President’s Thursday Night Economic Speech: Tragedy or Farce? | HughHewitt.com | 09.05.11

Karl Marx wrote that, “History always repeats itself twice, the first time as tragedy, the second time as farce.” Like much of Marx, this is basically nonsense dressed up as deep insight.  But maybe, just maybe, we’re about to see something like Marx’s dictum played out in Washington on Thursday night.  That will be when the president addresses yet another joint session of Congress, to present yet another economic recovery plan.

When Mr. Obama launched his first plan shortly after taking office, we were assured that, if it were adopted, unemployment would never break above a level that it penetrated within a year of the package’s passage and has dipped below only for the briefest time since.

Stimulus spending was to create lots of “shovel ready” jobs.  Many Republicans and allied economists warned that the truth was likely to be a lot of spending for nothing.  But, as the president told then House Republican Whip Eric Cantor when Mr. Cantor pressed GOP proposals on him, “I won” the election.  It was only recently that Mr. Obama acknowledged, in effect, that Representative Cantor had been right, confessing, “Shovel ready was not as shovel ready as we expected.”

Since then, the president has launched various initiatives to conjure the long-awaited recovery into life.  Each time he has called for more taxes, more spending, and, in actuality if not words, more regulation.  The tragedy has been, he has had nothing to offer except more of his failed first package.  Job growth in America last month was officially zero.  This probably means that when the numbers are revised in subsequent months, the economy is actually shedding jobs.

If you trace job losses in recessions since the end of World War II, at no time has it been more than four years from the start of a contraction to when total US jobs returned to the pre-recession level.  The current period of employment loss began in late 2007.  We are just a few months from the four-year mark.  By historical standards, we should have been back to the previous peak of employment months ago.  But despite being officially out of the late-2007 to mid-2009 recession, total job losses in the U.S. economy remain equal to the deepest point of the next deepest recession of the post-war era. (http://cr4re.com/charts/charts.html)

It didn’t have to be this way.  Here I will quote myself in early 2009, but I only said what others were warning in different ways. 

In February 2009, in a column published at USNews.com, I wrote (http://tinyurl.com/JudgeinUSNews):

Following Milton Friedman’s rule [on the impact of monetary movements], the severe downturn of the last three months of 2008 almost certainly originated in the monetary events of January through May when, among other things, the structured finance markets went dead and Bear Stearns folded. By the same rule, following the massive actions the Treasury and Fed took between September and December last year, the economy should rebound between May and September this year.

What could go wrong? In contrast to what the Obama administration is arguing, having done enough, the government could now do too much. The administration could repeat the Hoover-Roosevelt mistakes. Working with [the Democratic] Congress, it could mandate trade protection, increase tax rates, divert resources from productive private investment to uneconomical government-sponsored activities, intrude in the management of major industries, or prosecute business people to make populist political points….

Magnitude matters. Small mistakes may not derail a recovery powered by such massive monetary movements as are already in place, while doing too much of what was done in the ’30s could prove fatal.

As we all know, the economy did begin a recovery in the period of May to September 2009, as predicted, but soon stalled under the weights of all the burdens that the new administration was loading on it.

By all indications, in Thursday night’s speech, the president will propose yet again more of what turned a deep but potentially brief downturn into the prolonged debacle we are experiencing today – more taxes, more spending, more bad stuff. 

For example, how does he propose to get more lending?  The administration is already threatening to prosecute banks that don’t give out enough subprime mortgages (see: http://tinyurl.com/KisselinWSJ), as well as taking action against banks that foreclose on non-performing loans.

Is it any wonder that despite increased and unprecedented monetary creation by the government since the president took office, banks shrunk their commercial and industrial loan portfolios, not to mention their housing portfolios between May ‘08 and July this year, even as they increased their cash holdings? 

In sum, the Obama administration has given us the most contractive national economic policies since Herbert Hoover, even as the Federal Reserve’s creation of M1 money has fueled inflation in such commodities as food and gasoline.

By all accounts, on Thursday night the president will tart up his old economic package in politically alluring dress, teach it a few new steps, and hope it can wow the crowd one more time.  Try not to laugh at the farce… or cry at the tragedy.