Edward Lazear: Stimulus and the Jobless Recovery – WSJ.com

With the news that GDP grew at 3.5% in the third quarter, it seems apparent that economic recovery is underway. How much of this was a result of government programs? To evaluate this, it is important to understand what constitutes a recovery. There are three developments needed to restore the economy to its prior vibrancy.

The first development, bank stabilization, began in late autumn of last year. The source of the recession was financial-sector turmoil that commenced in August 2007 and peaked in early autumn 2008. Although we did not know it at the time, by the end of 2008 the financial crisis had passed. Financial markets were far from normal, but the panics and major collapses that characterized September 2008 were behind us, and no others arose. This financial-sector stabilization created the environment that is allowing our economy to heal.

This past January, at the end of my term as chairman of the President’s Council of Economic Advisers, my agency released the White House economic forecast. At that time, I said that I foresaw a couple of bad quarters but expected that the second half of 2009 would be positive, with perhaps very strong growth in 2010. These forecasts assumed no stimulus; the projected turnaround was instead based on the natural rebound of the economy that would come after the financial crisis had eased. The resumption of GDP growth, which is the second development on the road to full recovery, probably began in late spring of this year.

The third recovery factor—job growth—will be slower to develop. In a shallower recession that ended in late 2001, job growth did not become positive until 2003. Historically, recoveries have a consistent pattern: Productivity grows first, then jobs are created, and finally wages rise.

via Edward Lazear: Stimulus and the Jobless Recovery – WSJ.com.

  • USMCSniper

    From Canada Free Press:

    The notion that the White House or Congress can create any jobs other than government jobs is a fallacy. Real jobs are largely created by small business owners and by major corporate enterprises, but the latter keep leaving the United States because they are paying among the highest corporate taxes to be found anywhere in the world. Neither can plan ahead thanks to the uncertain penalties that Obamacare would impose.

    The prospect of an increase in the costs of healthcare insurance and/or the complete government takeover of healthcare is enough to make corporations look for a friendlier place in which to set up shop.

    The present recession differs from previous ones. “The U.S. economy, once the greatest job-creation machine in the world, has taken longer and longer to replace the jobs lost in recent recession,” reported Sasseen. “This time could be even worse. U.S. payrolls peaked at 138 million in December 2007; today they stand at roughly 130 million.”

    As household and businesses reduce their spending, the prospect of any near-term increase in hiring or economic recovery is unlikely.

    The government’s spending binge continues. Fox News reported that “The federal government spent $3.5 trillion during President Obama’s first year in office.”

    Though fond of blaming President Bush for all the ills of the economy, President Obama “shattered the budget record for first-year presidents, spending nearly double what his predecessor did when he came into office and far exceeding the first-year tabs for any other U.S. president in history.”

    “That price tag came with a $1.4 trillion deficit, nearly $1 trillion more than last year. The overall budget was about a half-trillion more than Bush’s for 2008, his final full fiscal year in office.”

    The stimulus bill has billions allocated for so-called “green jobs” in the area of solar, wind, and biofuels; so-called “renewable energy.” In a December 2 commentary in The Washington Examiner, Thomas J. Pyle of the Institute for Energy Research pointed out that, “At the height of its construction this past summer, the largest solar plant in the United States employed 400 workers. Now that it’s complete, the DeSoto Solar Center in Arcadia, Florida, stakes claim to two – yes two – full time ‘green jobs.’”

    Contrast this with an estimated 1.2 million energy jobs that would be made available if the Obama administration would permit exploration of the nation’s vast continental shelf for the vast oil and natural gas resources going untapped. There are an estimated 115 billion barrels of recoverable oil and more than 565 trillion cubic feet of natural gas. The Institute for Energy Research estimates those jobs would generate $70 billion in annual wages. Then add in the savings in the cost of importing these energy sources, plus the bonus if increased national security.

    The costs of the proposed economy-killing healthcare “reform” could be reduced starting with tort reform, opening the marketplace for the sale of insurance, and a serious effort to reduce the estimated $70 billion in Medicare fraud.

    Instead of taking billions out of Medicare and thus likely causing some hospitals to shut down and the widespread denial of care to the millions of seniors who paid into the system, the Obama administration is more focused on government control of one-sixth of the economy. Or what will be left of it after they run it into the ground.

    All manner of steps could be taken to energize the economy, not the least of which would be tax cuts that would encourage spending and hiring.

    But no, the Obama administration would rather put on a show for the cameras.