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Morici: The Recovery Is Near Grinding to a Halt

Tuesday, 5 Oct 2010 | 10:44 AM ET

Friday, the Labor Department reports jobs creation for September, and forecasters are predicting the U.S. economy neither added nor lost jobs. This indicates the economic recovery is near grinding to a halt.

Over the horizon, most predict substandard growth, below 3 percent, for the next several years and chronically high unemployment much like Britain after the mindless fits of Labor Governments before Thatcher.

President Obama will point to some 75,000 private sector jobs that were created but more than 300,000 are needed each month to pull down unemployment to prerecession levels, and pay the taxes needed to finance the President’s ambitious social agenda and industrial policies.

More troubling is core private sector jobs growth—private sector jobs creation less government subsidized health care and social services, and temporary services. That is likely to come in at about 35,000 for September.

Job seekers wait in line to have their résumés reviewed at the second annual Anaheim/Orange County Job Fair.
Robyn Beck | AFP | Getty Images
Job seekers wait in line to have their résumés reviewed at the second annual Anaheim/Orange County Job Fair.

Core private sector jobs growth tracks tax-paying jobs and is lower than a snake’s belly, as the threat of higher taxes, regulation and health care costs have just about exterminated entrepreneurial instincts and the appetite for risk among businesses of any size.

After more than $800 billion in stimulus spending, sweeping health care and bank reforms and reorganization, massive government buyouts at General Motors and Chrysler, this paltry jobs performance is a sweeping indictment against the tax, spend and regulate policies of Barack Obama, but he gets a pass by dint of Republican incompetence.

The loyal opposition wanders clueless in the desert.

The GOP keeps chanting tax cuts and indiscriminant deregulation, as if that would cure an economy dependent on Wall Street avarice to accomplish growth. Much like generals in an Armageddon movie screaming we need to build more missiles to avert another nuclear holocaust.

Simply, businesses can’t hire and America cannot grow because businesses lack customers and capital. The huge trade deficit with China is blowing a hole in demand for U.S. goods and services bigger than President Obama can fill with deficit spending, and regional banks were not much helped by the TARP.

"Learn Mandarin. Other than working on Wall Street, the brightest future may be in serving America’s new landlords." -Professor, University of Maryland, Peter Morici

Most Main Street financial institutions remain burdened by bad real estate loans and securities backed by such loans, and did not get Washington subsidies to rekindle foolish trading and pay big bonuses. Now most small and medium sized businesses can’t get loans to expand.

Add all the uncertainty President Obama has instigated about future taxes, regulations and health care costs and a second perfect storm is brewing.

Until Democrats and Republicans alike recognize the need to stand up to China, create a Savings and Loan Crisis era Resolution Trust for Regional Banks, America will not grow.

Sadly, neither the Pledge to America nor President Obama on the campaign trail address these issues.

Learn Mandarin. Other than working on Wall Street, the brightest future may be in serving America’s new landlords.

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Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.

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