RUTHFULLY YOURS

PETER HUESSEY: REPUBLICAN STRATEGIES WORK IN PRODUCING JOBS

Posted By Ruth King on September 27th, 2012

http://www.familysecuritymatters.org/publications/detail/the-new-narrative?f=puball

The 2012 election should come down to a simple question: what is the best way to create millions of new jobs in an economy where 12 million people are unemployed, 5 million are underemployed and 6 million people have become so disillusioned they have given up looking for work altogether.

Where Are We?

We have added 3.8 million jobs in the three years and two months since the June 2009 recovery began according to the administration. That is 100,000 jobs a month, the worst recovery in 67 years.

During this recovery, the US government spent $11 trillion, 5 million people were added to the poverty roles, 14 million more people now receive food stamps, 3.5 million people were added to social security disability roles, the value of the dollar tanked, and the debt of the US went up nearly $6 trillion to $16 trillion, a greater per capita debt than Greece.

Manufacturing jobs have been lost as have jobs in energy and mining. Measured from January 2009, no net new jobs have been created. Economic growth this past quarter as been 1.5%. 150 new regulations costing more than $1 billion each are poised to cascade through the economy starting next year. Taxes are scheduled to go up by $500 billion each year for the next decade, 10 times the highest tax increase ever in US history.

The administration says “this works” and they assert we just have to do more of the same and the US economy will boom as it did under President Clinton in the 1990s.

What is wrong with this picture?

Since the election of President Reagan in 1980, the US has had three economic recoveries prior to the one we are now in. They were 1983-89, 1991-2000 and 2003-07. In that 24 year period, the US economy produced 54 million jobs in the 22 growth years or 250,000 jobs a month. Can we do this again?

Yes we can–but if we copy Reagan not Obama. Clinton in his second term copied Reagan, not Obama.

In 1983-89, what did the US government do to improve the economic climate to encourage job growth? Let us look at the record.

REAGAN

Taxes: Cut tax rates 30% on individuals; cut top rate to 28% including cutting capital gains to 20%, compared to Carter era 70% and 35% respectively.

Regulations: Have major regulatory reform of trucking, transportation, communications and energy, resulting in millions of new jobs in these economic areas.

Energy: Reduce the price of oil from $32 barrel (December 1980) to $16 barrel in 1989.

Spending: Reduced government spending as a percent of GDP by 1.5%.

Revenue: Government income increased an average of $65 billion a year.

GDP: Growth in the US economy averaged 3.9% between 1983-89.

Jobs: Job growth reached 20 million from January 1983 to January 1989 or 3.3 million a year and 11 million from 1983-5 in first three years of the recovery.

CLINTON ADMINISTRATION:(1997-2000)

The first term taxes were increased on high wage earners, social security recipients and the Medicare tax extended to all salaried income. But from 1997-2000, the administration:

• Lowered the top capital gains tax rate from 28 percent to 20 percent;
• Created a new $500 child tax credit;
• Established the new Hope and Lifetime Learning tax credits to reduce the after-tax costs of higher education;
• Phased in an increase in the estate tax exemption from $600,000 to $1 million;
• Established Roth IRAs and increased the income limits for deductible IRAs;
• Established education IRAs;
• Conformed AMT depreciation lives to regular tax lives.

Regulations: Reformed welfare to require work and limit the time one could spend on welfare.

Energy: Barrel of oil was $17.

Spending: Reduced spending 3% of GDP and balanced the budget for three years.

Revenue: Receipts to the US government climbed by over $102 billion a year.

GNP: Growth averaged 4.2% a year compared to 3.2% in first term.

Jobs: Grew by 10 million in four years 1997-2000.

In comparing the two Clinton terms, we find (from the Heritage Foundation):

These two periods of growth under Reagan and Clinton were very similar, because they followed many of the same policies. However, Reagan’s economic boom was over 6 years and started with an inherited recession that gave us 10.8% unemployment, 14% inflation and 21% interest rates or the “Huessy just created” new misery index of nearly 46. The unemployment rate plummeted from 10.8% to 5.3%, a huge drop of 5.5% drop or more than 50% by the end of Reagan’s recovery. By contrast, in 2009, at the beginning of the Obama administration, the unemployment rate was 7.2%, inflation was 2% and interest rates were 0.25% or a misery index of 9.5.

The Clinton era started with a growth rate of over 4% in the last quarter of 1992 of the Bush41 administration and unemployment of 7.5%, inflation was 3% and the prime rate was 7%. By 1996, unemployment was 5.4%, a drop of 26%. In the second term, unemployment dropped to 4%, or another 26%. So Clinton inherited 4.2% growth, raised tax in his first term and dropped growth to 3.2%, but largely adopted the Republican agenda in his second term–welfare reform, balanced budget, tax cuts, regulatory reform and no Hillary Care–and growth increased to 4.2%.

A full one point increase extended over the lifetime of a college graduate today means an increase in annual salary of $70,000 at the end of their careers over and above what it otherwise would be. Bush Recovery: 2003-2007

Now how does that compare to the Bush 43 recovery from 2003-7? The economy in 2003 was barely growing at 0.5% of GDP, unemployment was 4.2%, inflation was at 3%, and interest rates of 6.5% or a misery index of 14. This was due to the recession that started at the end of 2000, the collapse of the dot-com stocks and the attacks of 9/11. The period 2001-3 saw the loss of roughly 3 million jobs.

What did the Bush administration do?

Tax rates were cut by 10%, inheritance expanded, capital gains taxes were cut to 15%, welfare reform remained. Fully 90% of the tax rate cuts for all but the lowest wage earners occurred in 2003 after the Senate switched to Republican control.

Regulations: New regulations on investments through Sarbanes-Oxley; energy fracking regulations were left to the states, resulting in the eventual doubling of natural gas production and a drop in price from $12 to$3.

