Economy not fixed, another crisis brewing
By Peter Morici
Even Wal-Mart is too expensive for recession battered America.
Everyday low prices are no longer enough—middle class consumers are fleeing to Dollar Stores to stretch shrinking paychecks. Yet, Democratic politicians and economists who fashioned their failed policies tell us the economy is on the mend.
Janet Yellen at her confirmation hearing bragged that the economy has created 7.8 million new jobs, and assured Senators it's just a matter of time before the Federal Reserve stops printing money to purchase $85 billion in government debt. Incidentally this funds President Obama's stimulus spending and reckless expansion of government into health care.
She reassures us that Fed policymakers are just waiting for the right moment. That may be when hell freezes over, because Mr. Obama's spending and borrowing are visiting Eurosclerosis on America: slow growth, high youth unemployment and a level of debt that will force presidents in the next decade to either dry dock the Navy and stand down the army to pay all the interest and the entitlements he has created.
Washington will have to dramatically curtail most federal spending for road building, medical research, education and support for law enforcement to maintain the barest levels of government administration.
Welcome to Italy or worse Detroit's woes, generalized across America, where it takes nearly an hour to summons police in an emergency.
Since unemployment peaked at 10 percent in 2009, the economy has grown at a paltry 2.3 percent annual rate. By way of contrast, unemployment peaked at nearly 11 percent for Ronald Reagan, and over the same period as the current recovery he delivered 4.9 percent growth and 12 million new jobs.
College graduates driving taxis during the Carter years found bright new futures and ultimately gave us the New Economy of the Clinton presidency.
Reagan tackled ailments that besieged the country, whereas Obama ducks the economic challenges that hold back growth—a dollar that is overvalued, government regulations shutting down new oil and gas offshore and on the North Slope, and business regulations that are more burdensome than effective.
Dodd-Frank is forcing small and regional banks to sell out to their larger brethren who take the virtually free money the Fed is stuffing on their balance sheets to gamble and worse. Consider JP Morgan's mammoth losses in the London Whale trading debacle—and criminal activities. Many of its executives, and perhaps the bank itself, face criminal indictment according to the recent settlement of civil and regulatory claims with the Justice Department.
Economists across the spectrum propose reasonable solutions to the problems of Chinese and Japanese currency manipulation that swell U.S. store shelves and car showrooms with artificially-cheap, subsidized goods and steal jobs from American workers.
Printing lots of money and dolling out Medicaid and health insurance subsidies to families earning up to $100,000 a year, funneling money to states to hire more unionized workers to reliably vote Democrat, and standing idle while the IRS terrorizes conservatives who criticize the president's policies won't fix what's broke.
The combination is a prescription for the decline, distain and despair that gave Europe fascism in the 1930s, and if the Democrats beat down the middle class enough, don't think it can't happen here.
American democracy has always stood on a foundation of individual initiative, personal responsibility, and prosperity. Those are going away as Barack Obama changes America.
Peter Morici, an economist and professor at the University of Maryland Robert H. Smith School of Business, is a widely published columnist. He tweets @pmorici1