Commentary Magazine


Contentions

But What About the Economy?

Unemployment is soaring while the president and Congress contemplate a massive energy tax and regulatory scheme and a government take-over of health care. Investors are watching and seem to have concluded that the economy is not getting better anytime soon:

Stocks have drifted lower in recent days as the market’s confidence about the economy took hits from a poor jobs report for June, waning consumer confidence and plunging commodities prices.

[. . .]

“Uncertainty has crept back into the picture,” said Carl Beck, partner at Harris Financial Group. “We started to get some data that put a damper on some of the optimism that had been growing about the economic recovery and that sort of put everything on hold until we start hearing from companies.”

The Dow fell 161.27, or 1.9 percent, to 8,163.60. It was the lowest finish for the blue chips since April 28.

There is reason to be gloomy when one considers the overall economic picture. The New York Times reports:

“We’re a little concerned,” said Nicholas Bohnsack, sector strategist at Strategas Research Partners. “The economy has moved toward less-bad territory, but it’s struggling to move into good, or a recovery mode.”

[. . .]

Underscoring concerns about financial stocks and consumer credit, the American Bankers Association said that delinquency rates on home equity loans, auto loans and others rose slightly in the first three months of the year as people lost their jobs and fell behind on their debts. In all, 3.23 percent of loans were 30 days behind or more through the end of March, up from 3.22 percent a quarter earlier, the group reported. . . As earnings stagnate and consumers put more of their disposable income into savings — 6.9 percent, according to recent government figures — analysts are concerned that corporate revenue will flatten or keep falling. And many corporations will be able to beat earnings expectations only by cutting jobs and other costs, which could worsen the already weak job market.

The president assures us there is “nothing” he would have done differently on the economy. (Nothing?) His agenda is devoid of any measures to encourage private-sector growth or spur employment. He would rather devote his energies to government-run, universal health-care. But his domestic priorities are spectacularly ill-suited to assist in the economic recovery. As Michael Gerson writes:

Initially, Obama counted on an atmosphere of economic crisis to grease the passage of any legislation he pronounced an economic need. But it hasn’t worked out that way. Whatever their virtues, restricting carbon emissions and expanding the health entitlement do not constitute a direct response to America’s financial and economic failures. No economic theory suggests that a round of new federal regulations and entitlements would result in a burst of economic growth.

Continuing the spend-a-thon and panoply of measures hostile to free-market activity seems doomed to fail. When will it be time to hit the “reset” button on Obama’s domestic agenda? If he does not, the voters may have to in November 2010.