Like a bursting dam, the nation’s debt gushed soon after a deal on the debt ceiling was reached. On Tuesday, America endured a largest-in-history one day bump of $239 billion, increasing the national debt from $14.294 trillion to hit $14.532 trillion, according to the Treasury Department. As a result, two daunting realities were revealed. First, that the bump represents 60 percent of the initial $400 billion in borrowing authorized by the debt ceiling deal. Second, America’s borrowing now exceeds 100 percent of GDP for the first time since 1947. Meanwhile, key economic indicators are sagging. The obvious question: is America headed for a double-dip recession?
An idea considered remote as recently as two months ago is now gaining steam. The economy is at a virtual standstill with a 1.3 percent gain in GDP for the second quarter, well below previous estimates of 2 percent. Furthermore, first quarter estimates, initially registered at 1.9 percent, were revealed to be an abysmal 0.4 percent – meaning they were overstated by a factor of almost five.
According to the Bureau of Economic Analysis, growth below 2 percent has signaled a recession six-out-of-seven times since 1970. Justin Wolfers, associate professor of business and public policy at the Wharton School of the University of Pennsylvania, who thinks the economy is on “the knife’s edge,” contends that another recession may already be occurring, noting that we’re only “one data revision away” from such a reality.
Unsurprisingly, reality is in short supply in the Obama administration. “We do not believe that there is a threat there of a double-dip recession,“ said White House Spokesman Jay Carney in a Wednesday press briefing. He then contended that the debt ceiling deal sent a “reassuring message around the world” that America is serious about balancing its budget.
Yet in order to balance a budget, one has to have an actual budget to balance. The Democratically-controlled Congress completely punted on their obligation to produce one in 2009, fearing that Americans, just prior to the 2010 election, might be appalled at the level of debt they were more than willing to pile on on top of that amassed by the Bush administration. Debt largely abetted by the same Democrats who controlled Congress from 2006-2010. Incredibly, despite numerous attempts by House Republicans to get budgets passed since then, the still-Democratically-controlled Senate has refused to cooperate for more than two years.
Rep. Paul Ryan (R-WI) points out why. “Ever since they abused the budget process to jam their health-care takeover through Congress last year, the Democrats have simply done away with serious budgeting altogether,” Ryan writes. “The simplest explanation—and the president’s real bluff—is that they don’t want to commit publicly to the kind of tax increases and health-care rationing that would be required to sustain their archaic vision of government.”
That reality didn’t stop DNC Head Debbie Wasserman Schultz from blaming Republicans for the “eight months they have controlled the house with no jobs bills coming to the floor.” And like President Obama himself has on numerous occasions, Ms. Wasserman Schultz assured Americans that “we’re going to focus on what we know is the number one priority on Americans’ minds right now, that is, creating jobs and continuing to get this economy turned around.”
Such promises should sound familiar. Here’s a list compiled by the RNC revealing how often such job creation has been deemed the “number one priority” of this administration and the Democratic Party.
Wall Street is apparently pricing in their own interpretation of this administration’s commitment to job creation and the overall health of the economy. Despite an ephemeral gain on Wednesday, breaking an eight-day losing streak, the market was down 500-plus, stomach-churning points on Thursday. In the last two weeks, the Dow has lost more points than it did in 2008 when Congress initially failed to approve the TARP bailout of the banking system. All this has occurred prior to today’s jobs report release, which, barring a miracle, was expected to reinforce the notion that a double-dip recession is imminent.
Adding fuel to the proverbial fire is the president’s ongoing insistence that Keynesian-inspired big-government solutions are the answer to the nation’s economic problems. Peter Ferrara, former White House Office of Policy Development for President Reagan, illuminates the weakness of that argument. “The central fallacy behind Keynesian economics is that the money for the increased government spending and deficits has to come from somewhere,” he writes. “If the government borrows a trillion dollars out of the private sector to spend a trillion back into the private sector, it hasn’t done anything to increase the economy on net. If it seizes a trillion dollars in taxes out of the private sector to finance the trillion of increased spending, the result is worse. The economy has not been expanded on net, and the increased taxes reduce the incentives for production, resulting in a net loss to the economy.”
