September 2, 2010 | Commentary on Economy
'This is a chance to do something big, man!" So proclaimed Vice President Joe Biden in a recent Time magazine article about the Obama administration's "all-out effort to exploit the [economic] crisis" to advance its agenda.
Outside of Washington, D.C., most Americans aren't concerned with doing things "big." They're looking for less government spending, lower taxes and good jobs. And they see today's economy as a tragedy to be resolved—not a political opportunity to be exploited.
This coming Monday marks the second Labor Day of the Obama administration, and the American work force has little to show for it other than higher unemployment, stagnant wages, last year's $1.4 trillion federal deficit, this year's $1.3 trillion deficit, and next year's anticipated $1 trillion-plus deficit. Oh, and a slew of new federal regulations and programs—like ObamaCare—that will make it even more expensive for businesses to retain current workers, much less create new jobs.
No wonder American confidence in the future is evaporating. And when confidence crumbles, consumers won't spend, lenders won't lend, investors won't invest, and businesses won't hire.
Today we see businesses husbanding cash rather than hiring. Nonfinancial S&P 500 companies are sitting on a record $837 billion. Personal savings are increasing dramatically, to over 6% of income today compared to barely 1% in 2005. Those small businesses still willing to take on more debt to expand are having tremendous difficulty finding credit.
The politicians who promised a "summer of recovery" have delivered nothing but economic doldrums. Most economic indicators these past few months have been disappointing—when they haven't been downright dismal.
Typically, after moving backwards, the economy takes even more steps forward. Coming out of the 1981-82 recession, we had five straight quarters of 7%-9% GDP growth and six years of strong, sustained economic prosperity.
But that kind of recovery isn't in the cards with the policies coming out of Washington today. Instead, GDP is stagnating. The annualized growth figure from the second quarter of 2010 was recently revised down to 1.6%, half what it needs to be for net job growth to occur. An economic resurgence seems distant indeed.
It's not coincidental that America's vigorous recovery in the early 1980s was led by a president who worked hard to unshackle growth in the private sector. Ronald Reagan pushed through major tax cuts (a 24% reduction in marginal tax rates kicked in on Jan. 1, 1983), reduced growth-choking government bureaucracy, and opened foreign markets to American exports.
President Obama has done the opposite. In the last 20 months, there's been an all-out push to increase government spending and taxes. The federal government is also on a perilous path toward trade protectionism. We are now in the 18th month of a trade war with Mexico, our third-largest trading partner. It began in 2009, when President Obama signed into law a provision banning Mexican trucks from hauling freight into the U.S. Mexico retaliated with more than 100 new tariffs on American products.
Meanwhile, we are squandering export opportunities with other nations. Three fully negotiated free-trade agreements— with South Korea, Colombia and Panama—have languished in Congress for more than two years. If these policies don't change, Americans will continue to suffer needlessly.
Still, there are some bright spots. For starters, we seem to be facing up to failure faster. Thanks to the Internet and the proliferation of news sources on radio and television, it is commonly acknowledged that the current tax-and-spend policies are impeding economic recovery.
The first step in reversing failure is to face up to it and not spend an entire decade, as we did in the 1970s, compounding economic debacle upon economic debacle. Facts may not impede injurious agendas in the capital, but a politically aware electorate can derail the wrong-minded political elite.
The men and women who compose the American work force are 150 million more reasons to be confident in the future. Our private-sector work force is the most industrious, innovative, productive and ambitious in the world. We can overcome the government policies currently constraining us.
Ms. Chao, who served as U. S. Secretary of Labor from 2001-2009, is a fellow at the Heritage Foundation.
First appeared in The Wall Street Journal