An­other Rea­gan mo­ment has ar­rived

The Washington Times Weekly - - Commentary -

No sooner had Pres­i­dent Barack Obama shocked the po­lit­i­cal world with a gloomy eco­nomic fore­cast, pro­ject­ing 9.1 per­cent un­em­ploy­ment for this year and a re­elec­tion-killing 9 per­cent for 2012, than the dis­mal Au­gust jobs re­port ar­rived show­ing no gain in non-farm pay­rolls. That’s right, no gain at all. Pri­vate jobs in­creased a scant 17,000, while hours worked and wages ac­tu­ally de­clined. Obama’s eco­nomic poli­cies have failed.

Are we on the front end of yet an­other re­ces­sion? This re­port alone sug­gests that we could be, although other data points dis­agree. But on the eve of Pres­i­dent Obama’s so-called jobs speech, there’s a much big­ger ques­tion here: Has the U.S. en­tered into long-term eco­nomic de­cline?

As a quin­tes­sen­tial op­ti­mist who be­lieves in Amer­i­can ex­cep­tion­al­ism, I don’t even want to raise this is­sue. But the data tell me that I must.

For ex­am­ple, over the past 10 years, the U.S. has ac­tu­ally lost jobs on a net ba­sis. In Au­gust 2001, non-farm pay­rolls cal­cu­lated by the Bureau of La­bor Sta­tis­tics stood at 132 mil­lion. Through Au­gust 2011, pay­rolls stand at 131.1 mil­lion.

In fits and starts, a 4 per­cent un­em­ploy­ment rate has moved up to some kind of per­ma­nent 9 per­cent plateau. Fol­low­ing the Bush tax cuts of 2003, 8 mil­lion new jobs were cre­ated. But in the af­ter­math of the fi­nan­cial melt­down, those jobs have dis­ap­peared. The so-called Obama re­cov­ery over the past two years has made no dent in this gloomy pic­ture.

And through this whole pe­riod, our econ­omy has barely grown at a sub-par 1.6 per­cent yearly rate for real gross do­mes­tic prod­uct.

Mean­while, the stock mar­ket, per­haps the best mea­sure of our wealth and well-be­ing, has been es­sen­tially flat for the past decade. And while the free en­ter­prise pri­vate sec­tor has barely mud­dled along, the govern­ment has grown fat.

Dur­ing the Bush years, the fed­eral govern­ment in­creased from 18 per­cent of GDP to 21 per­cent. The debt went up $2.5 tril­lion, from roughly 32 per­cent of GDP to 40 per­cent. And now, dur­ing the Obama pe­riod, spend­ing has moved even higher, to at least 24 per­cent of the econ­omy, while to­tal fed­eral debt has bal­looned to nearly 100 per­cent of GDP.

It’s al­most a mir­ror im­age, the ex­pan­sion of the pub­lic sec­tor and the de­cline of the pri­vate sec­tor. This is com­pletely in­im­i­cal to the Amer­i­can peace­time ex­pe­ri­ence. And it forces us to think se­ri­ously about whether we are los­ing our world eco­nomic lead­er­ship. Are we? And if so, does this loss of eco­nomic lead­er­ship threaten our national se­cu­rity and for- eign pol­icy stature?

And while jobs, the econ­omy and stocks have slumped over the past 10 years, the dol­lar has dropped 37 per­cent, and gold has in­creased by nearly 500 per­cent, from $250 to nearly $1,900 an ounce.

We don’t have the kind of in­fla­tion to­day that we ex­pe­ri­enced in the 1970s. But it is cer­tainly worth not­ing that a col­laps­ing currency and a sky­rock­et­ing gold price are key barom­e­ters of a loss of confi- dence in the Amer­i­can eco­nomic story.

And be­cause most for­eign cur­ren­cies and gold de­nom­i­nated in those cur­ren­cies have shown the same prob­lems, pa­per money go­ing down and the yel­low metal go­ing up, it’s not far-fetched to sug­gest that Amer­ica’s funk is lead­ing the rest of the world in the wrong di­rec­tion.

My key thought is that the U.S. in the past decade has adopted a wrong­headed pol­icy of govern­ment ex­pan­sion, pri-

The ex­pan­sion of spend­ing and reg­u­lat­ing is rob­bing the pri­vate sec­tor of its en­tre­pre­neur­ial vi­tal­ity. Here’s the new fear: more big­gov­ern­ment spend­ing stim­u­lus from Obama’s jobs plan. More EPA.

mar­ily spend­ing and reg­u­lat­ing, fi­nanced by ul­tra-easy mone­tary pol­icy and rock-bot­tom in­ter­est rates.

Tax rates haven’t moved much. But the whole tax sys­tem is badly in need of pro-growth flat-tax re­form and sim­pli­fi­ca­tion. How­ever, the ex­pan­sion of spend­ing and reg­u­lat­ing is rob­bing the pri­vate sec­tor of its en­tre­pre­neur­ial vi­tal­ity. Here’s the new fear: more big-govern­ment spend­ing stim­u­lus from Obama’s jobs plan. More EPA. More NLRB. More Dod­dFrank. More Oba­macare.

And as the pol­icy man­tle for growth has swung to Fed­eral Re­serve stim­u­lus, we are learn­ing once again what Mil­ton Fried­man taught us 40 years ago: The cen­tral bank can pro­duce new money, but there is no per­ma­nent pro­duc­tion of jobs and growth from that pump prim­ing.

Big govern­ment fi­nanced by easy money is a lethal eco­nomic com­bi­na­tion. It must be re­versed.

We should be re­duc­ing the reg­u­la­tory and spend­ing state while keep­ing money pre­dictably sta­ble (and even re­linked to gold).

The sup­ply-side nostrum that worked so well for 20 years, be­gin­ning with Ron­ald Rea­gan, was low tax rates, light reg­u­la­tion, lim­ited govern­ment and a hard dol­lar.

Gold col­lapsed be­tween 1980 and 2000 as stocks, jobs and the econ­omy roared. The past 10 years? We’ve got­ten the pol­icy mix com­pletely back­ward. The re­sults show it.

This is a Rea­gan mo­ment. We need a new leader who can get the eco­nomics right and re­verse our de­cline. Lit­er­ally, for the whole world, noth­ing is more im­por­tant.

Lawrence Kud­low is a na­tion­ally syn­di­cated colum­nist.

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