President Barack Obama this week finally will be addressing America’s jobs crisis. He’s been fiddling while the jobs burn.
The U.S. unemployment rate remained stubbornly stuck above 9 percent for July. When Obama was inaugurated in January 2009, unemployment stood at 7.6 percent. He promised that his $767 billion stimulus bill would cap unemployment at 8 percent. All the stimulus did was goose the federal debt, now above $14 trillion — and rising.
Obama’s continued cluelessness is shown by his appointment last week of Alan Krueger to chair the White House Council of Economic Advisers. During 2009-10, Krueger served as assistant Treasury secretary in the Obama administration. So, he already is part of the problem, not the solution.
Krueger worked on Obama’s “cash for clunkers” program. That didn’t work. Its main effect was to remove old, cheap vehicles from sales lots, making it difficult for poor people to buy cars. According to the NADA Used Car Guide, the average price of a used car two to five years old soared to $16,765 in April 2011 from $10,000 in January 2009.
According to the Wall Street Journal, Krueger maintains “that increases in the minimum wage don’t depress employment.” This defies basic economics, in which higher prices reduce demand (in this case, demand for workers).
“Krueger is a champion of the minimum wage – that is, outlawing some jobs — as good for the economy,” Lew Rockwell told us; he’s chairman of the free-market Mises Institute. “But if orders from D.C. to pay everyone more are a good idea, why not $10,000 an hour? Maybe because there would be 100 percent unemployment. Krueger is the worst sort of authoritarian Keynesian.”
Believers in Keynesian economics, named after British economist John Maynard Keynes (1883-1946), believe that government can stimulate economic growth through minimum-wage increases, more government spending, inflation and artificially low interest rates. As during the 1970s “malaise” economy, it is just these policies that have been tried under Obama, and have failed.
Although the economic doldrums began in 2007 under President George W. Bush, Obama now has had more than two and a half years to get America growing again. By this time in President Ronald Reagan’s recovery program — the year 1983 — the economy was roaring, with a 7 percent annual growth rate.
Reagan’s polices included curbing inflation under Fed Chairman Paul Volcker, no minimum-wage increase, tax cuts and spending restraint. The Gipper wasn’t perfect. His deficits were stubborn. He later admitted he was “snookered” by Congress into tax increases in return for more spending cuts that never materialized. But it’s hard to argue with results.
And it’s hard to defend failure, as Obama is finding out.