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Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.Home > Blogs > A Matter of Opinion > Archives > 2010 > July > 05 > Entry
Editorial: Government can’t pull back hard now on economy
The national economy slowed irritatingly in June.
Job growth in the private sector was only 83,000, not enough to keep up with population growth. Overall job “growth” was actually negative, because the government no longer needed 200,000 people it had hired for temporary Census jobs.
The official “unemployment rate” dropped from 9.7 to 9.5 percent, but only because some people dropped out of the job market. Car sales slowed. Consumer confidence dropped. The stock market struggles. Unemployment claims rose.
On the upside,
the growth in private-sector jobs was double the rate in the month before and was the third-biggest in two-and-a-half years. And the difference between the first half of 2010 and 2009 was enormous: a half million jobs gained as opposed to 3.5 million lost.
Most economists weren’t seeing the dreaded “double-dip” recession, but just a too-slow recovery.
Truth is, though, if the numbers continue to look this lame, the current period will seem a lot like a recession. An often forgotten fact: the economy grew in many years during the 1930s. But that failed to make up for the huge losses in the early years. So we still think of the entire decade as the Great Depression.
In May, an editorial in this space said, “The current upswing — modest, but entailing four months of job growth — pretty much obviates a debate about the need for a new national stimulus (not to mention the fact that President Barack Obama would have great difficulty selling any major new spending plan). Now the work seems to be up to forces beyond the federal government.”
That judgment may have been premature. While a new stimulus now might also be premature, too, a debate looks like a good idea.
Minds might have to be opened gradually. We’ve heard so much lately about the evils of big government and big debt. With congressional and media Republicans in lockstep in absolute certitude that these are the evils of the moment, congressional Democrats are scared.
But in a time when state governments are facing budget cutbacks, when other governments in the world are retrenching on spending, and when millions of Americans are still on the economic edge, a retrenchment in Washington could have sharp downsides.
At the least, Washington needs to extend unemployment insurance again, rather than pretend the hard times are over. It was good to see U.S. Rep. Mike Turner, R-Centerville, vote for extension. But the issue remains poisonously partisan in Washington.
Washington also needs to consider other forms of stimulus through the tax code. The tax credit for home-buyers clearly stimulated housing sales, as the cash-for-clunkers program helped with cars.
In the late 1930s, the nation saw a recession. Some economists attribute this to a governmental pullback from the recovery spending of the New Deal.
Other economists disagree. Despite all the numbers economists use, their field remains an inexact science at best.
But the 1930s and similar experiences need a close look now.
The stimulative efforts that have been undertaken so far have not enlarged the nation’s long-term debt hugely, because they have not created ongoing programs. (The new health care plan has done that, of course, with controversy over whether it also pays for itself.)
But the recession itself has made the deficit outlook much worse; a few more years of recession would do major harm.
In 2009, the nation managed to avoid dropping into a depression, quite possibly because of government action. It can’t now drop into a recession because of inaction.
Permalink | Comments (14) | Post your comment | Categories: Economy, Editorials, Martin Gottlieb, National government
Comments
By davidss2
July 5, 2010 11:37 AM | Link to this
Nice to blame Republicans for not spending more money to extend unemployment checks after Obama has been so inept at managing from Day One, both at economy and at the oil spill. Day One, my foot. —————— The Republicans offered several compromises to take caer of paying for the $30,000,000,000 to extend. Remember PayGO is supposed to show where the money is coming from. I realize the dems have forgotten that a lot in the last 18 months after they were so giddy to have power and money spend Jan 2009. But they misspent the money in the stimulus. Instead of job creation, they created pigs—PORK. Last summer should have been full of jobs created by stimulating the private sector with tax cuts and incentives. Instead we had highway job signs all over this summer for UNION jobs (gotta protect the UAW and the others don’t they). But some of the stimulus money is still unspent. That’s one choice Voinovich offered to the dems to pay for their $30,000,000,000 to extend unemployment. NoGo from the dems. They blocked it.———————And the lack of jobs stimulated LAST summer means less income for state and local governments in taxes. So the slow tax income is compounded now by Obama and the DEMS ineptitude. Shame on them.
By Concerned
July 5, 2010 12:35 PM | Link to this
At this point, continuing to extend unemployment benefits is nothing more than welfare. We have a program for that. Time to make the switch and call it what it is.
By John
July 5, 2010 12:46 PM | Link to this
Obama has demonstrated what the truly informed already knew, you can not lead this country with rhetoric. He administrative and management experience is zip. Silver tongued individuals have duped the public before and I doubt Obama will be the last, unfortunately, we may never recover from his damage.
By Ice Bandit
July 5, 2010 12:49 PM | Link to this
No doubt about it, Marty has one of the finest Keynesian minds of the 1930s. Only problem being, stimulus didn’t work during the depression and it ain’t workin’ now. Democrats are right to be scared; they promised shovel ready jobs, and instead, left us a pile of manure that has to be removed by a shovel. Don’t blame the GOP because the novice you endorsed for president can’t get the job done.
