Bad news about the U.S. economy keeps pouring in, yet many of our lawmakers in Congress and certainly President Barack Obama seem unwilling to admit that unchecked federal spending is making things worse.
Recently revised figures from the Commerce Department show that our economy grew at only 1.9 percent in the first quarter of this year. That’s hardly cause for celebration.
And now, two highly respected firms have sharply downgraded their assessments of current economic growth and the growth they expect to see for the rest of this year.
Goldman Sachs and Macroeconomic Advisers both originally predicted that growth in the just-ended April-June quarter would be about 4 percent. But now they say actual growth in that quarter was only about 2 percent. Both say growth for the rest of 2011 will also be lower than they first predicted.
That comes on top of the Federal Reserve’s recent downgrade of its own predictions of growth for 2011 and 2012.
Some would look at those numbers and say, “Well, a little growth is better than no growth.”
That’s true, but it can be misleading.
That’s because with normal population growth, economic expansion of at least 3 percent is required just to keep unemployment from rising even higher. Growth of 5 percent or more is required to make any serious dent in unemployment — and nobody is realistically predicting that we’ll have 5 percent growth anytime soon.
That’s why some observers say the United States is experiencing a “jobless recovery” — at best. But what’s the value of a “recovery” that doesn’t put people back to work so they can pay their bills and support their families?
Some fear that instead of entering a time of real recovery and prosperity, we may be careening toward a second recession or at least long-term stagnation. And a number of analysts expect it will be several years before unemployment gets back down to anything close to a more normal rate of 5 percent or 6 percent. Meanwhile, many of the jobless are having to drain their savings and rely on unemployment benefits.
What is evident from these grim numbers is that the $862 billion federal “stimulus” was a painful failure. Not only has it failed to hold unemployment down to 8 percent, as the Obama administration said it would, but it has increased our already crippling $14.3 trillion national debt.
We are reminded of the words of a clearly frustrated Henry Morgenthau, who was Treasury secretary under President Franklin D. Roosevelt while the big-spending New Deal programs were being implemented during the Great Depression.
Morgenthau said: “We have tried spending money. We are spending more than we have ever spent before and it does not work.” After massive federal outlays, he added, “we have just as much unemployment as when we started ... [a]nd an enormous debt to boot.”
Washington could not tax and spend our country into prosperity then, and it cannot do so now. But it’s unclear whether we have learned that lesson.