Another solid month of job growth – that would make 36 straight – and an unemployment rate at its lowest point in four years. Both good news to be sure, and indicative of a recovery that may not be as robust as most would like, but is nonetheless consistent and enduring.
Since it bottomed out three years ago, the U.S. economy has created 5.7 million jobs, surviving the worst economic downturn since the Great Depression, while Great Britain, by comparison, has been unable to come out of recession. The difference comes down to one word: austerity. One country has had a love affair with it; the other has managed up till now to resist it.
You’d think, based on all the data available, that it would be a slam dunk to anyone with a calculator and a brain which strategy was more successful. You’d think that, but you’d be wrong. That’s because, after fighting the urge to slash and burn, America is on the verge of replicating Britain’s disaster.
The preoccupation with the debt and the deficit has now so thoroughly infected the body politic that it isn’t a question of whether to cut, but how much. At a time when many economists are urging – dare I say it – additional stimulus spending to create demand, Washington is hellbent on doing just the opposite.
The sequester is just the beginning. Next up is the continuing resolution, followed by another go at the debt ceiling. The sequester alone could cost as much 700,000 jobs over the next two years. Congressional Republicans are attempting to do via the purse, what they couldn’t do at the ballot box: ostensibly pass their agenda; an agenda, mind you, that was thoroughly rejected by the voters. They have convinced themselves that the deficit is the number one problem besetting the country. If we can only get a handle on our addictive spending then the economy would really take off.
There’s just one tiny problem with that mindset. It’s dead wrong. The immediate problem is NOT spending, it’s demand. The fact is that the private sector is sitting on roughly $2 trillion. They aren’t spending it not because of the huge debt or high taxes or excessive regulations. The reason employers aren’t hiring is because they don’t see enough demand to warrant increasing their payrolls, period. The undeniable truth is that even if you slashed corporate taxes and removed most regulations, the likelihood is that corporate America would simply pocket the savings. Unemployment would remain stubbornly high.
That’s the real dilemma facing America. Despite the net gains in jobs over the last three years, the nation remains stuck between 2nd and 3rd gears. The economy continues to grow, but not fast enough to get the unemployment rate down to where it was prior to 2007. Instead of cutting spending, what Washington ought to be concentrating on is growth. Not the phony growth that supply-siders keep insisting on, but the kind of growth that leads to real job creation.
Here’s an interesting fact. Had it not been for the slashing of government jobs over the last three years, the unemployment rate would be 7.2 percent – a full half percent lower than it currently is. That may not seem significant, but consider that in the first two years of the Obama Administration the Treasury lost almost half a trillion dollars in receipts due exclusively to high unemployment. Half a point in the jobless rate might well have reduced that figure by tens of billions.
Fears of runaway inflation and stock market crashes have been thoroughly debunked. If anything, inflation should remain at historic lows for the foreseeable future and profits are at an all-time high. The economy continues its rebound in spite of the doomsayers who predicted its demise, and now, as it prepares to exit that long, dark, formidable tunnel, some want to jam on the brakes and derail the train altogether. Not because they are right, but because they can’t bring themselves to admit they’re wrong, no matter how obvious it may seem.