicago and James Sullivan of the University of Notre Dame built a consumption-based index that estimates the 2010 poverty rate at about 5%. People at the bottom aren't well-off, but they're better off than they once were. Among the official poor, half have computers, 43% have central air conditioning and 36% have dishwashers.
Samuelson’s point is that above the bottom 5%, we have an underclass able to survive in its present state. Samuelson continues,
"a hand up, not a handout". . . failed dismally. America remains a tiered society with millions at the bottom still living more chaotic and vulnerable lives. Government's capacity to boost them into the mainstream was oversold. Although Head Start produces some gains for 3- and 4-year-olds, improvements dissipate . . . by third grade. . . the breakdown of marriage and spread of single-parent households suggest that poverty may grow. . . Low-income men may flunk as attractive marriage mates. Or, "women can live independently more easily rather than put up with less satisfactory marriages," as Brookings' Isabel Sawhill says.
We are back to the link between family breakdown, dependency, and poverty.

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