It’s starting to feel a lot like the late 1970s when America’s economic engine stalled. It’s a sign of how low expectations have fallen when the monthly jobs numbers released Friday showed a gain of a paltry 84,000 - leaving the unemployment rate at 8.2 percent - no one was surprised. Three years into this supposed recovery, the U.S. economy is still down 5 million jobs from peak, and there’s little hope for improvement.
The onslaught of new regulations and taxes Obamacare will unleash will further weaken the economy. Without a significant reduction in the regulatory and tax burden, America will find itself in the same boat as the European Union, deep in a recession with an unemployment rate of over 11 percent and climbing.
America’s official unemployment rate is understated because it fails to count individuals who’ve given up looking for work. The labor-force participation rate remains at historic lows, below 64 percent, and there’s no way unemployment will return to its historical norm without 300,000 new jobs created each month.
That can’t happen with the manufacturing sector shrinking. According the Institute for Supply Management, the index for factory activity fell from 53.5 in May to 49.7 in June. That’s recession territory - something we haven’t seen since June 2009. Corporate profits also fell in the first quarter of 2012, according to a Commerce Department report, for the first time since the last quarter of 2008, by $6.4 billion. Last month also saw a decline in exports, as European economies continue to shrink and growth in China slows.
Small businesses, the key to job creation and growth, are pessimistic about the economy, according to a survey by Vistage International, citing both the European crisis and domestic-fiscal uncertainty as significant in their decisions to put off investment and hiring. A slew of tax increases are set to go into effect on Jan. 1, 2013, unless Congress acts between then and now. Supreme Court Justice John G. Robert Jr.’s upholding of Obamacare will trigger not just another round of taxes, but also an avalanche of regulation. The Internal Revenue Service is looking to hire 800 new employees just to draft the regulations needed to implement the law and might need as many as 16,000 agents for enforcement efforts.
None of this is productive expenditure. Massive bureaucratic spending crowds out private investment that creates real jobs. Obamacare’s unprecedented government intervention will have an adverse impact on innovation in pharmaceuticals, an industry in which America leads the world. Many Obamacare provisions apply to companies over a certain size. This will act as a regulatory barrier to growth, preventing businesses from taking advantage of economies of scale they would have in the absence of this cost.
It doesn’t have to be this way. As President Reagan proved when he ended the malaise of the Jimmy Carter years, relieving businesses of red tape and taxes frees them to create jobs. Voters will decide in November whether they want to give the Carter economic strategy a third term by re-electing his ideological successor, Barack Obama.
Nita Ghei is a contributing Opinion writer for The Washington Times.