Monday, January 19, 2015

What six years of Barack Obama's economic incompetence has wrought

Now that Barack Obama’s first six years are over it might be nice to see what he has wrought, and compare him to another iconic president, Ronald Reagan.

When Barack Obama took office in 2009 65.7% of Americans were participating in the laborforce. (This is called the Labor Force Participation Rate – LFPR – which includes those working and those looking for work.) Six years later that number was down to 62.8. When Ronald Reagan took office in 1981 63.9% of Americans were participating in the workforce and six years later that number had grown to 65.6%.

Unemployment is the measure of those in the laborforce looking for work but can’t find it. At first blush Obama seems to be doing well using that measure. In February 2009 unemployment sat at 8.3% and by November 2014 it had dropped to 5.8%. In February 1981 Ronald Reagan took office with an unemployment rate of 7.4%, which by November 1986 had only dropped to 6.9%. Using the unemployment measure seems to suggest Obama’s policies trump those of Reagan.

Upon closer inspection however… not so much. The LFPR tells the story – or really its inverse does. That is the number of those not working who must be supported by workers, unless they were independently wealthy. A 65% LFPR indicates that 35% of the population would be supported by workers. In the case of both Obama and Reagan the US population grew by approximately 11 million people over their first six years in office. Under Reagan, because job growth was so strong – 11 million new jobs – the total number of people who needed to be supported by those working (unemployed + those not in the workforce) remained steady at 93 million throughout those six years. Under Obama however, because job growth was so anemic – 3 million total new jobs – the number of people who needed to be supported by those working actually jumped 8 million from 121 million to 129 million. That means that under Reagan the number of workers in the US grew by 11 million while the number of non workers remained steady. Under Obama the number of workers grew by 3 million while the number not working grew by 8 million.

But some might argue that Obama faced a tougher economic situation than did Reagan. Not really.

When Ronald Reagan took office inflation was 10.1% and six years later it was 1.9% while under Barack Obama inflation started out near zero and has remained there throughout his terms. What’s ironic about this tame inflation is that it has much to do with dropping prices for things like big screen TV’s, mobile phones and oil, – the latter despite Obama’s best efforts – while core items that the poor spend most heavily on such as meats, poultry, fish, eggs and electricity, are hitting all time record highs.

When Reagan took office interest rates were 19.5% and by his sixth year they were down to 7.5%. When Barack Obama took office interest rates were at 3.25% and have essentially stayed in that area since. That extraordinarily low rate is in large part due to the Fed’s pumping of $4.5 trillion into the American economy since 2008, allowing the federal government to borrow like a drunken sailor.

Of course that pumping also has the impact of juicing the GDP numbers as there is more borrowing and investment going on than the fundamentals would otherwise support. And it’s in this easy money environment that Barack Obama’s biggest failure can be seen. In the six years he’s been president GDP grew by a total of 22%. Compare that to the same period under Reagan, where GDP grew by a whopping 42%. Of course Reagan did add substantially to the national debt, growing it by 6% of GDP during each of his first six years. But Obama borrowed even more, growing the national debt by 8% of GDP each of his first six years. Add to that the 5% the Fed kicked in each year with its Quantative Easing and it’s almost impossible understand how GDP could grow as slowly as it has under Obama.

The key however is hiding right in plain sight. Q4 GDP numbers give it away. The administration crows that the economy grew at a 5% clip in the last quarter of 2014. Not bad. What they don’t tell you is that fully half that uptick came specifically as a result of coerced Obamacare spending. Obamacare is a microcosm of what’s wrong with Obama and his administration. On the one hand it kills jobs, increases prices, eliminates choices and puts private practice doctors out of business. On the other hand, those very same regulations force Americans and companies to spend more on its mandates, which has the result of juicing GDP. So by regulatory fiat the government can remake the economy and claim Americans are better off in the process by juicing GDP numbers. Now imagine the same thing with hundreds of thousands of regulations over the last six years and you understand just how it’s the case that GDP seems to keep growing but Americans seem poorer.

