Free Markets, Free People
Investors Business Daily saves you the trouble. Of the past 10 recoveries since WWII, this recovery rates dead last.
Employment: By this point, the average job growth in the past 10 recoveries was 6.9%. Under Obama, jobs have grown by just 1.9%, according to data from the Minneapolis Federal Reserve.
Had the current recovery kept pace with just the average recovery over the past 60 years, there would be 6.5 million more people with jobs today, and the unemployment rate would be below 7%, instead of above 8%. That assumes several million more Americans would have joined the workforce. If the current anemic labor force were unchanged, those 6.5 million jobs would drive unemployment to 4%.
Just as importantly:
GDP growth: The Obama recovery has also performed far worse than average when it comes to GDP growth. After 11 quarters, the economy is still only 6.8% bigger than it was when the recession ended. In contrast, GDP was 16% bigger, on average, by this point in the previous 10 recoveries, the Minneapolis Fed data show.
The current recovery is so slow, in fact, that it just barely beats GDP growth 11 quarters after the 1980 recession ended — even though there was the intervening long and painful 1981-82 recession. And unless GDP shoots up in Q2, the current recovery will soon be the absolute worst since the Great Depression.
Had the Obama recovery tracked the average GDP growth in the 10 previous recoveries, the economy would be almost $1.2 trillion bigger today.
Remember, we’re just talking average here. If this recovery were a average recovery, we’d see the numbers IBD is talking about. Instead, this recovery is well below average. In fact, it defines the bottom.
Incomes: By the third year of the past five recoveries, real median household incomes climbed an average 2.8%, according to the Census Bureau, which only has household income data back to 1967.
But in the current recovery, real household incomes dropped 5.4% during the recovery, according to Sentier Research, which compiles a monthly household income index using Census data.
"Unlike previous recoveries, we actually saw household incomes drop faster during the recovery than they did during the recession itself," said Gordon Green, who co-founded Sentier.
Again, extraordinarily poor performance.
And, to the claim that Obama has spent less than any other recent president (a laugher if ever there was one and factually wrong), lets examine the actual record on deficits and national debt:
Deficits: The current recovery also doesn’t stack up well when it comes to annual federal deficits. By this point in previous recoveries, deficits were running an average 2.2% of GDP. This year, they’re expected to be 7.6%, according to the Congressional Budget Office.
Here’s another way to look at it: If the deficit-to-GDP ratio matched the average of the previous recoveries, it would be around $341 billion, instead of $1.2 trillion.
National debt: Although Obama claims that he’s cleaning up after the "wild debts" Republicans ran up, the national debt has climbed much faster during Obama’s economic recovery than the typical recovery in the past.
On average, federal debt climbed 9.5% in the first three years of those recoveries, after adjusting for inflation. Under Obama, debt has climbed $4 trillion since the recovery started, a 28% increase in real terms.
Which brings us to the Obama excuses for this poor performance:
Obama routinely blames the deep recession. The problem is that, historically, the deeper the recession, the stronger the recovery has been.
Others have argued that recoveries from financial crises produce sluggish recoveries. However, a paper published by the Atlanta Fed concluded that U.S. history provides "no support" for linking the current mediocre recovery "with the financial crisis of 2007—2008."
And there are those who argue that the stimulus was insufficient. But that’s hard to believe, too, since spending has averaged more than 24% of GDP over the past three years, and deficits averaged 9.3% — higher levels than at any time since World War II.
Obama most recently has argued that Republicans are thwarting the recovery.
"We’ve got too many of my dear Republican friends in Congress that have been standing in the way of some steps that we could take that would make a difference at the moment," Obama said last week.
But Obama got everything he wanted in terms of economic policy his first two years in office, when he had solid Democratic majorities in the House and Senate, including a massive stimulus, Cash for Clunkers, mortgage aid, Wall Street reform, ObamaCare and so on.
The arguments simply have no factual support. They’re political excuses; the usual attempt at blame shifting for which this president is so famous.
In fact, his record in this recovery is abysmal. Yet he’s asking for another 4 years, one assumes, to try to fix what he’s royally screwed up.
These should be the facts and figures the Romney campaign uses constantly. And with that, they should also point out the mess a President Romney will “inherit” from the current occupant of the White House.
