President Barack Obama was talking economy again the 24th of July. This is typically the topic he comes back to after every other topic he could discuss seems to be one about which he should zip his soup cooler. The bromides flew like Japanese Beetles during an infestation. He seems to have noticed the high level of inequality between the average American and the typical student at the Punahou Academy. He dusts off his old copy of Resnick and Wolff below.
“This growing inequality isn’t just morally wrong; it’s bad economics,” he told his Galesburg, Illinois audience. “When middle-class families have less to spend, businesses have fewer customers. When wealth concentrates at the very top, it can inflate unstable bubbles that threaten the economy. When the rungs on the ladder of opportunity grow farther apart, it undermines the very essence of this country.”
Having rammed his signature healthcare reform bill through Congress and thereby commoditized human capital at a rate most businesses couldn’t afford, President Obama now furrowed his brow in deep worry over the fact that businesses weren’t hiring the now-unaffordable full time employee. You see, when wealth concentrates at the upper strata populated by your typical maxed-out contributor to the Democratic Party, really bad and unfair things happen.* Robert Samuelson describes these unpleasant outcomes below.
This recovery, compared to its post-World War II predecessors, has been exceptionally weak. The number of part-time workers who would like full-time jobs (defined by the Bureau of Labor Statistics as 35 hours a week or more) has dropped very slowly. In May 2009, it peaked at 9.1 million; as of last month, it was 8.2 million. Moreover, the level was almost twice as high as before the recession — 4.2 million in December 2006. As Zuckerman argues, this suggests many companies are quietly shifting employment practices.
Firms seek to minimize fixed labor costs by using contractors, “temps” and part-timers. Obamacare intensifies the pressures, because the incentives against hiring full-time workers are so obvious. A survey by the New York Federal Reserve of manufacturers in the state found that 6.5 percent had already refrained from hiring or had fired workers to stay below the 50-worker threshold; 5.4 percent said they had substituted some part-time for full-time workers. (These firms apparently represented a large share of the companies subject to the threshold, because most firms had more than 50 workers. The average firm employed 218.) A survey by the Philadelphia Federal Reserve produced a similar response.
Barack Obama has failed to solve growing income inequality for two reasons. He has made it harder for average, unconnected Americans to actually earn income. This has happened through the disincentivization of full-time hiring via hostile regulatory activity aimed at energy producers, Obamacare, and the egregiously heavy-handed selection of winners and losers via the so-called Stimulus of 2009. He has also incentivized the permanent jobless life to a much greater extent than his predecessors. So people who aren’t already filthy rich in America are less likely to get there and less likely to die if they fail. The Wall Street Journal article referenced above describes the end result of these twin policy failures of Mr. Obama’s tenure in office.
The bad news is that median real household income is $2,718, or 5%, lower than the $54,218 median in June 2009 when the recession officially ended. Median incomes typically fall during recessions. But the striking fact of the Obama economy is that median real household income has fallen even during the recovery.
The food stamp and disability rolls have exploded, which reduces inequality but also reduces the incentive to work and rise on the economic ladder. This has contributed to a plunge in the share of Americans who are working—the labor participation rate—to 63.5% in June from 65.7% in June 2009. And don’t forget the Fed’s extraordinary monetary policy, which has done well by the rich who have assets but left the thrifty middle class and retirees earning pennies on their savings.
So having gone the wrong way for four and a half years in office, the question then can asked “Why will this time be different?” Michael Barone seems to suggest that this was the wrong question. We should have asked “Will there be any different outcome this time?” To which the highly probably answer is “Thanks for playing.” Here are the retread policy proposals in Barack Obama’s latest jumpstart of the dead yard-car that is American job creation.
Obama called for increasing the minimum wage…. But in real life it tends not to create but to destroy jobs, especially for young people with few skills and little work experience. He also called for job retraining, a Community College to Career Initiative. Unfortunately, studies have shown for years that government job training programs aren’t very effective. Obama mentioned in passing his administration’s efforts to connect 99 percent of students to high-speed Internet. Amazingly, Obama called for more money to create jobs in wind and solar energy. No mention was made of the hundreds of millions in loan guarantees lavished on the now bankrupt Solyndra…
President Barack Obama is a man who has learned from the past. He has learned to continue pumping money into failed boondoggle programs that funnel wealth into the pockets of his allies. From the point of view of the Government Bureaucrat; ensconced in the K-Street Elysium, the last four years have featured quite the recovery. Out beyond Panem, this outlook isn’t shared by the silly provincials. But as long as these people aren’t smart or organized enough to stop this plundering, the beatings will continue regardless of whether morale improves.
And meanwhile amongst the elites we read the following:
Hedge fund billionaire Steven A. Cohen did not let the filing of criminal charges against his $14 billion SAC Capital Advisors get in the way of a party this weekend at his vacation estate in tony East Hampton, New York…
And why should an SEC indictment stand in the way of a good, sodden bash? The Steven Cohens of the world own this economy. Barack Obama’s presidency has strengthened their claim and enhanced their capability to pimp-slap anyone who doesn’t wise up fast and get the memo. Cohen has absolutely zero to worry about. Economic equality is the least of his fears. It will arrive at his doorstep the same dreary evening as The Wendigo. The rest of us animals on the farm are experiencing that equality. We will increasingly experience it at the zero.
*-The elite can purchase reelection for a totally unqualified buffoon of a President and buy themselves seats in the US Senate for life.
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