Does President Obama understand fundamental economic principles?
The President held a Press Conference Friday to discuss the state of the economy and job creation and made a startling assertion:
Reporter’s Question on the topic of jobs:
What about the Republicans saying that you’re blaming the Europeans for the failures of your own policies?
The truth of the matter is that, as I said, we created 4.3 million jobs over the last 27 months, over 800,000 just this year alone. The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government…(emphasis added)
The President and his people often brag about 4 million private sector jobs, hoping the listener will think it sounds like a lot. But in historical context it isn’t. In fact, as the chart shows this is the most anemic jobs recovery since World War II.
The President Continued:
And so, you know, if Republicans want to be helpful, if they really want to move forward and put people back to work, what they should be thinking about is how do we help state and local governments and how do we help the construction industry?
It’s true that state and local governments have shed jobs over the past couple of years while the private sector has been adding jobs, albeit at a painfully slow pace. However the numbers do not support the President’s assertion. Even if government jobs bounced back to pre-recession levels the unemployment situation would be only marginally better.
The President’s assertion reveals his bias toward government over business and industry and shows a lack of understanding of basic economic reality. The big problem is lack of growth in the private sector. If private businesses had recovered as they have after previous recessions there would now be millions more private sector jobs than there were in in 2008, not 4 million fewer.
State and local tax revenues would be higher than 2008 and there would likely be more state and local government employees than in 2008.
Government is not the source of wealth, jobs or prosperity. The private sector produces all the wealth and all the income. Government operates by taxing that income in order to pay it’s employees. State and local governments have been forced to lay off employees because the private sector has not recovered and is not yet generating as much tax revenue as it did before the recession.
Obama demands that Congress divert even more private sector resources – either through borrowing or taxation – to the government sector. But that wouldn’t address the fundamental problem of lack of private sector business formation and expansion. The best thing government can do is get out of the way. The number one federal priority should be deregulation and tax simplification, not propping up government jobs.
Prosperity starts in the private sector. The government can not create prosperity through deficit spending. If it could the Obama years of record high deficits would have brought us record job creation and prosperity.
Later in the day the President made another comment which was characterized by the media as a correction or clarification. But in Clintonian style he used the word “economy” instead of the term “private sector.” He said:
It’s absolutely clear the economy is not doing fine. That’s the reason I had a press conference. That’s why I spent yesterday, the day before yesterday, this past week, this past month and this past year talking about how we can make the economy stronger. The economy is not doing fine. There are too many people out of work. The housing market is still weak, too many homes underwater and that’s precisely why I asked Congress to start taking some steps that can make a difference.
This does not indicate understanding that the private sector, not the government is the engine of economic growth, prosperity and jobs. His charge to Congress to fund more state and local government hiring didn’t change. So, this “clarification” doesn’t really alter his original assertion that “the private sector is fine.”