James Pethokoukis

Obama: “Private sector is doing fine”

On Friday, President Barack Obama hosted a press conference at the White House to discuss the economy. It wasn’t his finest moment. In his remarks, Obama told the media that all is well in the private-sector, rather it is the public-sector that is holding the economy back. Here’s the relevant quote:

The truth of the matter is that, as I said, we created 4.3 million jobs over the last 27 months, over 800,000 just this year alone. The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government. Often times cuts initiated by, you know, Governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in.

It’s hard to convince many people, particularly those that will be voting in the fall, that the private-sector economy is “doing fine.” People see the news reports about tepid job creation, still high unemployment numbers, and incredibly large budget deficit. They’re no doubt wondering what planet Obama has been living on over the last three-plus years.

The press conference really could be taken as an in-kind contribution to Mitt Romney and the Republican Party. They’ve pounced on the opportunity to slam the gaffe-tastic remarks. Playing right into their hands, Obama later issued a statement emphasizing that the economy is, in fact, not doing all that well:

CBO report shows high-cost per stimulus job

President Barack Obama and Democrat have time and time again repeated the talking point that the $831 billion American Recovery and Reinvestment Act, passed in early 2009, helped save the economy, which was suffering the effects of a severe recession, and helped create jobs.

However, a new report from the Congressional Budget Office (CBO) via James Pethokoukis shows that the stimulus bill was largely wasteful considering its affects on unemployment, with a high cost for what jobs were created:

When [the American Recovery and Reinvestment Act] was being considered, the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation estimated that it would increase budget deficits by $787 billion between fiscal years 2009 and 2019. CBO now estimates that the total impact over the 2009–2019 period will amount to about $831 billion.

By CBO’s estimate, close to half of that impact occurred in fiscal year 2010, and more than 90 percent of ARRA’s budgetary impact was realized by the end of March 2012. CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies and drawing on various mathematical models that represent the workings of the economy. …

On that basis CBO estimates that ARRA’s policies had the following effects in the first quarter of calendar year 2012 compared with what would have occurred otherwise:

– They raised real (inflation-adjusted) gross domestic product (GDP) by between 0.1 percent and 1.0 percent,

– They lowered the unemployment rate by between 0.1 percentage points and 0.8 percentage points,

Perry’s “Flat” Tax: Good Policy or Hail Mary?

Rick Perry has found himself at the bottom of the second tier after what seemed like a cake walk to the presidency.  But the Rick Perry bankroll has pundits on the ready for the next move upward.  On Monday, Perry tickled the media with a preview of his 20/20 Flat tax.  His overall plan which is named “Cut, Balance and Grow” seems much less catchy, especially if he has his eye on a primetime ABC host slot.

If one were going to summarize the plan, they might suggest that Perry believes in “caps”.  His 20% flat tax is optional, so essentially everyone paying more than 20% currently can move to 20% while everyone paying less can still pay their current rate. It also moves the corporate rate to 20%, kills the death tax, and removes taxes from qualified dividends and capital gains.  The plan also includes capping spending at 18%.  I believe talking about caps on spending as a percentage of GDP are a mistake for the simple fact that if you do this, what are the odds that congress will ever spend less than this amount?  Then again, after what we’ve seen in the last three years, it doesn’t sound half bad.

James Pethokoukis breaks down Perry’s plan over at The American:

—A choice between a new, flat tax rate of 20 percent or their current income tax rate.

—The new flat tax preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually, and it increases the standard deduction to $12,500 for individuals and dependents.

—Abolishes the death tax once and for all, providing needed certainty to American family farms and small businesses.

—Lowers the corporate tax rate to 20 percent—along with a tax holiday for foreign earnings—and moves toward territorial taxation.

Jobs report far below expectations, labor participation rate back at 35-year low

 

Though the unemployment rate dropped to 6.7% in December 2013, the lowest point since in more than five years, the economy added an unimpressive 74,000 jobs, according to the jobs report released this morning by the Bureau of Labor Statistics (BLS).

Coming off consecutive months of solid gains, economists expected the economy would add 200,000 jobs in December. The ADP survey released earlier this week estimated that 238,000 jobs were added to private payrolls. Unfortunately, the BLS report comes in well below those expectations, adding the fewest number of jobs since October 2008.

The disappointment isn’t limited to the total number of jobs added, but also that 347,000 people left the workforce in December. That brings the labor force participation rate to 62.8%, where it was in October 2013 and, also, its lowest point since 1978.

Here’s the chart via Zero Hedge (click to enlarge):

Labor Force Participation Rate

Economy posts weak job numbers in August

While President Barack Obama’s push for war against Syria is dominating headlines and television news, the jobs numbers for August posted on Friday were nothing short of disappointing, despite the economy adding 169,000 jobs last month and the employment rate dropping by one-tenth of a percent (emphasis added):

If you only looked at the headlines on Friday’s August jobs numbers, you’d think “Not bad!”

You would also be completely wrong.

Yes, the unemployment rate fell a notch to 7.3 percent, from 7.4 percent in July. Yes, the nation added 169,000 jobs, broadly consistent with the pattern of recent months.

But in almost all the particulars, you can find signs that this job market is weaker than it appeared just a few months ago, and maybe getting worse. The drop in the unemployment rate was caused by 312,000 people dropping out of the labor force. The number of people actually reporting having a job actually fell by 115,000 in the survey on which the unemployment rate is based.

