Why Obama can't fix the consequences of his two-year abandonment of financial sanity.
In two years of complete control, Democrats gave America a despised health-care plan and an un-stimulating stimulus package instead of jobs.
Tonight Barack Obama will attempt to deliver his latest "pivot" towards job creation. Many critics, both left and right, contend the attempt will be "too little, too late." Whatever ideas the president proposes, it is likely they will be presented with a caveat that is becoming tiresomely familiar: "obstructionist" Republicans who put "party before country" will be responsible for any subsequent lack of improvement in the economy. Yet from 2008-2010, Democrats had unassailable control of Washington, D.C. The result? A two-year opportunity to put America on sound economic footing was squandered on a health-care crusade and a one-shot Keynesian cure-all that has left the country on the brink of a double-dip recession.
First, the health-care bill. It is more than ironic that a president now calling for bipartisanship saw nothing wrong with signing a health-care bill into law on March 23, 2010, after it was passed without a single Republican vote, or the support of the American public. Even now, the latest Rasmussen poll shows voters favor repealing the health-care bill over keeping it by a whopping 21 percentage points, 57-36 percent. And 54 percent believe repeal is at least somewhat likely, the highest level for that sentiment recorded so far.
The public's instincts are on target. According to the Bureau of Labor, America averaged an increase of 67,600 private sector jobs per month between January 2009 and April 2010, seven days after the health-care bill became law. Coming out of a deep recession, such a level of job creation, if not good, was at least respectable. From April 2010 to June 2011, however, job creation went into free-fall: an average of 6,500 jobs per month were created.
The fault of the health-care bill? Consider that Section 1513 of the bill requires every employer with more than 50 full-time employees to provide health insurance coverage to those employees by 2014, or pay a $2000 fine. Furthermore, if a company does offer insurance, but the employee turns it down because it is "unaffordable" (more than 9.5 percent of the employee’s household income), the fine goes to $3000 for each employee who buys insurance on government-run health exchanges. Exchanges in which more than 80 percent of the cost could be borne by taxpayers. Couple that with Section 1302, which grants the Secretary of Health and Human Services (HHS) the power to "define essential health benefits" that determine the actuarial values of various levels of coverage, and, in turn, will ultimately determine premium prices, and what do you get?
A potential double-whammy for employers. The former section disincentivizes expanding one's business past 50 employees due to the significant increase in health-care costs. The latter section makes it impossible to determine exactly what those increased costs will be, until they are determined by HHS Secretary Kathleen Sebelius.
Admittedly, neither of these onerous provisions provide direct causation with respect to a flat-lining jobs market. But when 33 percent of small businesses cite the 2010 health-care bill as either their "greatest or second greatest obstacle" with regard to hiring, and 79 percent prefer that Washington D.C. "get out of the way," as opposed to "offer a helping hand," it takes a certain level of willful denial not to make some connection. At the very least, they are contributing factors to another daunting survey of 1,100 respondents that reveals that 69 percent of small business owners have no plans to hire additional workers.
Adding irony to insult, it was revealed on Tuesday that since Barack Obama became president, the percentage of Americans who lack health-care insurance has increased -- and continued to increase even after the health-care bill was passed. That revelation followed last Sunday's "Chris Matthews Show," during which Huffington Post political editor Howard Fineman and Washington Post editor David Ignatius (neither of whom can be identified as a conservative) both agreed that the president's "biggest political mistake" was the enactment of the health-care bill.
Perhaps it was. But the American Recovery and Reinvestment Act of 2009, a $787 billion stimulus package whose costs soared to $862 billion less than a year later, runs a close second. At the time of its passage, Christina Romer, chairwoman of the president's Council of Economic Advisers, and Jared Bernstein, the vice president's top economic adviser, projected that the plan would create 3 to 4 million jobs and that unemployment would peak at just under 8 percent in 2009.
The projections were pipe dreams. Unemployment rose to 10.1 percent in October 2009 and remains at 9.1 percent currently. And that's the official rate. The U-6 unemployment level, a Bureau of Labor statistic that measures the "[t]otal unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force" stands at a sobering 16.4 percent. Both Romer and Bernstein have since resigned from the administration.
The president's fallback position? “My job over these first two years has frankly been to clean up a big mess,” said Mr. Obama at a $10,000-per-ticket event at a gated mansion in Miami Beach on June 13th. “We were able to make sure we yanked an economy out of what could have been a second Great Depression.”
This is one of the more recent iterations of two now-familiar themes that this president and his party will be repeating over and over between now and the 2012 election. The implication behind the "big mess" is that two and a half years after becoming president, Mr. Obama still blames George W. Bush for the nation's economic problems, even as he omits the reality that his party controlled both houses of Congress from 2006-2010, and that both he and Joe Biden voted for much of the spending now being derided as "irresponsible."
Furthermore, what this administration has "yanked an economy out of" remains to be seen. Job creation has literally ground to a halt: for the first time since WWll, a net zero number of jobs were created in August. The White House itself, despite the chilling effect it is likely to have on Mr. Obama's re-election, has had to predict unemployment will remain above 9 percent through 2012. The administration has also revised growth estimates for 2011 down from 2.7 percent to 1.7 percent. Neither number is sufficient to get America back on sound economic footing.
Even more daunting, this low number may be optimistic. The Commerce Department reported an annual growth rate of just 1 percent, and many economists note that 9 of the past 11 recessions since World War II have been preceded by a period of growth totaling 1 percent or less. That means a "double-dip" recession is a distinct possibility -- for those Americans who remain convinced that some sort of recovery actually occurred in the first place. According to a Rasmussen survey, a majority of the public believes the recession that began in late 2007 never ended.
All of the above data begs a couple of obvious questions. First, at what point does the media-anointed "Great Recession" become a Depression? With respect to housing, we're already there. Prices have fallen more than they did back in the '30s. The European debt crisis, precipitated by the same kind of Keynesian economic bailout mentality that threatens America, remains an existential threat. And the stock market, despite two rounds of quantitative easing by Fed Chairman Ben Bernanke (more Keynesian economic stimulus by another name), finished its worst quarter since 2008 at the end of July.
Second, when will Mr. Obama accept responsibility for his own failures? Does anyone seriously think the same administration that readily blames the previous one for all of the country's economic woes wouldn't be taking complete credit for any economic uptick that might have occurred?
Tonight, the president will give his speech, the details of which will be illuminated on Friday. Americans hoping for anything resembling a Bill Clinton-esque tack to the economic center are likely to be disappointed. Unlike Clinton, Mr. Obama's party still has majority control of government, and many Americans fail to realize that it was the more moderate faction of the Democrats party that was eliminated in the 2010 election.
Moreover, the president himself, in spite of all evidence to the contrary, remains ideologically wedded to the idea that government is the principal generator of all solutions to our economic crisis. A government whose public debt has topped $10 trillion for the first time in history, which represents an increase of 59% since Barack Obama was inaugurated on January 20th, 2009. Thirty-one months later, the president is pivoting to job creation.
Too little, too late is an understatement.