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We often forget that economics is a social science and not a hard science. Sometimes it’s easy for us to think these economic ‘theories’ or ‘laws’ are immutable as the number of protons and electrons in an atom of iron. But, they do a pretty decent job of studying the past, quantifying the numbers and coming up with a viable theory that can predict future economic activity.
Okun’s Theory isn’t perfect but it is based on the past economic behavior in the market, given all things remaining the same. The theory contends that job growth and contraction occurs in a measured rate as the GDP rises and falls. There is a direct correlation or even a possible causation. If there is economic growth of 2%, the unemployment rate should drop by .5%. Conversely, if there is a drop in economic activity, job losses should rise at a particular rate as well. It’s very sensible and seemingly reliable. What is fascinating is this little theory reveals so much about the nature of this administration and the nature of their economic program.
John Harwood of the New York Times wrote and article that tickles the fancy. Entitled ‘Mystery for the White House: Where Did the Jobs Go?” is an interesting foray into economic theory and practice. Harwood contacted several economists to find out why this economy shed so many jobs and why they are not coming back. Now being a New York Times reporter, I’m sure he believed the answer would lie with the mean, greedy capitalists and the poor, put-upon workers, but one economist he contacted may have said too much.
Harwood explains that “[u]nder Okun’s Law . . . the jobless rate at the end of 2009 whould have been around 8.3% instead of 10%. In other words, the amount of economic downturn we experienced should have only produced a rate of a little over 8 percent. In spite of all the hyperbola of the left, this economic downturn was severe but certainly not as severe as even that in the early 1980’s. The rate of decreased GDP and following increas in GDP in the first stages of recovery were such that we should never have seen such a big number. This we know now because the Obama administration seems to confirm it.
Christina Romer is the chairperson for Obama’s Council of Economic Advisors. She was one of the people contacted by Harwood to explain the ‘missing jobs.’ Now, while the writer never says Romer told him about Okun’s Law, she does confirm that in regards to the unexplained unemployment rate, “[w]e’ve done a lot of things to look at possible explanations.” So Romer is confirming the rate is higher than they expected, higher than the economic output numbers suggest, and higher than they planned for. She seems as baffled as the reporter as to these numbers.
There a three things we can glean from Ms. Romer’s confirmation in regards to this anomaly and the administration’s economic policy. First, they never thought this economic situation was that bad in the first place. Second, their economic policy was planned to curtail an economic situation that wasn’t so bad. Finally, they are clueless as to the cause of this economic imbroglio. Why are these three seemingly benign things important? Because all three things go directly to this administration’s handling and philosophy in regards to economic matters and those three things are indictments of that policy.
Now bear with me.
1. Administration knew the economic downturn wasn’t that bad. Before and after the 2008 election, Obama and his Democratic allies ran to every microphone they could find and argue in doomsday terms how this was the worst economic downturn since the Great Depression. Now, I looked at the numbers and thought, it’s not even as bad as the 1980’s, but, I’m not an economist and figured my understanding was incomplete and they had access to numbers that could show something more ominous. Now we know, because Romer just confirmed it, that these liars knew it wasn’t nearly as bad as they advertised. Every one of their trained poodles and lapdogs in the lame-brained media also yapped about it even coining the phrase “The Great Recession” to back Obama up. The contractions in the early 1980’s were far more severe and pervasive over the course of two years than what we’ve witnessed, and the growth that did pepper those years was more due to inflation than actual economic growth. But, the lie was published and perpetuated. We know the economic situation isn’t as bad because Romer confirms the unemployment shouldn’t have gotten so high and stayed there.
2. The stimulus plan was created to give us ‘just enough’ stimulus to pull us out of the recession. We were told that over and over again because the price tag was so high. Over three quarters of a trillion dollars is by far the largest spending bill ever passed. We were told it would stimulate the economy and change it so we would be rolling in the clover. And yet, we are not. There is anemic growth, far less than with any normal recovery, and no job growth whatsoever. What is the problem? Well, in the first place, there was no stimulus in the package. Most economists scratched their heads and couldn’t understand how it was called a stimulus package that contained, well, no stimulus. It was a bailout for state workers and union workers and poverty programs and grants to liberal organizations. It had almost no stimulus. We know that because the 850 billion dollar program, along with the almost 600 billion in additional spending and extra trillion in monetary stimulus, has produced a whopping 300 billion in economic growth. We pumped 2.5 trillion into the economy and it has only generated that much growth. We took the private sector money and we gave it to the public sector.
3. They don’t know what happened. This is why there are no jobs. The governmental/nonprofit sector takes enormous amounts of money to create one job. The private sector takes a little money and parlays it into a job. All that money we stole from the private sector investments and future capital and potential growth, was transfered to nonproductive areas of the economy. All this waste for nothing.
Romer knows this. She is no dummy. She may be a loyal socialist lackey, but she knows this economic program is what is stealing the jobs and bankrupting the economy. Yet, she pretends she doesn’t know. She has to because the socialists in charge are not going to empower the evil capitalists to grow the economy. Nor are the capitalists going to let the ‘little people’ have their hand in the mix. All this transfer of wealth has made it worse. It won’t get better either.
The Obamacare, the new financial strangle-ment, and the coming tax increases will stifle and kill any recovery. The business climate from the bullying and harassment are as poisonous and sick as you will find. The corporatists will continue to take the steady government money, but the rest of the economy will continue to stay in a half-coma. The Obama adminstration doesn’t understand this because they won’t listen to anyone but Karl Marx. They will silence any other voices, unless we isolate and repeal these travesties.
Our economy will continue to behave like a sick patient without decent food and care. Romer just admitted it. She may have meant it, she may have not.