Sunday, December 20, 2015

Limping Into the New Year

After seven years of an absurdly slow-walked economic recovery, the economy looks ready to slide backward.  In prior recoveries, it took two years to accomplish what this recovery has not yet accomplished in seven years.  And, now it appears to be over.

The Obama Administration, surprisingly, is taking a bow for this pitiful showing and Hillary Clinton changes the subject.  The usual excuse for this poor economic performance is the severity of the 2008 financial collapse.  A better explanation is the incredibly stifling government response to the 2008 crisis that culminated in the passage of the infamous Dodd-Frank legislation. 

Dodd-Frank guaranteed that commercial lending would never be adequate to fund a decent recovery and its passage inspired an out-of-control Justice Department to extort billions of dollars from financial institutions to dish out to Obama-Clinton political allies.  Why, no recovery?  The real surprise is that the American economy was able to show a pulse at all with the hammering given it by the Obama Administration and their allies.

Both Republicans and Democrats alike seem to have given up on the idea of an American economy regaining its footing.  The Paul Ryan spending compromise that recently passed Congress is a concrete example of the capitulation of Republicans to the stifling policies of the Obama crowd.

So, what does 2016 portend?  Consider first that S&P earnings in 2015 were below the level of 2014 and things could get worse in 2016.  The one thing that has gone up (besides the number of people who have given up trying to find a job) is the stock market, which has nearly tripled in value since March of 2009.  But, in 2016, the stock market appears to be a loser -- not a big loser, but a loser nonetheless.

And what has 2 percent growth done for us?  Middle income disposable income has consistently lost ground since 2008.  Corrected for labor force participation rates, the employment market remains moribund.  There is no wage pressure, regardless of what Janet Yellen may think.  Poverty is higher and growing.  2 percent growth hasn't hurt the wealthy (Obama, Clinton, Buffett, Gore, etc.) but it has savaged the rest of the country.

So, what should economic growth be?  Historically, economic growth, leaving out the Johnson-Nixon 1970s, has been north of 4 percent.  But, given the pace of technological change and paradigm shifts (think Uber, AirBnb), there is no reasons that private sector economic growth could not exceed 8 percent on a sustained basis.  But, this cannot happen with Obamacare, Dodd-Frank, Sarbanes-Oxley, the EPA, the Department of Education, higher minimum wage laws, over-regulated economy and a lawless executive branch of government.

The poor, the disenfranchised have no hope in a growthless economy.  There is zero empirical evidence that government programs help poor people when the economy experiences limited or no growth.  The only thing that helps the poor, the disadvantaged, the middle class is robust economic growth, creating opportunities for individual advancement.  Slow growth merely shifts the deck chairs around.

No wonder the rich support slow economic growth policies.  The rich can maintain their position of hegemony over the masses.   This is George Soros' and Warren Buffett's dream -- pretend to help poor people but focus on policies that maintain their own personal economic power.  If Soros and Buffett think the tax system is unfair (as they claim), nothing prevents either of them from paying higher taxes voluntarily.  What conceivable reason, other than personal greed, prevents Soros and Buffett from doing exactly that?  Hypocricy abounds.

Meanwhile, the economy limps into the New Year with little prospect for improvement and a foreboding sense of coming danger.

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