It's Still the Economy, Stupid!

Massive government spending didn’t work under FDR and it’s not working now.

WASHINGTON, September 30, 2012 — The economy should be a major focus of this election—the Romney campaign is desperately trying to make it so—but the Democrats are trying every trick in the Alinsky playbook to divert attention away from it. With the propaganda power of the establishment media, the unions and even the federal government itself, it is a close race. It shouldn’t be.

Much as a doctor checks your pulse and temperature to get a quick sense of your bodily health, let’s look at employment as an indicator of economic health. By employment measures, the body politic is in mortal danger.

The usual measure of unemployment says that the number of unemployed in August was 8.1 percent, rising to 8.3 percent in September, a range that has held pretty steady all year. The Bureau of Labor Statistics (BLS) reports this data and calls it “U3.” What is that? How does BLS arrive at that number?

It comes from the number of people who have applied for unemployment benefits. Thus, if you don’t file for benefits or if you aren’t eligible for benefits in the first place, or it you’ve run out of benefits, you don’t count as unemployed.

Let’s say, for example, you’re an independent contractor or are self-employed. No unemployment insurance, no benefits. Maybe your customers just aren’t buying and you’re not getting any new contracts. No money coming in but you’re still employed.

The official U3 rate doesn’t count what the government describes as “short-term discouraged” workers either. To get that number, you have to look at “U6” which includes them. You may have heard lately that the “real” unemployment rate is more like 11.4 percent; that’s U6. That doesn’t sound as good, so neither government nor the press report it very much. Short-term in government-speak is 12 months.

But it gets worse. If you don’t find a job in a year, you become a “long-term discouraged” statistic, and then, like the self-employed, you don’t count at all. These people were counted starting in 1967 but were defined out of existence in 1994—that is to say, taken out of U3 and U6 reporting. Can you remember who was in the White House in 1994? It was Bill Clinton, eager to show that it was the economy, stupid, and that he was doing a good job of improving it. Short-term discouraged workers were moved from U3 to U6 and long-term discouraged workers became non-persons, at least as far as employment reporting was concerned.

The BLS still attempts to count them, and Shadow Government Statistics still reports the number. Thus, the real unemployment rate is around 22% and has remained over 20% since 2009. You read that right: We have unemployment rates that rival the Great Depression.

This administration did indeed inherit a bad economy—and they proceeded to make it worse. The rate of unemployment slowed in 2009 but has remained high despite massive, never-before-seen levels of government spending.

Let us set aside for the moment the blame game of who was responsible for the 2007-8 recession. Both parties are culpable. Instead, let’s take a quick look at why this progressive administration has only made things worse.

The key idea is simple: Government does not and cannot create jobs. Keep that firmly in mind and all else makes sense.

Only the free market can create jobs. Only the free market creates value. Only the free market creates goods and services that people want and are willing to trade their labor (usually in the form of money) to get. Only the free market creates profits which can then be reinvested or spent on other goods and services, producing a virtuous cycle that grows an economy.

All government does is siphon off some of that productive energy. Government does not create jobs, but it can steal jobs from the private economy and create government jobs. Sadly, despite all the government spending by this administration, they have not even done a good job of creating government jobs: The number of government jobs has declined as well.

So when Bill Clinton stood up at the DNC last month and said “We created 4 ½ million new jobs,” he lied. He lied not only in the sense that government can’t create jobs but also because he cherry-picked the statistics. Yes, 4 ½ million new jobs were created in the last year, but the net change over the almost four years of this administration has been a loss of 300,000 jobs. By contrast, just to keep even with the growth of the population, during this period a net 12 million jobs should have been created.

But it gets worse. If you look at the size of the population and the number of people employed—instead of trying to arrive at some number of the unemployed—you find that today the country is at the lowest level of employment since the depth of the 1982 recession, 58.3%. We have lost all the jobs that were created in the last thirty years. Thanks, Obama.

This November, we need a change or the economy will not survive.


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Al Maurer

Al Maurer is a political scientist and founder of The Voice of Liberty. He writes on topics of limited government and individual rights.

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