When President Barack Obama sold his $787 billion stimulus package to the American people, he set one metric for success: jobs. Specifically, President Obama promised the American people he would create 4.1 million jobs by the end of 2010. According to the President’s plan, the stimulus should have lowered the nation’s unemployment rate below 8% by this August. That is the objective standard the President set for himself.
And according to objective data released by the Bureau of Labor Statistics this morning, President Obama’s policies, and his stimulus package, have been complete failures. BLS reports that the number of unemployed persons increased by 466,000 in August raising the nation’s unemployment to 9.7% … the highest it has been in 26 years.
Faced with the failure of their signature economic policy, the Obama administration trotted out Vice President Joe Biden to defend the stimulus yesterday in a speech to the Brookings Institute. Biden claimed that the stimulus bill created or saved between 500,000 and 750,000 jobs. This is demonstrably false. Job creation has fallen since the stimulus became law. When Congress passed the stimulus in February the new hire rate had fallen to 3.2%. The most recent data, from June 2009, shows that after the stimulus passed, job creation fell even further to 2.9%. Employers are creating fewer jobs than they did before the stimulus was passed.
Other data also shows that job creation has fallen sharply. Gallup surveys show that far fewer Americans report that their companies are hiring than a year ago. Last August 37% of Americans reported their companies were hiring. That figure has now fallen to 24%. Lower job creation accounts for roughly two-thirds of the increase in unemployment since the recession began.
Why has private-sector job creation fallen so sharply? The obvious and broad answer is the recession. A more precise answer is that business owners have grown wary about the future of the economy and consequently business investment has fallen sharply since the recession began. As businesses cut investments in new projects they have less need to hire, and job creation falls. As long as business investment remains low and entrepreneurs hold back from starting new enterprises, job creation will remain low–and unemployment, high.
Yesterday Vice President Biden said the stimulus “doesn’t reflect a lack of design; that was the design.” This is exactly why the stimulus has failed to reduce unemployment. Congress spending tens of billions of dollars on highway projects does nothing to encourage any business owners who do not build highways that potential investments will succeed. Spending tens of billions more to bail out state governments does not encourage an entrepreneur to take the risk of starting a small business. Government spending programs do not encourage the risk taking and innovation and investment needed to spur lasting job creation.
Who creates jobs? Employers with profitable businesses, investing and creating wealth. The stimulus bill was a grab bag of traditional liberal priorities that did nothing to encourage private sector employers to invest or create jobs. If anything the stimulus discourages investment and job creation. The enormous increase in federal spending that President Obama has undertaken raise the prospects of vastly higher taxes or rapidly rising inflation.
The federal deficit is expected to approach $2 trillion this year, and to remain well above $1 trillion for many years to come, doubling the national debt in just five years. This situation is not sustainable, but businesses can only guess how the federal government will restore order to its fiscal house, knowing full well that successful businesses make an attractive tax target. In the face of such a threatening environment, it is not surprising that job creation has fallen since President Obama signed the stimulus.
- Growing joblessness is causing the pace of delinquencies for prime borrowers, the nation’s most credit-worthy borrowers, to rise.
- President Obama’s hand picked Green Jobs Czar Van Jones admitted yesterday that he signed a petition accusing President George Bush of deliberately allowing 9/11 to happen.
- Materials from the Department of Education asking students to “write letters to themselves about what they can do to help the president” have caused school districts in six states to refrain from showing President Barack Obama’s address in class next week.
- California taxpayers will pay nearly $10 million in interest on the nearly half a million IOUs the state has issued this summer.
- The Obama administration is threatening to not recognize the democratically elected winner of the Honduras presidential election set for November.
- The Morning Bell will return on Tuesday, September 8. Have a wonderful Labor Day weekend!