Goolsbee heads for the hills
It can’t be easy serving as chief economic adviser to President Obama. The harder Austan Goolsbee has worked to implement the administration’s borrow-and-spend philosophy, the worse the economy has become. No wonder Mr. Goolsbee wants to get out of town. If only he were more honest about it.
The unemployment rate has risen to 9.1 percent, and the economy added a mere 54,000 jobs in the private sector in May. Mr. Goolsbee tried to pass off as good news the million jobs added in the economy in the past six months.
This is no cause for optimism when the unemployment rate is climbing and a record number of Americans have given up on finding a job.
As of May, the civilian-labor-force participation rate was at a historically low 64.2 percent. This dismal statistic is preventing unemployment numbers from edging into double-digit territory.
Mr. Goolsbee says the administration is committed to “help the private sector stand up and be the driver of recovery.” That would be cause for optimism — until you see the policies being advocated.
The Obama administration is still pushing schemes like an infrastructure bank, more regulations and tax incentives to jump-start investment in favored portions of the private sector. These stale, Washington-centric ideas have never worked anywhere they have been tried, but ivory-tower academics like Mr. Goolsbee have nothing else in their bag of tricks.
The numbers show that American businesses are holding back because the administration’s reckless policies are fostering economic uncertainty.
Corporate profits were reasonably healthy in the last quarter of 2010 at $36.9 billion, though profits slowed in this past quarter to $21.9 billion. At the same time, banks are awash in reserves ($1.5 trillion in April) but they still aren’t lending. The market is holding back, and the result is inadequate job creation.
Banks will not lend and firms will not hire when they think Washington is going to change the rules of the game by imposing new regulations or hiking taxes.
Temporary gimmicks, like the payroll tax holiday, don’t provide enough of an incentive to undertake long-term investment and hiring decisions. Tax incentives granted to favored industries won’t increase efficiency in the economy either, not to mention the damage they do to the rule of law and trust in institutions.
There are far larger uncertainties in the system that need to be resolved to get the economy back on a stable growth path and creating jobs.
The single biggest uncertainty is the staggering $14.3 trillion in government debt and effect of a possible downgrade of the U.S. credit rating on interest rates.
As part of any debt-ceiling agreement, real spending cuts must signal that Congress and the president are serious about slashing the size of government and limiting intervention in the market. Anything less will encourage capital flight, not the investment the administration ostensibly is seeking.
The White House ought to take Mr. Goolsbee’s departure as an opportunity to try some economic policies that actually have proved to work.
Unless Mr. Obama finally gets serious about dealing with long-term problems with long-term solutions, America won’t see long-term investment or jobs — just long-term unemployment growing.