The North Mobile Post

    Republicans and Democrats both have their excuses for why the economic recovery has been so slow after the 2008 financial collapse. Republicans blame the policies of President Obama, claiming he has led an anti-business administration. Democrats blame Republicans for obstructing their economic plans in Congress. While they bicker over who’s to blame, America’s people are left to suffer.

    In general, economists blame weak demand for the current struggles. We are a consumer driven economy, and our consumers don’t have enough money to spend. It is a vicious cycle that has kept the country in neutral for the better part of three years. Most economists believe a push from the federal government is needed to kick start the economy. That was the theory behind the Recovery Act signed by President Obama. Experts say the original stimulus was to small, and that is why we have slogged along since.

    President Obama offered a second stimulus package called the American Jobs Act last year. With Republicans in control of the House, the bill did not have a prayer of passing Congress. The president claims the bill would create at least a million jobs. Economists say the first stimulus saved or created three million jobs, so his numbers are likely in the ballpark.

    The New York Times has an interesting article on another problem in the jobs market, and that is government jobs losses. Right now, there are 639,000 fewer government workers than there were in January of 2009 when President Obama took office. That is a shocking number of jobs lost for a president who is accused of growing the government.

    As the New York Times piece points out, government job growth usually picks up at this point in a recession, but that has not happened this time around. According to the Times piece, if government hiring mirrored that of the last two recessions (1990 and 2001 respectively), we would have an additional 1.4 or 1.9 million jobs right now. That would lower the unemployment rate to 7-7.3%.

    The current jobs situation is but a preview of what would happen if Mitt Romney’s economic plan was enacted. Governor Romney has called for tax and spending cuts to help balance the budget. While the stimulative results of tax cuts are still up for debate (Obama has passed many, and still has the Bush tax cuts enacted in the current weak economy), there is little doubt the effect his spending cuts would have. The loss in government jobs is due to spending cuts at the state level, and the effect that has had on the economy is questioned by few at this point.

    Europe has also attempted this method to handle their sovereign debt crisis. Many of the continent’s nations are now battling recession as a result. Economists have been screaming at the top of their lungs that cutting spending in this economic environment would be a disaster. Romney would be the first Republican to attempt this level of austerity in generations. Venerated conservative Ronald Reagan was a big spender, as was George W. Bush.

    Our trade policy has to take some of the blame for our current weak economic condition. As jobs have been off shored, workers have been left with few good options to replace them. The unemployed typically have to take a drastic reduction in pay in order to get back to work. This means less money in their pockets, and less consuming power. Thus, demand is weakened.

    I believe this effect is shown in the data the New York Times provides in its article. It took 32 months to recover from the 1990 recession. The 2001 recession took much longer at 48 months. People forget that the 2001 recovery was fairly weak, with some calling it a “jobless recovery”. Off shoring was felt during this recovery, with many workers taking lower paying jobs. The damage was hidden thanks to rising home equity, a resource that was crushed in the 2008 financial collapse.

    Given the current political climate, we seem destined to remain in neutral for some time. At this rate of job growth, it will take years to return to full employment. Government stimulus is not likely, as Republicans won’t go for it and will probably at least maintain control of the House. The only chance at an outside boost will come from the Federal Reserve. Fed chairman Ben Bernanke gave hints recently that the central bank may be ready to act in its next meeting.

    Demand is the key. It is why President Bush told Americans to go out and shop after 9-11. It is why President Obama spent over $700 billion on the stimulus in 2009. Without robust demand, our economy will continue to sputter.

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