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President Barack Obama’s weekend proposal to raise $1 trillion in new taxes over ten years in the wake of a spike in the unemployment rate illustrates why the American economy won’t arise from its three-year rut anytime soon. Present leadership is incapable of leading us out of the morass because present leadership doesn’t understand basic economics.
With the American people against both massive tax increases and raising the debt ceiling as solutions to the debt problem, President Obama faces an impasse in budget negotiations that has as much to do with his Republican bargaining partners as it does with the electorate he will face next year. The president’s economic illiteracy is matched by a political tin-ear.
If the 9.2 unemployment rate or the dubious record of deficits for every month of the Obama presidency isn’t compelling enough evidence of the administration’s ineptitude, then Monday’s presidential press conference provided damning proof of it. Therein, the president mouthed several economic clichés that underscore that he lacks a fundamental understanding of how markets work.
What did the president specifically say in Monday’s press conference that merits a reality check?
Myth # 3 The Stimulus Worked
“I’m absolutely convinced,” the president maintained Monday, “and the vast majority of economists are convinced, that the steps we took in the Recovery Act saved millions of people their jobs or created a whole bunch of jobs.” Alas, there is no economic formula that can accurately gauge whether a particular bill “saved” a “whole bunch” of jobs. Yet, the “saved or created” language persists, with the “saved” verbiage a tacit admission that the government hasn’t created very many jobs. Regarding the jobs the Recovery Act actually created, they cost the government almost $250,000 per, according to a number crunch of Congressional Budget Office statistics. Infamously, the administration warned that the unemployment rate would eclipse 8 percent if Congress rejected its stimulus package. The bill passed—and unemployment surpassed 10 percent.
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