"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Monday, June 6, 2011

The Biggest Recession... and Longest

Here is a chart that puts into perspective how deep and how long the recession (at least in hiring, if not technically in GDP growth) has lasted.  

The graph begins on the left in December 2007, so Obama is elected in month 11, takes office in month 13, and the stimulus package is enacted in month 14, February 2009.   But the collapse in employment continues for many months, and the recovery is anemic.  So the question is... why so deep, and why so flat a recovery in hiring?

Michael Barone has the answer:
Exogenous factors explain some part of the current economic stagnation. The earthquake and tsunami in Japan caused a slowdown in manufacturing. Horrendous tornadoes did not help. Nor did bad weather, though only a few still bitterly cling to the theory that it's caused by man-made global warming.
But poor public policy is surely one reason why the American economy has not rebounded from recession as it has in the past. And political posturing has also played a major role.

Barack Obama and the Democratic congressional supermajorities of 2009-10 raised federal spending from 21 to 25 percent of gross domestic product. Their stimulus package stopped layoffs of public employees for a while, even as private sector payrolls plummeted.

And the Obama Democrats piled further burdens on would-be employers in the private sector. Obamacare and the Dodd-Frank financial regulation bill are scheduled to be followed by thousands of regulations that will impose impossible-to-estimate costs on the economy.

That seems to have led to a hiring freeze. The Obama Democrats can reasonably claim not to be responsible for the huge number of layoffs that occurred in the months following the financial crisis of fall 2008. And Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke did manage to help stabilize financial markets.

But while the number of layoffs is now vastly less than in the first half of 2009, the number of new hires has not increased appreciably. Many more people have been unemployed for longer periods than in previous recessions, and many more have stopped looking for work altogether.

It's hard to avoid the conclusion that the threat of tax increases and increased regulatory burdens have produced something in the nature of a hiring strike.
The true believers around Obama think they have the power, not just to reverse the tides, but to rewrite the laws of economics.   But the real world runs on profit margins, and if businesses don't know whether they can make a profit from a new employee, they won't hire him or her.   It's that simple.  

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