Context is one of those tricky words for some. Because, when applied, it tends to trip up their attempts to shade news a certain way. Without it, they’re much more able to do their shading than when context is added to their formulation.
Take the unemployment numbers – the “official” unemployment numbers. We’re supposed to believe that everything is getting better because that number has come down from 10% to its current “official” level of 8.5%.
But when one digs into that number, it becomes apparent that one can only get to 8.5% if one is willing to write off over a million American workers who’ve somehow “vanished” from the labor force.
Or in other words, in context, with those workers being added back in as they should be, our unemployment rate is much higher than 8.5%. Dale has explained this many times. I’ve pointed it out a few times. Investors Business Daily does it this time:
In the 30 months since the recession officially ended, nearly 1 million people have dropped out of the labor force — they aren’t working, and they aren’t looking — according to data from Labor’s Bureau of Labor Statistics. In the past two months, the labor force shrank by 170,000.
This is virtually unprecedented in past economic recoveries, at least since the BLS has kept detailed records. In the past nine recoveries, the labor force had climbed an average 3.5 million by this point, according to an IBD analysis of the BLS data.
"Given weak job prospects, many would-be workers dropped out of (or never entered) the labor force," noted Heidi Shierholz of the Economic Policy Institute in her analysis of the BLS jobs report issued last Friday. "That reduces the measured unemployment rate but does not represent real improvement."
According to the BLS, the "labor force participation rate" — the ratio of the number of people either working or looking for work compared with the entire working-age population — is now 64%, down from 65.7% when the recession ended in June 2009. That’s the lowest level since women began entering the workforce in far greater numbers several decades ago.
That “labor force participation rate” hasn’t changed significantly. In fact, given our expanding population, it has probably remained at least the same. What the “official” number does is ignore the missing million plus workers and thereby misrepresent the true level of unemployment in this country. That official number also hides the real problem that IBD’s chart shows us – something unprecedented in past recoveries:
Labor force growth, as you might imagine, is one of the indicators of a recovering economy. Instead we seem to be in the middle of fooling ourselves that such a recovery is happening by viewing a falling “official” unemployment number as an indictor of progress in that area. I’m not sure how one can make that argument – in context, as provided by this chart.
IBD goes on to outline what this all means in the long run:
Not only does the shrunken labor force mask the real size of the unemployment problem in the country — since only those actively looking for work are counted as unemployed — it likely means that economic growth will be subpar going forward.
The weak job market has also helped depress wages. Real median annual household income has dropped 5.1% since the recession ended, more than the 3.2% decline during the recession itself — according to a new Sentier Research report.
The smaller labor force is just one of the problems with the current unemployment number. The other is that the jobs being created aren’t keeping pace with population growth. Since June 2009, the economy has added 1.4 million jobs, which is below the more than 2 million needed to keep up with population growth and far below the gains experienced at the same point in the previous 10 recoveries — which saw job gains average more than 4 million.
So, what has happened? Well there are all sorts of explanations being bandied about – Baby Boomers choosing retirement instead of seeking work, etc. But the fact remains, as IBD points out, “the labor force had been climbing until Obama took office. In fact, it peaked in May 2009, the month before the recession officially ended.”
That sort of dampens the “Baby Boomer retirement” explanation and leaves us again searching for an answer.
The whole point of this post, however, isn’t so much wrapped up in the answer, but the context of the problem. Or said another way, you’re being led down the primrose path with the “official” unemployment number and here’s why.
Context. A dirty word to those who would prefer to feed you false sunshine via their “official” numbers. But when you look at their numbers remember that you’re mostly looking at contextless nonsense.
Oh, and if you’re not depressed enough:
The Economic Policy Institute calculates that when you add the number of jobs lost in the recession and the growth in the working age population over the past few years, the "jobs deficit," as EPI calls it, "remains well over 10 million."
There’s also the problem of people who want full-time work not being able to find it. The BLS offers a different unemployment measure that counts not only those currently looking for a job, but those who’ve given up looking, as well as those who are underemployed because of the soft job market.
That measure has unemployment at a whopping 15.2%.
But don’t look for this administration to ever tell you that.
Last week Investors Business Daily ran an editorial claiming that the new 1018 page House health care reform bill had a provision (on page 16) that outlawed private insurance.
Well they caught some flak for that, with detractors claiming that they didn’t read far enough and had they done so they’d have found that wasn’t the case. IBD did the right thing and did indeed go back an revisit their claim.
