Why, it’s as if the economy is failing by design, according to ABC’s report on Wreckovery Summer, although Devin Dwyer doesn’t quite connect the dots on incompetence. Dwyer notes that the White House, and especially Joe Biden, predicted a booming economy and large-scale job creation as the power of Porkulus went into overdrive. But a funny thing happened on the way to Democratic Nirvana — the money ran out, and not coincidentally, so did the meager growth in the economy:
Thousands of infrastructure and construction projects funded by theAmerican Recovery and Reinvestment Act were to come on-line during June, July and August, helping to “create jobs for American workers and economic growth for businesses, large and small.”
The White House dubbed it “Recovery Summer” and President Obama declared the economy had begun “growing at a good clip.” Vice President Joe Bidenpredicted weeks earlier that creation of 250,000 to 500,000 new jobs a month could soon be on the horizon.
But with summer quickly coming to an end, those jobs gains and a robust economic recovery have not yet materialized, leaving Democrats on the verge of a fall election campaign in which Republicans are poised to make them eat their words.
Well, we know that already. For the last three months, all of the economic indicators have gone the wrong direction. Initial jobless claims hit a new nine-month weekly high last week; instead of adding 500,000 jobs a month like Biden promised, we had 500,000 initial unemployment claims in the second week of August.
But why has the economy tailed off? Dwyer almost gets it:
Most economists agree the $787 billion Recovery Act has helped prevent the recession from being significantly worse, boosting the gross domestic product and stemming job losses. But many say its effect has largely begun to wear off. …
Two thirds of all stimulus dollars will have been spent by the end of the summer, Bivens said. The economy grew 3.7 percent in the first quarter of 2010 but slowed to 2.4 percent in the second quarter.
Economic growth is “going to drop rapidly for the rest of this year and the Recovery Act is going to add zero. It will have run out,” Bivens said.
Actually, Q1 GDP was revised downward to 2.7% in June. The second-quarter growth figure is almost certain to be revised downward towards 1%. The economy has slowed after really just one quarter of significant growth, 2009 Q4 — and that was mainly due to inventory management. Porkulus didn’t save us from a “significantly worse” recession; it merely extended it. We’re going to have the same recession we would have had without massive government intervention, except now we’re going to have it in 2010 as well as 2009.
And we’re going to be almost a trillion dollars further in debt on top of it, thanks to the massive borrowing Porkulus required.
The Democratic stimulus plan worked exactly as well as FDR’s WPA for the American economy, of which this White House is so enamored. Government spending requires higher taxes sooner or later, which takes capital from the very job-creating activities necessary to grow the economy. As soon as the artificial effects of government spending dissipate, the economy is left with fewer investors and less capital to pick up the pieces. On top of that, the passage of ObamaCare and the threat of other heavy-handed regulatory regimes has private capital sitting on the sidelines, waiting to see what the rules will be before investing in any expansion. With jobs stagnating at high unemployment levels, consumers aren’t spending.
We’ve just seen a Cash for Clunkers on the largest scale possible.