Post-Election Economy - Prof. Peter Morici

On Friday the Labor Department is expected to report the economy added 125,000 jobs in October and unemployment increased to 7.9 percent.

Hurricane Sandy should little affect these estimates as employer and household surveys were conducted earlier in October. Going forward, the hurricane will depress employment but only until the rebuilding begins in earnest. Rebuilding will raise employment and incomes later in 2013, but not enough to substantially alter the national economic picture.

If President Obama is reelected and delivers on campaign promises, the jobs picture will worsen.

The Long-Term Trend

Since peaking at 10 percent in October 2009, the jobless rate has fallen mostly because 6 million adults have chosen not to look for work. But for this phenomenon, the unemployment rate would still be 9.7 percent. More than 8 million part-time workers would like full-time work but can't find it. Adding in those folks, the unemployment rate is 14.7 percent.

In 2007, the last year before the financial collapse, the deficit was $161 billion with the Bush tax cuts in place, wars in Iraq and Afghanistan, and Medicare prescription.

Over the last four years, the deficit has averaged $1.3 trillion. Additional tax cuts, such as the $95 billion payroll tax holiday, subsidies for green energy and electric cars, and social and regulatory programs, promoted by President Obama, caused this red ink.

Even with huge stimulus, convincing millions they don't want a job and compelling desperate workers to settle for part-time work has been the Obama Administration's most effective jobs program.

Though Congress may avoid sequestration, some temporary tax cuts, such as reduced Social Security taxes and elements of the Bush tax cuts benefiting high income families, will likely lapse and some combination of savings in entitlements and defense spending will be accomplished. Overall, these would lower the deficit in the range of $300 billion.

If reelected, President Obama promises additional stimulus—aid to state budgets under the guise of teacher retention, infrastructure projects and more subsidies for alternative energy projects.

Another Recession?

When the dust settles, the deficit should be unchanged. However, the tax increases will come quickly but the additional spending will arrive with considerable lag. As take home pay is slashed and consumer spending slows, the economy easily could be thrown into a second, deep recession—double-digit unemployment by any measure. Already, the sales of S&P 500 companies, which account for about 80 percent of publically traded enterprises, are flat, and business investment fell in the third quarter. Sustaining profits will require layoffs.

By mid 2013, the economy may well be in a recession from which it cannot easily be resurrected—a depression—caused by fundamental problems not addressed by President Obama. The growing trade deficits on oil and with China have been a huge drain on domestic demand, and those kill nearly 10 million jobs.

The Romney Alternative

If elected, Governor Romney promises to tackle China's undervalued currency and other mercantilist policies that run up the U.S. deficit with the Middle Kingdom, and open up more offshore and Alaskan oil reserves for development. Those polices would quickly boost demand and get the economy back on track.

Longer term, Romney policies to lower the trade deficit would substantially increase R&D spending—enough to permanently boost U.S. growth by several percentage points. An economy growing at 4 or 5 percent a year, instead of its current 2 percent, would have far more resources to address issues like health care, the solvency of Social Security, an adequate national defense, and space exploration.

The choice this election is simple—more of the same, high unemployment and perhaps a permanent recession, or a new course that gets the economy growing more rapidly again.

Peter Morici is an economist and professor at the Smith School of Business, University of Maryland 

U.N. Levies (Taxes) Through Treaty

Only the President and the Senate need to approve. The people's Representatives will not have a vote!

A “Robin Hood” tax on financial transactions. Every time you buy or sell a stock or bond or exchange money while traveling, you'd be hit with a financial transactions tax, a percentage of your transaction, that would go to the U.N.

A global tobacco tax with the funds to flow to the World Health Organization (WHO).

A U.N.-imposed tax on billionaires all over the world. And don't delude yourself for a moment that it is only the 1,600 current billionaires who will be hit. Once the precedent of a U.N. tax on U.S. citizens is approved, it will gradually grow downwards to cover more and more Americans. Again, the funds will go to the U.N.

