Economic Recovery Moving in Right Direction

by John M. Curtis
(310) 204-8700

Copyright April 3, 2011
All Rights Reserved.                                         

             Moving in the right direction, the nation’s unemployment rate dropped in March to 8.8%, a one-tenth improvement from February, adding 216,000 non-farm jobs.  While there’s still evidence of the Great Recession around the country, there are concrete signs that Federal Reserve Board Chairman Ben S. Bernanke stewardship is paying off.  His low interest rate policy and “quantitative easing” or repurchasing of U.S. treasuries, has kept the Dow Jones Industrials growing at the fastest pace since 1999.  “If we continue to see reports like this, the Fed could tighten as early as next quarter,” said Ethan Harris, head of the developed markets at Bank of America-Merrill Lynch, optimistic about future growth.  Today’s positive economic news redeems Treasury Secretary Tim Geithner and Bernanke’s policies that have helped grow the stock market and promote solid economic recovery.

            House Speaker John Boehner (R-Ohio) speaking for the GOP today blasted President Barack Obama’s economic policies for too much spending.  Boehner insists that the key to private sector job creation is passing Republicans spending cuts to bring down the whopping $1.5 trillion budget deficit.  Republicans hasten to criticize Obama for military spending on Libya, while giving former President George W. Bush a blank check on spending in Iraq and Afghanistan.  Today’s unemployment report showed improvement in private sector jobs.  “The speed of this decline in the unemployment rate is putting pessimists to shame,” said Robert Brusca, chief economist at New York City–based FAO Economics.  With the unemployment report showing a drop in government jobs, it makes you wonder about Boehner’s plan for a hiring freeze and to slash more government spending.

            Bashing Obama’s economic policies are fair game heading into next years’ presidential elections.  No one likes runaway budget deficits, currently at about 10% of the nation’s Gross Domestic Product, driving down the U.S. dollar, especially against the euro.  Boehner and others know that federal budget deficits don’t cause unemployment.  Government spending promotes job growth in the public and private sector employment.  Boehner surely knows that once the financial system crashed in 2008 under former President Bush’s economic policies, Bernanke had no option other than bailing out the nation’s biggest financial institutions, causing the biggest single spike in deficit spending.  Spending on the Afghanistan and Iraq wars also put pressure on the federal deficit and national debt.  Ending both wars would save the federal treasury countless billions in wasted tax dollars.

            Washington’s current budget slashing mood is bound to hurt economic recovery by adding to unemployment in the public sector.  Instead of slashing vital government spending, it’s more productive to add to private sector and government payrolls.  Whether working for the government or private sector, employed taxpayers expand government tax receipts.  Cutting either side hurts government tax receipts.  Bernanke’s low interest rate and liberal government spending policies have kept the stock market growing since Barack took office Jan. 20, 2009.  In case anyone forgets, it was healthy capital gains revenue in the late ‘90s that gave former President Bill Clinton the tax revenues needed to run large surpluses.  Keeping markets growing now is the best way to assure more long-term private sector employment and the capital gains revenue to reduce budget deficits.

            Economists know that robust stock market growth enables publicly-held companies to add to payrolls.  Bear markets cause companies to streamline and reduce payrolls.    While there’s nothing wrong with more efficiency, there’s something wrong with companies expecting double the work from employees.  Budget woes across the nation are forcing states, like California, New York, Texas and Wisconsin, to reevaluate state jobs, salaries and pension structures that have left states with unsustainable budget deficits.  To keep the economy rolling, states can’t slash payrolls without causing adverse effects on the federal tax receipts.  Instead of only bashing unions, states should be doing top-down audits on all state jobs and consultants to get control over payrolls.  Unions and collective bargaining is only one small part of why many states can’t meet current payroll and pension obligations.

            Budget slashing is no long-term fix to economic recovery and the U.S. economy.  White House, Congress and the Fed must look for more ways to keep the stock market advancing, providing the capital needed to add to payrolls.  Instead of squabbling over budget cuts, the White House and Congress should be looking at getting more foreign manufacturers to set up shop in the U.S.  Foreign carmakers are ahead to the curve building factories and manufacturing in the U.S.  Barack must hold a White House economic summit to figure out how to create more foreign manufacturing jobs in the U.S. Working with Fed, the White House and Congress need to solve the problems of outsourcing, where U.S. companies save money by sending jobs overseas.  Only by adding more manufacturing jobs and inducing U.S. companies to use domestic labor, can the government expect more tax revenues.

About the Author

 John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

©1999-2005 Discobolos Consulting Services, Inc.
(310) 204-8300
All Rights Reserved.