The fourth quarter showed 5.7% growth (on an annualized basis), the second straight quarter of growth (real GDP grew at 2.2% in the third quarter). Whereas Obama and his progressive Dem cronies in Congress will be quick to credit the "recovery" (so-called stimulus) bill, the growth was not a result of consumer spending (roughly 70% of the economy) but more business, government, and foreign spending.
Most of the business spending had to do with inventories being drawn down to a reorder point. None of these are sustainable so long as consumer spending remains muted. It's like an unemployed person whom normally commutes to a job; running on a tank of gas, he's driving less (maybe going to job interviews, church, grocery shopping, etc.), and eventually he has to stop by a service station to fill up. You can't read very much from the fact he's filling up the car. It becomes stronger indicator when the time between fill ups drops, i.e., when businesses start turning over their inventories on shorter cycles. But some economists argue that it will take the strongest GDP in years just to drop employment by a single percentage point--and it appears that for the year we are seeing forecasts of 2.5-3% GDP growth.
No wonder the Dems are starting to panic about the unemployment rate; the last thing they want is to face voters this November with their political opponents wanting to remind them that unemployment still remains over their much-hyped 8% cap for passing an inefficient, ill-focused, ultra-expensive stimulus bill. Obama's Clintonian "I feel your pain" message isn't going to go over well with voters this fall.
Obama's "Job Bill": Thumbs Down!
Obama's job policy leads me to make the following analogy: Obama is like a fisherman whom habitually goes to the same fishing hole, which has been overfished. He refuses to give up on the pond, insisting that he will surely land more fish: he'll lure them with bigger, better bait. But that assumes there are enough fish in the pond to jump at the bait being offered. The problem is that he's picking the wrong place to fish. Bottom line: fish are going to be found in conditions where they thrive, and he needs to broaden his tunnel-visioned focus on where to find job growth. In the context of this example, jobs are more plentiful under conditions which the private sector finds inviting. We have a President whom is continuing to run up the national debt past $12T crowding out private investment, just as there are signs that China and other foreign investors are showing less interest in buying US Treasury debt; he has been actively meddling in various industries (the auto and financial sectors), threatening the health care sector with rigged government "competition", speaking of new taxes and penalties with health care and cap-and-trade legislation, talking down the economy, freezing free trade pacts, engaging in divisive class warfare, and vowing to raise high tax bracket rates at the end of the year (despite the adverse effect on investment and job creation).
What I've heard, in video snippets, is Barack Obama speaking of coaxing businesses in 2010 to hire incrementally new employees and/or giving employees raises. This is essentially pushing on a string--probably rewarding employers for actions they would be making anyway for business reasons, not gimmick tax breaks. Consumers will start to spend more when they aren't worried about their next paycheck. Businesses are not going to respond to gimmicks; it's amazing that Obama hasn't learned this lesson from the last two stimulus bills, where many taxpayers have saved the proceeds or used it to pay down debt.
The basic point, as Mike Pence pointed out in yesterday's Republican retreat where Obama was an invited guest, is a broad-based business tax cut. Obama is trying to manage a recovery by making certain occupations and businesses more equal than others, based on this megalomaniacal delusion of statist economical micromanagement. We have to go back to the basics of economics: the law of supply and demand. If you cut the cost of labor, you raise the demand. But you need to do it widely, across employers and industries. Some Republicans have discussed a payroll tax holiday (think of it as a starter log to get the economic fire going), although I would prefer a permanent tax cut (which, among other things, would hedge against a double-dip recession).
The Democrats have already blown it big time. If they had come in with more centrist administration policies and legislative agenda (say, post-1994 Clinton), they could have possibly done to the Republicans what the Democratic-Republicans did to the Federalists in the aftermath of the Adams Presidency. We conservatives and the Republicans can only watch in absolute amazement; the Republicans don't have much say (only 41 seats in the Senate) in the Democrats taking all the rope they need to hang themselves. I'm hoping the Republicans will seek a legislative mandate this fall for reducing the government burden, for deep cuts in government (not just freezes, cementing growth in the federal bureaucracy), for tax simplification, and for legitimate bipartisan compromises in tackling tough entitlement solvency issues.
Political Cartoon
IBD cartoonist Michael Ramirez should have pointed out that the first option is no longer realistic. See IBD poll results below for how independents, who helped elect Republican Scott Brown to the US Senate in Massachusetts, earlier this month graded Obama compared to his self-assessed B+; notice he rates lowest on his domestic agenda. (Of course, I think independents are grading Obama on a curve.)
Musical Interlude: Mac Davis, "Whoever Finds This, I Love You"
Mac Davis is known primarily for songs he's written for other artists, especially Elvis Presley ( "In the Ghetto", "A Little Less Conversation", and the song below), Gallery ("I Believe in Music"), and Bobby Goldsboro ("Watching Scotty Grow"). He later scored a number of his own singles, especially "Baby Don't Get Hooked on Me" and "Hard to be Humble", but my favorite was his first hit single (which didn't quite break the Top 40), a sweet song about an old man befriending a little orphan girl. Elvis Presley, who lost his mother early as a young adult, wanted to sing "Don't Cry, Daddy" in tribute to his father, a widower.
"Whoever Finds This, I Love You!"
On a quiet street in the city a little old man walks along.
Shuffling through the Autumn afternoon.
And the Autumn leaves reminded him another summer's come and gone.
He had a long, lonely night ahead waitin' for June.
Then among the leaves near an orphan's home a piece of paper caught his eye,
And he stooped to pick it up with trembling hands.
And as he read the childish writing, the old man began to cry,
'Cause the words burned inside him like a flame.
"Whoever finds this, I love you!"
"Whoever finds this, I need you!"
"I ain't even got no one to talk to!"
"So, Whoever finds this, I love you!"
The old man's eyes searched the orphan's home,
And cam to rest upon a child with her nose pressed up against the window pane.
And the old man knew he'd found a friend, at last,
So he waved at her and smiled.
And they both knew they'd spend the winter laughing at the rain.
{Recitation
And they did spend the summer laughing at the rain, talking through the fence, exchanging little gifts they'd made for each other. The old man would carve toys for the little girl, and she would draw pictures for him of beautiful ladies surrounded by green trees and sunshine, and they laughed alot. But then on the first day of June, the little girl ran to the fence to show the man a picture she had drawn, BUT HE WASN'T THERE! And somehow, the little girl knew he wasn't coming back. So she went back to her little room, took out a crayola and a piece of paper, and wrote:
"Whoever finds this, I love you!"
"Whoever finds this, I need you!"
"I don't even have no one to talk to."
"So, whoever finds this, I love you!"
Bonus Video: Elvis Presley, "Don't Cry, Daddy"
