Oba­ma­nomics: R.I.P.

Slug­gish growth is the long-term new nor­mal for Amer­ica

The Washington Times Weekly - - Commentary - By Stephen Moore

Well, it turns out An­nie had it wrong. The sun won’t come out to­mor­row. That was ba­si­cally the mes­sage from Fed­eral Re­serve chair Janet Yellen last week when she ac­knowl­edged the econ­omy is do­ing more poorly (again) than pre­vi­ously hoped. The Fed ad­mit­ted that slug­gish growth that caps out at 2 per­cent is with us for as far as the eye can see, or at least through the next two years. Is this a dec­la­ra­tion of the last rites for Oba­ma­nomics? It should be.Throw it in the dust­bin of his­tory along­side all the other failed lib­eral eco­nomic ex­per­i­ments.

The pre­vi­ously bullish Fed fi­nally and openly ac­knowl­edged that slug­gish growth is the long term new nor­mal for Amer­ica. Sec­u­lar stag­na­tion is here to stay. The growth rate has limped out of the 2008-09 re­ces­sion at a 2 per­cent pace now for seven years. The Joint Eco­nomic Com­mit­tee of Congress tells us a nor­mal re­cov­ery gives us about 3.5 per­cent growth and the Rea­gan and JFK booms were closer to 4 per­cent. So the GDP today thanks to Pres­i­dent Obama is about $2 to $3 tril­lion smaller than it should be. This is roughly the equiv­a­lent of los­ing the en­tire an­nual out­put of ev­ery busi­ness and worker in Michi­gan, Ohio and In­di­ana com­bined.

In­stead of speed­ing up to re­cover all this lost ground, we’re de­cel­er­at­ing. Growth was 1.4 per­cent in the 4th quar­ter of 2015. It was 0.8 per­cent in the first quar­ter of this year. The Fed now has down­graded growth now to less than 2 per­cent for the rest of 2016 — down from an orig­i­nal fore­cast of 2.4 per­cent. Ms. Yellen now is telling us that the chances of an in­ter­est rate hike this year be­fore the elec­tion are close to zero. That cer­tainly worked out well for Hil­lary who needs a grow­ing econ­omy to have any chance of win­ning in Novem­ber.

No one is more sur­prised by this turn of events than Mr. Obama him­self. The Obama economists have con­sis­tently over­es­ti­mated growth for seven years now to the tune of $2 tril­lion ac­cu­mu­lated lost growth (see fig­ure.) Alas, they were drink­ing their own Kool-Aid.

All of this comes atop the lousy jobs re­port, the find­ing that 95 mil­lion Amer­i­cans over the age of 16 aren’t work­ing, and that still 40 mil­lion are on food stamps. The busi­ness sec­tor is in es­pe­cially wor­ri­some shape with in­dus­trial pro­duc­tion down 1.4 per­cent over the past year, in­vest­ment slump­ing, and cor­po­rate prof­its flat lined.

The les­son of the Fed un­der Ben Ber­nanke and now Yellen is that easy money is no eco­nomic so­lu­tion to this decade-long malaise. As econ­o­mist Larry Kud­low puts it: “The Fed can print money, but it can’t cre­ate jobs.” Our cen­tral prob­lem now is not with our mon­e­tary poli­cies. It is se­vere reg­u­la­tory and tax drag.

When I re­cently at­tended a meet­ing of the Trump Lead­er­ship Coun­cil in New York with dozens of in­dus­try lead­ers and CEOs, I was sur­prised to hear story af­ter story of these ma­jor em­ploy­ers of how Washington reg­u­la­tions and man­dates are suf­fo­cat­ing their busi­nesses. Their mes­sage to Don­ald Trump: “Please get gov­ern­ment off of our back.”

All of this brings me to the Repub­li­cans. Why are they stone silent on the econ­omy and jobs, and why are they beat­ing up Mr. Trump rather than Hil­lary and Mr. Obama for their eco­nomic mal­prac­tice. Ev­ery poll over the last three years finds the econ­omy and jobs are by far the big­gest voter con­cern. In 2007 and 2008 when the role of the par­ties were re­versed, House Speaker Nancy Pelosi sent a bliz­zard of leg­is­la­tion to the desk of Ge­orge W. Bush which he ei­ther had to veto or put his tail through his legs and sign into law.

Where is the Repub­li­can tax cut? Where is the Repub­li­can reg­u­la­tory freeze? Where is the Repub­li­can bill sus­pend­ing the 50-worker rule un­der Oba­macare or the 30-hour-a-week reg­u­la­tion that has forced mil­lions of Amer­i­cans into part-time jobs. Why haven’t they sus­pended the Clean Power Plant rules by the EPA that are putting coal min­ers out of work? House Speaker Paul Ryan has some won­der­ful pol­icy ideas he is rolling out, but rather than talk­ing about them, how about pass­ing them?

Hil­lary’s growth agenda is to give Amer­ica more of the same. Con­gres­sional Repub­li­cans seem to have no eco­nomic agenda at all — just white pa­pers of what they will do in the fu­ture. But to quote Ge­orge Allen, “The fu­ture is now.” Con­gres­sional Repub­li­cans like to blame Mr. Trump for their pre­car­i­ous po­lit­i­cal predica­ment and lousy poll num­bers. Maybe they should look in the mir­ror. Stephen Moore, an eco­nomic con­sul­tant with Free­dom Works, is the au­thor of “Fuel­ing Free­dom: Ex­pos­ing the Mad War on En­ergy” (Reg­n­ery, 2016).

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