14 July 2012

Grading Obamanomics on a Curve?

It seems quite remarkable that the Obama 2012 campaign effort has the temerity to argue for re-election with 8.2% unemployment, yet that is one of the few policy arrows in their quiver. Alas, Obama’s economic argument is far off the mark.

 To sway Congress to approve the $837 Billion Stimulus legislation, the Obama Administration vowed that the unemployment rate would not exceed 8.0%. Obviously that Obama promise was inoperative as the official unemployment rate hit 10.1% in the summer of 2009 and currently the U-3 number is 8.2%, but this does not include discouraged workers which is 14.9%

[L] Austan Goolsbee & President Barack Obama

Austan Goolsbee, the Obama Administration’s former Chairman of the President’s Council of Economic Advisors, has tried to temper any criticism concerning Porkulus.by essentially blaming Bush and claiming that the problem was worse than anyone in the Obama Administration understood in February 2009.  Goolsbee points to the official CEA report from late 2009 which shows that June 2012 unemployment was predicted to be 8.2%, leading people to believe that everything is going according to plan.

The problem with pointing to this revised economic forecast is that the same report anticipated that stimulus spending would vault American economic growth to 4.3% in both 2011 and 2012.  Those rosy scenarios have not panned out and the American economy has significantly underperformed.  In 2011, the GDP grew by only 1.7%.  In the first quarter of 2012, economic growth “skyrocketed” to 1.9%.  Economic analyst anticipate that economic growth with be below 2% in the second quarter of 2012.  Oops.  How is it that Obamanomics can demand an over $800 Billion Keynsian spending spree, garner only half the growth that it promised yet have the same unemployment rate than if Porkulous was not approved?

Playing with the unemployment numbers had mainly been the domain of the Department of Labor.  On Thursday mornings, the DOL would release unemployment numbers which are not as robust as expected, which will be chalked up to holidays or bad weather.  Some weeks, numbers would hint at the right direction and the Lamestream Media along with minions of the White House will crow that the recovery is continuing.  The problem is that unemployment numbers seem to be routinely revised upwards a couple of weeks later, without any fanfare.

The other trick to minimizing employment rates is through workers dropped from the unemployment rolls.    As the ninety nine weeks of  unemployment benefits expire, the people are dropped off the U-3 unemployment rate and such discouraged workers become part of the underreported U-6 roll.  Dropping long term unemployment benefits has accelerated has been accelerated as economic conditions are not as dire in individual states.  So if state unemployment rates does not spike over 10% during a three year period, the long term unemployment benefit disappears.  Since January, over 400,00 people have lost several weeks of the extended unemployment benefits, particularly in key battleground states such as Florida, Ohio, Pennsylvania, Colorado and North Carolina.

Bill Clinton signing Welfare Reform, 1996
This inconvenient truth about unemployment benefits may have partly inspired the Obama Administration’s ukase which ignores President Bill Clinton’s landmark achievement in "changing welfare as we know it."  The 1996 Personal Responsibility and Work Opportunity Act required that welfare recipients to work two years after starting to receive assistance, but some states enacted additional requirements to gain wider latitude over the program.

The Obama Administration recently issued “an official policy directive” which HHS Secretary Kathleen Sebelius to wave workfare requirements.  Unfortunately, such flexible authority in Welfare Reform is not authorized in the Public Law, but if the First Amendment did not stop Sebelius or the Obama Administration from threatening the free exercise of religion through the Contraception Mandate, why should the lack of authority in legislation slow them down?

Conservative Constitutional observers opine that it is likely that Obama’s workfare waiver will probably lose in court, adjudicating the infraction will take time and will not be concluded by the election.  If a couple of large “Blue” states, like California, New York and Illinois, avail themselves to the waiver, this regulatory legerdemain will have the serendipitous effect of tempering rising unemployment statistics through the election.

Instead of grading Obamanomics on a curve, maybe the electorate ought to offer a participation ribbon  and send someone “home” to Chicago.

h/t: AEI

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