Under the Law of the Sea Treaty, up for Senate ratification in December of the lame-duck session, offshore oil-and-gas wells would have to pay a proportion of their revenues to the International Seabed Authority, a U.N.-sponsored organization, which would distribute the loot to the Third World.

A carbon tax on all U.S. or other foreign commercial or passenger aircraft flying to Europe. Nominally to fight climate change, these revenues would also go to the Third World.

A mandatory assessment to be imposed on the U.S. to compensate Third World nations for the costs of reducing their carbon output.

And where would the money go? To so-called less-developed countries. The taxes are part of a global plan of redistribution of wealth from the Northern Hemisphere (the U.S., Europe and Japan) to the Southern Hemisphere (Latin America, Africa and South Asia).

Romney Likes Big Bird!

One must listen carefully to the spin that the media places on an idea. The question of whether the federal government has a right to fund public broadcasting (PB) is such an idea.

Certainly there is no enumerated right in the Constitution giving the federal government the right to create and fund public broadcasting. Just as the Bureau of Labor Statistics (BLS) and the Energy Information Administration (EIA) are indirect employees of the PotUS, they are employees of his Secretary of Commerce and Secretary of Energy respectively. The career civil servants in PB, BLS and EIA depend on political appointees of the President for advancement. It is tempting for the party in power to ensure that the messages and statistics are presented with as much positive spin as possible – or simply faked if close to an election. The decrease in unemployment from 8.1% to 7.8% is a case in point. Only 114,000 jobs were created. This is anemic. Only a dramatic increase in self-employed decreased the U-4 rate. September is also the month for dramatic changes in school-related employment. The 7.8% number was prominent in the BLS report. Arithmetic was necessary to clarify the reasons.

Candidates are reluctant to talk about specific cuts which they would make if elected. Gov. Romney gave a specific example in the first debate. He said that he would not fund PB if it meant having to borrow money from China. The media attacked him for wanting to “kill” Big Bird. Gov. Romney stated that the liked Jim Lehrer, the debate moderator, and Big Bird, but there was a principle (Law) which overruled emotions. By contrast, President Obama has shown obvious disdain for the Law.

114,000 New Jobs; Unemployment to 7.8%

The entire drop in the unemployment rate can be attributed to a surprise rise of 582,000 in part-time workers. U-6 unemployment remained at 14.7%. U-6 includes part-time workers who want a full-time job.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 4.8 million and accounted for 40.1 percent of the unemployed. After 26 weeks unemployment compensation must be paid by taxpayers. The Obama administration has raised the limit to 99 weeks. Many go on Social Security Disability after the 99 weeks further weakening Social Security's future solvency.

Debt - Senator Barack H. Obama, March 2006

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America 's debt weakens us domestically and internationally. Leadership means that, 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

~ Senator Barack H. Obama, March 2006

Education - John D. Rockefeller

"To help an inefficient, ill-located, unnecessary school is a waste...it is highly probable that enough money has been squandered on unwise educational projects to have built up a national system of higher education adequate to our needs, if the money had been properly directed to that end."

Progressive-socialism v Freemarket Capitalism

“The United States and other industrialized nations have experienced an employment shift away from the goods-producing sector and toward the service-providing sector in recent decades.” This is from the Bureau of Labor Statistics within the Department of Commerce. I wonder how much money it cost us for them to gather this data. I ask because I read Future Shock by Alvin Toffler in the early 1970s. He stated 42 years ago that the industrial age was waning just as the agricultural age had over a century before. It is a fact that as efforts mature, advances are implemented which increase productivity but decrease the need for manual labor. For agriculture it was the tractor replacing the team-driven plow. For industries it was first steam and then electrical or diesel engines. Now it is computers, robotics and the global economy. Productivity is higher; quality is better; workers are safer.

Ignorant people – who don't read folks like Toffler – claim that they are being forced out of business by “un-fair” competition. Freemarketers claim that competition makes the market more efficient. Progressive-socialists claim it is a wrong to be righted by total government control. They want to make everyone equally inefficient. Rather than equality of opportunity, they want equality of results.