OPINION:
The modest uptick in economic growth is a welcome breather in the bleak Obama economy, but it won’t reduce unemployment anytime soon.
The Commerce Department’s report Thursday that the gross domestic product (GDP), the broadest measure of the economy’s performance, grew at an annual rate of 2.5 percent. It means the economy is still weak - far from the 3.5 percent to 5 percent growth needed to put millions of unemployed Americans back to work.
The government’s estimate, and that’s what it really is, will be revised at least twice in the months to come, and it may well be less than 2.5 percent. But whatever the real rate may be, economists aren’t expecting the GDP to take off in the last three months of this year or next year, either.
“We are looking at very disappointing growth over the next year. It will be far short of what is needed to get businesses to hire more aggressively,” said Mark Zandi, chief economist at Moody’s Analytics.
The Obama administration will, no doubt, try to turn this 2.5 percent rate into “morning in America” campaign ads, but the long-term unemployed know the difference, and so do top economic analysts.
This is what passes for growth in the Age of Obama. This is about as good as it’s going to get in his presidency. The GDP rate “implies that the economy is growing only about as fast as it is capable of in the longer term,” writes Washington Post economics reporter Neil Irwin.
“But it’s not fast enough to claw out of the deep hole of 9 percent unemployment,” Mr. Irwin writes, adding that it “isn’t strong enough to bring down unemployment meaningfully, even if it were sustained.”
The Gallup Poll’s daily survey shows that nearly three-quarters of Americans say the economy is getting worse. The Conference Board, a private research firm, reported Tuesday that consumer confidence fell again this month to the lowest level since March 2009. That’s bad news for President Obama, who’s had nearly three years to get the economy and job creation up and growing again but with little success.
The economy is still limping along and almost went into a stall in the first half of this year. Mr. Obama’s jobs plan No. 2, a poisonous brew of higher taxes and more spending (that even several Senate Democrats oppose) is going nowhere in this Congress. A hastily assembled campaign agenda of executive orders are minimal initiatives at best that are not going to move a $14 trillion economy or create many new jobs.
The real unemployment rate, including those forced to work just part time, is at 16 percent. The U.S. Census Bureau said last month that the number of Americans in poverty has risen to 15.1 percent of the population and includes 22 percent of all children - the highest it’s been since 1993.
Mr. Obama’s job-approval polls are stuck in the 40 percent to 41 percent range, and no president since Franklin D. Roosevelt has won a second term with unemployment as high as it is now.
All of this has opened up a much-needed debate on tax cuts among Republican presidential candidates who’ve proposed tax incentives to unleash capital investment that will trigger stronger economic growth and job creation.
Business executive Herman Cain has his 9-9-9 flat-tax plan that would impose a 9 percent national sales tax. If it were added on top of existing state and local sales taxes, millions of mid- to lower-income Americans who are living paycheck to paycheck would pay higher taxes, according to many economists and the Wall Street Journal.
Texas Gov. Rick Perry, a latecomer to the presidential sweepstakes, has hastily thrown together a 20 percent flat income tax plan in an attempt to rescue his sagging bid for the nomination.
Mr. Perry would give taxpayers the option of taking the flat rate or filing under the existing system with its loopholes, credits and tax giveaways. Most of the wealthy of course “don’t pay 20 percent now, so don’t count them to volunteer for Mr. Perry’s plan,” economist Peter Morici says.
Neither will the 40 percent of lower-income Americans who now pay no income taxes.
To its credit, Mr. Perry’s plan calls for slashing government spending to 18 percent of GDP, but the bipartisan “supercommittee” can’t seem to agree on a $1.2 trillion deficit-cutting savings package, let alone the sizable spending cuts he’s called for.
There is much appeal to the flat income-tax idea among a lot of Americans who think it would insert fairness into our tax system, but the unmoving political reality is that it stands no chance of passing Congress, now or in the foreseeable future.
What can pass Congress is a full-scale overhaul of this monstrously complex, inefficient and inherently unfair tax code. A simplification plan is needed that would eliminate costly special-interest tax breaks and other loopholes, and lower tax rates accordingly.
Mitt Romney, the presumed front-runner, has proposed a far broader plan that calls for expanding trade, domestic energy and deregulation reforms, cutting corporate taxes to 25 percent, erasing capital gains taxes on incomes under $200,000 and ending the estate tax.
He’d keep the Bush income-tax rates for now, while developing a lower-tax rate-reform plan that can muster a majority on Capitol Hill.
Mr. Obama wrongly thought he could spend his way out of the recession by doling out borrowed tax dollars on parts of the economy; i.e., public-sector jobs and infrastructure projects here and there. He failed miserably.
The formula for growth and jobs is to free the economy from oppressive taxation and regulation and unlock trillions of dollars in private risk capital that is the lifeblood of a prosperous nation.
Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.
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