OPINION:
The Commerce Department’s revised gross domestic product (GDP) report Thursday threw cold water on the glimmer of hope that the economy was breaking out of its doldrums.
The GDP - the broadest and most-watched measurement of America’s economic health - grew at a weak 1.8 percent in the third quarter. That’s down from the previous estimate of 2 percent and far from the 3 percent to 5 percent growth of previous recoveries that is needed to reduce an unacceptable unemployment rate in the New Year.
Unemployment declined last month from 9 percent to 8.6 percent, but that was largely because of the thousands of discouraged workers who stopped looking for jobs and thus were no longer counted in the workforce.
With unemployment benefit claims falling somewhat, corporate profits climbing and some modest increases in manufacturing activity, several prognosticators thought the lackluster Obama economy finally was turning around.
But many economists have since trimmed their year-end predictions for 2012, forecasting weak growth next year in the 1.5 percent to 2 percent range.
“Unfortunately, I think we’re going to see a slowdown over the course of next year,” said business economist Ethan Harris of Bank of America Merrill Lynch to reporters last week.
“Not only do we have the European crisis spilling over and hurting U.S. trade and confidence,” Mr. Harris said, but the U.S. economy is facing “homegrown shocks.”
Our economy certainly faces possible upheavals from Europe’s severe debt crisis, which shows little or no signs of near-term improvement, but also from a $15 trillion debt here at home and a line of budget deficits that is expected to climb by another $1 trillion in this fiscal year.
Not only are local and state governments continuing to cut their payrolls to combat continuing budget deficits, but Congress isn’t making much headway in its own struggle to curb out-of-control spending and future debt.
President Obama’s latest job-recovery plan has been rejected on Capitol Hill, and the White House is running on empty for any future economic growth proposals. Instead, Mr. Obama has been running around the country bashing the Republicans for opposing his proposed tax increases on investors, corporations and small businesses and playing the class-warfare card against wealthy Americans who he says aren’t “paying their fair share.”
For the record, the richest 20 percent pay most of the nation’s federal income taxes.
Mr. Obama came into office on a platform to redistribute the nation’s income by taxing the rich and big business - the people who invest the most and start businesses - to expand a sea of giveaway programs that he said would “transform America.”
He soon set about giving away billions of dollars to environmental companies and other special interests that he said would produce millions of new jobs. But he turned out to be someone you wouldn’t trust managing your 401(k), let alone a nationwide investment portfolio.
Many, if not most, of his federal investments created few jobs, and some big ones went bust, including the notorious Solyndra solar-panel company, whose stunning bankruptcy cost taxpayers half a billion dollars.
Thus, three years into Mr. Obama’s presidency, the once-great American jobs machine remains broken, a sizable portion of our workforce remains idle, and capital investment is on strike.
What this economy needs is a strong dose of venture-capital investment, the mother’s milk of a prosperous, growing economy and new job creation. Yet that is what Mr. Obama wants to tax and drive into oblivion.
Our economy has lots of risk capital ready and waiting, but it’s locked away in stock assets or cash accounts when it could be used to expand our economy and put people back to work.
One stunning set of statistics illustrates the critical role that disappearing investment has played in the recession. Between the fourth quarter of 2007 and the recession’s official end two years later, the economy shrank by just 5.1 percent, but investment expenditures fell by a job-crushing 34 percent.
“The subpar recovery has coincided with a historically weak investment recovery,” Harvard economist N. Gregory Mankiw wrote earlier this year in the New York Times in a revealing article headlined “How to Make Business Want to Invest Again.”
Compare Mr. Obama’s meek recovery period with the early 1980s, when we had a severe two-year recession that sent the jobless rate to nearly 11 percent.
“That recession ended in the fourth quarter of 1982. In the subsequent two years, investment spending grew by a total of 54 percent. By contrast, in the first two years of this recovery, it grew by half that amount,” Mr. Mankiw writes.
What made that happen? The big difference between the two recessions is that President Reagan cut income tax rates across the board and reduced taxes on capital gain that unlocked a flood of new business investments that sharply boosted economic growth and job creation.
We are on track to raise taxes on our entire economy if Mr. Obama has his way and the George W. Bush tax cuts of 2001 are allowed to expire at the end of next year. That would push capital gains taxes up to 20 percent and choke off new investment.
What the U.S. economy needs now is a strong dose of capital investment, the same medicine President Clinton signed into law in his second term, which led to a surge in new jobs and a budget surplus.
That won’t happen if Barack Obama, who remains ideologically opposed to this medicine, stays in the White House.
Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.
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