And while the overall August jobs number was okay, the Labor Department revised down its estimates of June and July job creation by a combined 74,000 positions. In other words, through the summer, hiring has been quite a bit shakier than it had appeared.

BLS: 165,000 Jobs Created in April, Broader Unemployment Rate Inches Up

Yesterday, the Bureau of Labor Statistics released jobs number from the month of April, which found that the economy created 165,000 jobs — slightly more than the 150,000 jobs the economy needs to produce to keep up with population growth.

Employment rose by 165,000 jobs in April, according to the monthly economic report released Friday by the U.S. Bureau of Labor Statistics. And unemployment dropped slightly from 7.6 to 7.5 percent—a minimal change, but one marking a steady, .4 percent drop since January. It’s the lowest unemployment rate in four years.

Employment increases were seen in professional and business services, food services and drinking places, retail trade and health care, according to the report.

The Labor Department also announced revised and more positive figures for February and March: Employment for February was revised from 268,000 to 332,000 jobs gained and for March from 88,000 to 138,000 jobs gained.

There’s definitely some good news there after years of lagging economic growth. But there are still some concerns about another economic slowdown. But it should be noted that the U-6 unemployment rate, which many call the true measure of the jobs picture, inched up to 13.9% from 13.8%. Reuters noted that the “details of the report remained consistent with a slowdown in economic activity.”

Republicans haven’t made an effective case on taxes

boehner

With concern over the “fiscal cliff” growing, one thing has become painfully clear — Republicans are losing the debate in the eyes of the public. Some Republicans in Congress have abandoned the pledge they made to their constituents never to raise taxes and others haven’t effectively made the case as to why President Barack Obama’s tax proposal is a loser for the country.

Let’s get one thing clear on the “fiscal cliff” debate — this is not about a “balanced approach” to solving the deficit problem, despite what President Obama may say. The tax proposal that the White House is pushing would raise revenues by $1.6 trillion over the next 10 years ($160 billion per year), but, as J.D. Foster of the Heritage Foundation recently noted, the “national debt still goes up by about $7 trillion” in that budget window. In other words, our deficit problems are still there.

Paul Krugman goes off the rails again

Paul Krugman

With the debate over the taxes intensifying between House Republicans and the White House as part of the “fiscal cliff” negotiations, Paul Krugman weighed in yesterday floating the idea raising tax rates to 91%, back to levels seen in the 1950s. His rant is based on digs at conservatives and the same old “fairness” drivel that has been used by the Left since the 2001 and 2003 tax cuts were passed.

Most of us who read Krugman’s missive probably laughed it off. After all, this is the guy who, in the wake of the tsunami in Japan last year, said that the disaster would spur economic growth. He said the same of 9/11 when it occured. Krugman also called for a fake alien invasion to ramp up government spending, which he believed would have helped the economy. This, of course, defies a rule of economics called the “broken window fallacy.” But that’s just an example of Krugman’s crazier side.

Over at Cato @ Liberty, Brink Lindsey took Krugman’s tax idea head on:

“Fiscal cliff” talks to open with a call for a $1.6 trillion tax hike

Barack Obama

During a press conference yesterday afternoon, President Barack Obama laid out some of his terms on the so-called “fiscal cliff,” making it known that he wouldn’t accept a deal with House Republicans that didn’t raise tax rates on higher-income earners. Before the press conference even took place, the White House had rejected House Speaker John Boehner’s initial offer and The Hill noted that Obama would come to the table asking Congress for “$1.6 in new revenues by targeting the wealthy and corporations.”

Boehner, who has said that the talks with the White House are “going to take awhile,” has already said that House Republicans aren’t willing to raise tax rates, which could bring the talks to an impass. During the press conference, Obama said, “I’m open to compromise and I’m open to new ideas.” But, as noted, Obama has already turned away one offer for increased revenues and isn’t likely to budge much from his position.

James Pethokoukis noted that Obama’s tax plan, which supposedly brings a “balanced approach” to the deficit, isn’t balanced (emphasis mine):

[O]nce you begin to dig into the numbers, the plan doesn’t look balanced at all. As the bipartisan Committee for a Responsible Federal Budget noted back then:

3Q growth numbers show a still struggling economy

On Friday, the Commerce Department released economic growth statistics for the third quarter of this year. Anyone hoping that the United States was seeing movement towards a quicker economic recover was no doubt disappointed at the tepid 2% growth reported:

Growth in the July-September quarter climbed slightly but was still too weak to stir significantly more hiring. The pace of expansion rose to a 2 percent annual rate from 1.3 percent in the April-June quarter, led by more consumer and government spending.
[…]
Consumer spending rose at an annual rate of 2 percent in the July-September quarter, up from 1.5 percent in the previous quarter. And a survey by the University of Michigan released Friday found consumer confidence increased to its highest level in five years this month. That suggests spending may keep growing.

Americans spent more on cars, adding nearly 0.2 percentage point to growth. Housing added to growth for the sixth straight quarter.

Sure, it’s better than the dismal numbers from the second quarter, but the economy generally sees much more substantial growth in a period of recovery. Take, for example, the recovery under Ronald Reagan. The economy was coming out of a deep recession, but grew at an annual pace of 5.7% and created millions of private-sector jobs.


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