November 5, 2012

Tomorrow, an estimated 146 million people will decide between socialism and free-market capitalism. It's really that simple. Put another way, we will be deciding on whether it's better to be slaves to the Democratic party's vision of the nanny-state or the Republican Party's vision of creating jobs that won't be taxed to fund entitlements for those who don't want to work.

One last time, let's look at the big economic picture.

The latest jobs report came out Friday and, like so many others before it, the news was disappointing. Our economy is actually growing more slowly this year than it grew last year — somewhere in the 2% range. Normally after a steep decline, the economy would be roaring back at a 5% to 6% clip.

The official unemployment rate is 7.9%, one-tenth of a point higher than last month's number. But the true rate is almost twice that level. Many people who want a full-time job are working part-time instead. And much of the modest increase in economic activity is the result of people who have jobs working more hours rather than new workers being hired.

All told, we are experiencing the slowest recovery since the Great Depression.

 So what's the problem?

President Obama has been claiming while out on the campaign trail that he has created over five million jobs since being sworn into office in January 2009.

Today, we're going to adapt the chart we normally feature after each monthly employment situation report to see what the real numbers are, by age group!

Our chart below reveals on a month-by-month basis what the real numbers are, by age group.

Overall, you will see that there are 743,000 fewer employed teens through October 2012 as compared to January 2009, while young adults between the ages of 20 and 24 saw their numbers increase by just 497,000. Adults Age 25 or older saw their numbers among the employed ranks of the U.S. workforce increase by a relatively lackluster 1,443,000.

Altogether, that brings President Obama's total jobs created for his presidency up to 1,197,000, about 76% below his claimed job creation figure of 5,000,000. Put another way, President Obama's net job creation ability is less than one-fourth as good as he claims it to be. And where teen employment is concerned, outright negative.

All of the positive net gain in jobs for President Obama have come within the last three months after having been stalled out in the first half of 2012. This outcome is consistent with our observation that the U.S. economy went through a microrecession in the second quarter of 2012, followed by a much more robust performance in the third quarter.

In light of these factors, let me pose a loaded question: Why create jobs that will pay less than what the government will give to you should you decide to live off the the dole?

The real issue here is that public policy is wrong. Especially new policies that have been enacted during the Obama administration. These policies have the effect of discouraging people from accepting work and discouraging employers from offering it.

A new book by University of Chicago economist Casey Mulligan explains what has been happening on the supply side. In a nutshell, we are paying people not to work:

[I]n the matter of a few quarters of 2008 and 2009, new federal and state laws greatly enhanced the help given to the poor and unemployed — from expansion of food-stamp eligibility to enlargement of food-stamp benefits to payment of unemployment bonuses — sharply eroding (and, in some cases, fully eliminating) the incentives for workers to seek and retain jobs, and for employers to create jobs or avoid layoffs.

Mulligan gives the example of a two earner couple — each earning $600 a week. After the wife gets laid off she obtains a new job offer, paying $500 a week. But after deducting taxes and work related expenses her take home pay would be $257. Since untaxed unemployment benefits total $289, clearly she is better off not working.

Mulligan notes that it was the collapse of the housing market that set off the financial crisis that led to the Great Recession. But our problems are not confined to housing. They are system wide. For every one job lost in construction, five others were lost is other sectors. One thing that affects all sectors, however, is overly generous incentives not to work.

On the demand side, the elephant in the room is the Affordable Care Ac, what some call ObamaCare. Required family coverage under the act is expected to average more than $15,000 a year. For $15 an hour employees, that sum equals more than half their annual wage. Employers of low-skilled workers therefore are about to get hit with mandated benefit that will increase their labor costs by 50% or more.

To make matters worse, employers don't really know what insurance they will have to provide or what it will cost. The $15,000 number I refer to is an estimate by the Congressional Budget Office. Presumably, employers will have the option of paying a fine equal to $2,000 per worker if they don't provide the insurance. But does anybody think the fine is likely to stay that low? A lot of employers don't. The uncertainty created by all this is possibly worse than the actual monetary burden.

Add to all of this a Dodd-Frank banking bill that is encouraging bankers not to lend and you have a formula for perpetual stagnation — which is pretty much where we are.

Tomorrow will truly be a day of decision. Since the economy has been the number one issue in the minds of most Americans since 2008, it boils down to voting between more of the same (with more and more people opting to live off of the government and being turned into Democratic Party dependent zombies) or a new ethic which involves taking personal responsibility for your own life, your family and your dignity.

We believe that the Constitution of the United States speaks for itself. There is no need to rewrite, change or reinterpret it to suit the fancies of special interest groups or protected classes.