To put the cherry on top of this indictment of Barack Obama’s economic incompetence is a quote from Ronald Reagan: “Welfare’s purpose should be to eliminate, as far as possible, the need for its own existence”. Barack Obama likely disagrees. When he took office there were 32 million Americans on food stamps. Today that number stands at 46 million. In six years Barack Obama’s economic policies have so damaged the country that 5% of Americans have been added to the food stamp rolls while fully one third of the country receives some form of welfare. All of this while the rich are paying more in taxes than ever and half the country pays no income taxes at all and the middle class try to keep their heads above water.  That's what happens when your policies bring about the slowest economic recovery in the last half century

Too bad no one saw this coming…

Monday, January 12, 2015

From the Charlie Hebdo attack to your local street corner: Multiculturalism as a fount of bloodshed

There has been much commentary about the events in France over the last week. One of the major causes for the motivation behind the home grown terrorists who struck the offices of Charlie Hebdo is the fact that in many places in France, France is something of a foreign country. There are hundreds of “no-go” zones in the country where French police won’t go and French law has been supplanted by Sharia law. It is from these areas of largely disaffected, often unemployed youth on the government dole where much of this homegrown hatred emanates. These young people feel disconnected from the larger society, have little or no vested interest in the success of the larger society and often times are vocally disdainful of it.

In a very similar way, the United States is covered with neighborhoods where youth unemployment is sky high, where families spend generations on the government dole, and where there is little allegiance to the nation as a whole or the larger society. In France many of the young Muslims call themselves Muslims or Algerians and they rarely call themselves French. In the United States the hyphenated American such as African-American or Hispanic-American has replaced the designation of American for many.

While in the United States there may not be a religious component of that separation, there certainly is one similarly powerful: the cry of racism. The rallying cry of racism as the cause of the problems in various black and Hispanic neighborhoods around the country function in exactly the same way that radical Islam ideology does in France and other European nations. It drives separation. It drives anger. It drives a devaluation of the lives of others.

The separation is no accident. From Oakland’s effort some years ago to allow Ebonics in schools to Cinco de Mayo celebrations where the American flag is prohibited to college admission standards that vary by race to schools that teach American history is nothing but a chronicle of hate, prejudice and thievery against minorities and the poor; it’s little surprise that many young minorities feel like disconnected from the American Dream and larger society as a whole.

The anger is palpable. From race riots of the 1960’s to the Rodney King riots in 1992 to the recent riots in Ferguson, MO that inspired demonstrations across the country, many minority communities seem to be built on a tinderbox just waiting for spark. Extraordinary unemployment rates act as the tinder filling those boxes. In each case the spark was provided by the killing or striking of a black person by white cops. The resulting anger and destruction not only destroyed the neighborhoods of the rioters, but exacerbated the feeling of separation from the larger community as a whole. In the most recent case that anger resulted in demonstrations around the country and in New York with protesters chanting “What do we want? Dead cops! When do we want them? Now!” Soon thereafter they got their wish.

The devaluation of lives is heartbreaking. While Islamic terrorists killed 17 people in Paris last week, across the United States, in minority communities from Boston to San Diego young men are killing one another by the dozens every single week of the year. And those are only the thousands who die. Citizens of all sorts are assaulted, threatened and forced to try to live a normal lives in those struggling neighborhoods where drugs and crime and staggering unemployment are the norm rather than the exception.

Whether radical Islamic terrorists who seek to stifle free speech and murder infidels or a thug on an American street corner who is willing to shoot someone in cold blood because they wear a different color or have something coveted, both are products of a failed policy of multiculturalism. In France the left shut their eyes as Muslim communities separated from France and became isolated islands of radicalism. In the United States the left, through their destruction of America’s schools, their overregulation of job creating businesses, their demonizing of the police and through their distilling American history down to a chronicle of discrimination against blacks, Hispanics and Indians, have created a large swath of the population that has little comprehension of what the American Dream is, few tools with which to pursue it if they did, and most dishearteningly, little vested interest in the success of the country as a whole. In either case, liberalism and multiculturalism are the founts from which much bloodshed has been spilled. For anyone paying attention this should be no surprise.