Energy: Oil prices for all of 2003 was $31 barrel; oil production also increased roughly 10% from 2004-11, reversing a long decline. But strong demand in China and India and a built-in premium because of Iranian sponsored terrorism, drop in Venezuelan, Iraq and Iran production, drove the price to $50-60 a barrel by 2005-6, culminating in $145 barrel in July 2008. Little attention has been paid to the impact of these rising energy prices on the US economy between 2003-7; Secretary of the Treasury Geithner said this summer that the cause of the collapse of the US economy in 2008 was the rise of oil prices to $145 a barrel.

Spending: Spending as a percent of GDP increased between FY2003-8 from 19 to 20%.

GDP: The economy grew at 3.1% in the recovery between 2003-2007.

Revenue: The 2007 CBO report revealed that capital gains and dividends tax collections were actually $51 billion in 2003, $72 billion in 2004, $97 billion in 2005, and $110 billion in 2006, the last two years nearly doubling initial forecasts. In addition, overall US government revenue went from $1.7 trillion in 2003 to $2.56 trillion in 2007, a record $800+ billion increase in four years.

Jobs: And 6.7 million jobs were created between 2004-2006, or a three year average of 2.2 million a year or 2 million a year or 8 million over 2004-7.

The Obama Recovery

Now let us go back and remind ourselves of the record from 2009-2012.

Taxes: Temporary rebates and tax cuts but nothing to spur investment; $500 billion in new taxes for health care equipment manufacturers over ten years built into Obama Care, already killing jobs and closing plants; scheduled additional $500 billion a year in annual tax increases for all income levels, due in January 2013, causing huge business uncertainty.

Regulations: According to CBO, there will be massive new health care costs of $2.7 trillion over ten years under Obama Care; despite this, CBO says 30 million Americans will remain without insurance; 150 other new regulations each costing more than $1 billion; Heritage Foundation analysis says small business face $505 billion in new regulatory costs in next five years or roughly $100 billion a year–comes to $744 tax on every American, nearly $3000 a year for a family of four.

Welfare: Dramatically weaken the work requirements for welfare; add more people to the poverty roles than at any time since 1965…when Great Society poverty programs dramatically expanded….More people qualify for poverty programs than any other 4 year period; over $1.2 trillion now spending for poverty programs because of the serious lack of jobs. These costs cannot be sustained. And cannot be reduced without dramatic increases in jobs to move people from poverty rolls to the work rolls. That is not happening.

Energy: Oil is now averaging $90-100 barrel, three-fold increase since the December 2008 cost of $32 barrel; fracking technology did lead to a boost in oil production on private lands. And natural gas production on private and state lands doubled, resulting in very major declines in natural gas prices even as coal was replaced in significant amounts in the generation of electricity; but oil production and exploration on Federal lands declined by 40% as severe regulations were implemented by EPA and Interior. A policy of pushing gas prices to equal that of Europe as the Secretary of Energy endorsed, along with refusal to develop massive US and North American oil and gas resources leaves $7 trillion of GDP and 3.5 million jobs on the table according to major new study.

Spending: Spending was boosted to 25% of GDP and then leveled off at 24%+ a year compared to 18-20% during the economic boom years.

Revenue: Federal revenue has not yet gotten back to the 2007 year level of $2.56 trillion because of the lack of jobs and economic growth.

Debt: Has averaged $1.3 trillion a year from FY10-12, a record.

Jobs: Since the June 2009 recovery, 3.8 million jobs, or 100,000 a year, worst economic recovery since WWII, some 67 years ago; produced 0 net new jobs since January 2009; Americans have lost 40% of their net worth, 15% of their incomes, and we are supposedly in the fourth year of an economic recovery.

Former President Clinton tried to portray this administration as adopting growth policies like those adopted in his two terms between 1993-2000. But in every case, the Obama administration policies are opposite those of the Reagan, the second Clinton and the Bush 43 administrations on taxes, regulation, spending, debt, energy and welfare. The two similarities between Bush and Obama: spending as a percent of GDP markedly increased starting in 2007 and continued its ascent in 2009 and oil prices also skyrocketed. The only similarity between Clinton and Obama? They’re both Democrats.

Doubling down on failure will not yield success.

In Clinton’s second term, he largely adopted the very policies he first opposed. He said a balanced budget would be dangerous for the economy. He said welfare reform was punishing the poor. And he said tax cuts would only help the wealthy. Then he changed his mind. Gingrich won that fight. And policies now supported by almost all Republicans, many independents and Democrats were adopted: restrained spending and debt reduction; tax rate reform and tax cuts; energy production incentives; regulatory and welfare reform; and free and fair trade.

These very policies, Republican policies, have been proven to produce two to three times as many jobs as the current recovery–we have done so three times in three recoveries in the past thirty years. That works.

As a result of adopting wrong policies, the current economy is creating less than one-half of the jobs created in the slowest years of the previous three recoveries, and less than a fifth of the jobs created in the best recovery years between 1983-2007. In 2000 we were ranked 4th in economic freedom. We are now 18th, behind Mauritius and Qatar.

The Obama administration has increased the government spending rate; it has massively raised the debt; it has failed to generate even enough revenue to help get the US government back to where it was in 2007, some 5 years ago; has threatened $500 billion annually of new massive tax increases causing grave uncertainty among business and consumers; has pushed for energy prices to “necessarily sky rocket”, and has added massive new government regulations costing small business hundreds of billions.

The net result: The worst economic and job recovery in nearly 70 years. And an economy “Going Backward”. Any CEO with his record would hear this from all of us: “You’re Fired!”

Read more: Family Security Matters http://www.familysecuritymatters.org/publications/detail/the-new-narrative?f=puball#ixzz27f1SVYJP
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