Conclusion – they stand by their story. Here’s why:
Our impression was further confirmed Monday when Rep. Dave Camp, the ranking member on Ways and Means, told us that “any existing plan will not be able to enroll members.” There will be “a prohibition,” the Michigan Republican said, “on enrolling individuals in private health plans” after the bill becomes law in 2013.
It was also confirmed by Ways and Means staff director Cybele Bjorklund, who, in response to questions from Republican Rep. Paul Ryan of Wisconsin during a committee markup session, admitted last week that insurance providers “cannot create new policies outside of that window outside of the exchange.”
Many of those who have said we are wrong pointed to this health care exchange mentioned by Bjorklund as evidence.
But the exchange will not be a private market. It will be a program in which Americans can buy individual plans from private companies in competition with the “public option” provision of the bill that will provide taxpayer-subsidized coverage.
So in essence you’ll be limited to an insurer on the exchange, with all the regulation and mandates applied which is turn competing with a “public option” plan. You can’t just call up a private insurer and gin up your own brand and level of coverage.
Instead, you’re limited to the slim pickin’s the “exchage” will offer:
The exchange will be a highly regulated clearinghouse of providers that meet the government’s standards. Only those providers that follow Washington’s stringent guidelines will be allowed to join this exclusive club.
The government, through an unelected health choices commissioner, will set premiums, dictate benefits, determine deductibles and establish coverage. Exchange participants will be required to insure anyone who asks to be covered and to accept all renewals. Ryan believes the weight of the mandates will mean only five or six providers will be able to survive and sell coverage in the exchange.
Yes friends, as we’ve seen so often from this administration already, this is government picking winners and losers. From 1300 competing insurance providers today to “five or six”. That’s the government’s idea of “competition?”
And again, to reinforce the point, that is the only place you’ll be able to get your insurance should, for instance, you change a job. Or, as anticipated, your employer opts to quit providing it and essentially points you toward the exchange.
Even Henry Waxman admits this even while trying to convince reporters that IBD had it wrong in their first editorial:
In trying to prove the exchange will be a private market, the bill’s own supporters actually prove our point. Rep. Henry Waxman, D-Calif., complains in a letter that last week’s editorial is “factually incorrect and highly misleading” yet admits three paragraphs later that outside the exchange, providers “can’t continue to market” existing “policies to new customers.”
Restraint of trade by regulation. Insurers are limited to the “exchange” and if not on the exchange, they’re essentially not in the health insurance business other than servicing existing policies. Obviously as their pool shrinks, their prices will go up, causing their pool to shrink further. That’s competition? That’s a “market”?
As John Stossel said the other day:
Like the politicians, most people are oblivious to F.A. Hayek’s insight that the critical information needed to run an economy — or even 15 percent of one — doesn’t exist in any one place where it is accessible to central planners. Instead, it is scattered piecemeal among millions of people. All those people put together are far wiser and better informed than Congress could ever be. Only markets — private property, free exchange and the price system — can put this knowledge at the disposal of entrepreneurs and consumers, ensuring the system will serve the people and not just the political class.
Yet here again we have the central planners deciding what will be a “market” and of what it will consist. I hate to break it to them, but that’s not at all a market. It’s an artifice created by legislators to give the veneer of competition to a “market” that is decidedly not one.
Anything that is primarily steered by the hand of the government rather than the price signals that free markets so efficiently process on a daily basis would be an agency of the state.
The artificially legislated bars to entry will make this a captive process of the state.
Perhaps most damning to the argument of those who say we are wrong about the House bill outlawing new individual private coverage is the creation of the exchange itself.
If getting coverage from the exchange is the same as buying insurance in the private market, then why do we need it? The authors of the bill could have kept the private option by doing nothing.
In fact, if they really wanted a “market” and “competition” they should remove mandates and allow consumers to buy health insurance products across state lines. Allow the consumer to decide the type of coverage he wants and the amount he’s willing to pay. Review that with Stossel’s point about markets and you’ll begin to understand the power such a market would have in lowering insurance costs without the government having to do much of anything.
What Adam Smith said about the economic planner applies here, too: The politician who tries to design the medical marketplace would “assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”
They don’t want competition, folks – they want control. And history tells us where that leads.