Wednesday, January 28, 2015

Wrong Again

Barack Obama, whose only role in the current private industry, fracking-led energy boom was to hinder its progress, nevertheless now takes credit for sub-$2 gas. Likewise, even as his regulatory, taxation and health deform policies impede economic growth and job creation, Obama brags that "the shadow of crisis is past.". Yet it is the government limiting policies such as the spending cap provisions of the sequester and Republican state level tax reform that have begun to spur the economy. (Remember how the onset of the sequester generated forecasts of gloom and doom?)

And now there's more bad news for Keynesians. An editorial in today's Wall Street Journal cites a study which credits the sudden surge in job growth to the expiration of extended unemployment benefits. Republicans in Congress were responsible for having the program lapse despite warnings from Democrats that doing so would have deleterious effects on the economy.

At a Dec. 13 (2013) event, Mr. Obama invoked the needy and explained that this supposed abdication was “bad for our economy and that’s bad for our cities, because if they don’t have the money to pay the rent or be able to buy food for their families, that has an impact on demand and businesses and it can have a depressive effect generally. In fact, what we know is the economists have said failing to extend unemployment benefits is going to have a drag on economic growth for next year.”
The White House Council of Economic Advisers forecast direct job losses reaching 240,000 as aggregate demand fell. The Keynesians at the Congressional Budget Office warned of a recession.
As late as a June 2014 rally in Minneapolis, Mr. Obama added that the Republicans had harmed “more than three million Americans who are out there looking every single day for a new job, despite the fact that we know it would be good not just for those families who are working hard to try to get back on their feet, but for the economy as a whole.”
Instead, job growth in 2014 was roughly 25% higher than any post-2009 year. Joblessness plunged to 5.6% from 6.7%. Net job creation averaged 246,000 a month. What happened?

The report authored by three economists at the National Bureau of Economic Research found that "the cut in unemployment benefit duration led to a 2% increase in aggregate employment, accounting for nearly all of the remarkable employment growth in the U.S. in 2014."

The authors find that this abrupt policy shift created some 1.8 million jobs, or slightly more than three of five net positions filled in 2014. The cuts also pulled a million workers who dropped out of the labor force back into the workplace. This reality happens to be the opposite of what Mr. Obama and other liberal sachems predicted.

As a famous folk singer sadly asked, in a radically different context,

"When will they ever learn?"

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