Ferrara also administers a well-deserved smack to Keynesian economics champion Paul Krugman, who claims the Obama administration hasn’t spent enough money stimulating the economy. Krugman uses WWll spending levels as the basis of his contentions. Ferrara explains what that means in actual numbers:
Federal spending in 1943 was 43.6% of GDP, with the federal deficit at 30.3% of GDP. In today’s equivalent terms, that would mean a federal budget of $6.54 trillion, or over 70% higher than today, and a federal deficit of $4.55 trillion, almost 3 times higher than today.
In other words, Krugman countenances a one-year deficit nearly equivalent to the 4.9 trillion years of debt accumulated by the Bush administration over the course of eight years. The same Bush administration Democrats and the administration blame for driving the economy into a ditch. So why continue the borrowing madness? “[B]ecause [Krugman’s] devotion to the doctrine is religious, not intellectual, and so it can’t be falsified,” writes Ferrara.
Such religiosity was exemplified by the barrage of anger directed toward the Tea Party movement for daring to suggest that such economic policies are completely misguided. “Terrorist” was the word used persistently by the same progressives who were calling the supporters of fiscal sanity and limited government “racists” leading up to the 2010 election. Why the ongoing vituperation? The Wall Street Journal’s James Taranto explains:
Obama’s failure is the failure of the liberal elite, and that is why their ressentiment has reached such intensity. Their ideas, such as they are, are being put to a real-world test and found severely wanting. As a result, their authority is collapsing. And if there is one thing they know deep in their bones, it is that they are entitled to that authority. They lash out, desperately and pathetically, because they have nothing to offer but fear and anger.
Along with the same tiresome solutions. Thus it was completely unsurprising when the president once again reiterated his commitment to the idea that “economic growth, making ourselves more competitive, isn’t just about cutting programs. It’s also about making investments in our people.” As if on cue, Democrats were recommending new job training programs to help the “long-term unemployed get back to work,” due to the fact that their “skill sets no longer fit the needs of hiring employers.” Perhaps that is due in part to the fact that some former workers have been eligible for 155 weeks of unemployment benefits. Benefits the president has expressed a desire to renew. The CBO estimates extending those benefits through 2012, aka the election campaign, would cost $45 billion. In borrowed money.
Jobs? Nowhere to be found. Why? A partial answer can be found in a memo put out by Senator John Barrasso (R-WY) showing how many rules, how much red tape, and how many cancellation delays of existing regulations have been moved forward by the Obama administration – in the month of July alone. It is a sobering look at an administration dedicated to command-and-control policies. It is those policies, along with the uncertainties created by ObamaCare, that make businesses hesitant to hire.
Yet it is more than that. This administration in particular and the Democrat party in general never miss an opportunity to vilify the wealth-producers of this nation. It is a vilification so persistent and ongoing that the producers have, for all intents and purposes, gone on strike. And it is a strike driven in large part by an unprecedented fear of government, emphasized by both Home Depot founder Bernie Marcus and Las Vegas hotelier and self-professed “Harry Reid Democrat” Steve Wynn.
Are we entering a double-dip recession? All of the above combined leads one to the most disturbing conclusion of all: under the various banners of “social justice,” “spreading the wealth around” and “fairness,” incentive is being destroyed. It is being destroyed by a progressive movement which believes the stoking of envy, class warfare and guilt, all of which must be promoted and/or controlled by government itself, are sufficient substitutes for incentive. They are not, and they never will be.
On more than one occasion, Mr. Obama has wondered aloud what government can do to get America working. The answer is simple, even as it eludes progressives entirely:
Get government out of the way and let Americans be Americans again.