By xlt
July 5, 2010 6:58 PM | Link to this
When Bush lied about the reasons for the war in Iraq, the well informed knew that he was putting our country into a downward spiral. The damage that Bush did to our country is not easily forgiven or repaired. Our economy will return however, manufacturing will never be the same. And, new technology is the key to our future. Along with rejecting the conservative ideology of rewarding and supporting big business. Also, rejecting the evangelical thought process that caused more damage than good. The Teabaggers are not a viable option; They are nothing more than republican clones. Although, their “Lets Make a Deal” costumes and rants are humorous. Don’t ever think that the GOP or Teabag cult is a solution. They will kill what is left of the middle class.
By scott
July 5, 2010 8:26 PM | Link to this
I say…Spend, baby Spend. I will continue to support Obama and vote for him again till there is no more money to spend or we go bankrupt, whichever comes first. Once that happens, I will vote for someone else who promises to Spend, baby Spend.
By joe_mamma
July 6, 2010 8:23 AM | Link to this
The Supreme Court rulings in 1935 and 1936 that caused the pull back of the Agriculture Adjustment Act and National Recovery Act actually led to industry to begin to expand vigorously again. In late 1936 the effects of the National Labor Relations Act began to be felt and labor costs began to rise. In 1936 and 1937 the new Social Security taxes were instituted further raising labor costs. There was also a new tax on non-distributed corporate profits. And between 1936 and 1937 the Federal Reserve doubled the reserve requirements for all member banks….which in turn decreased available money for loans. The end result was a squashed recovery. Again it was government intrusion that actually makes things worse.
By Max
July 6, 2010 9:15 AM | Link to this
joe_Mamma; Again, you’re right (one more today and you get the hat trick). There was the ‘Hoover Depression’ which morphed into the ‘Roosevelt Depression’ that would have lasted at least 10 years had WWII not intervened. While I’m not a follower of ‘coincidence’ outside of math models, it may have been a subtle part of the Bush agenda to ‘war our way out’ of the impending mess facing us. In hindsight, it is difficult to imagine no one even partially foreseeing the entire bubble bursting as it did.
By Max
July 6, 2010 9:29 AM | Link to this
There is one point about government intrusion I think must be clarified. Since the Great Depression we have a symbiotic relationship between government and the banking industry. The Fed manages the cost of money it loans to banks which currently is under 1%. The government also insures bank deposits under the FDIC. Because of the latter, Fed bank regulators step in when failure is imminent. Because of the former, banks have no incentive to assume loan risks to businesses or home owners when, instead, they can invest their virtually ‘free’ money from the fed in low, but safe, return t-bills and bonds. Until the banks are ‘encpouraged’ by the fed to release funds to consumers - thus incurring a healthy level of inflation - no stimulus package - past or future - will make any difference other than on the national debt level. The FDR solution doesn’t apply here. But, I think it would be a misleading to state that the fed to do something about the banks as an ‘intrusion’ since the relationship and authority already exists. The ‘banking reform’ bill, by the way was very ‘bank friendly’ which is interesting in a negative way.
By Max
July 6, 2010 9:44 AM | Link to this
DDN: “Minds might have to be opened gradually. We’ve heard so much lately about the evils of big government and big debt. With congressional and media Republicans in lockstep in absolute certitude that these are the evils of the moment, congressional Democrats are scared.”———I hate to be the bearer of bad news but anyone who still holds to a certain degree of sanity is SCARED. Great minds are already OPEN but are being ‘talked over’ by media outlets speaking to their dumbed down audiences; the DDN is such in this blantant display of ‘shaped charge’ ignorance.
By Kurt
July 6, 2010 6:08 PM | Link to this
And again my children, 4.7% unemployment—14,000 stock market—only 1 trillion in debt, after fighting and winning two wars to keep the homeland safe, and a strong dollar and 54 straight months on record setting GNP, and he would proudly say the pledge, I give you President Bush, do you miss him yet, my little flock,?? and the 64 million total airheads, are ye not ashamed??
By Mike R
July 6, 2010 7:40 PM | Link to this
The customer of the bank pays for the FDIC through lower returns or more fees as the bank passes along the cost of their insurance premium from the FDIC. Currently the FDIC is underwater by $21 Billion of its statutory requirement. So, look for Obama’s bank Czar (has he appointed one yet? If not, he will soon) to levy higher premiums…resulting in less lending and higher fees. Under this new 2300+ page Financial Regulation bill, that passed last week, there will be even less lending as there currently is. Some of the instruments now used in calculating a banks Tier-1 level will not be allowed. In addition, INCREASED capital requirements will probably be required. Just like the Health Care bill, there are blanks yet to be filled in. On the Bright Side a whole new Gov’t bureaucracy has been created in the Bureau of Consumer Financial Protection (BCFP). An area they will help protect consumers with is Student Loans. Yes, the same student loans that in the Health Care bill the Fed Gov’t will be taking over. So, now Dodd and Frank have created a gov’t entity to police and monitor another gov’t entity. Yes, Marty, It’s looking like the 30’s—Germany 1930’s.
By Michelle O.
July 8, 2010 2:54 PM | Link to this
I enjoy reading fact-based opinions. However, those that appear to be from the Left attacking Bush are not fact-based, but instead repeat tired lines that have been proven false many years ago. I wish the DDN would force posters to document their opinions with facts, or not allow them to post. If they did this, only the educated, conservative poster would be allowed to post. The world would be a better place if illogical, uneducated liberals were not allowed to speak unless they could document their facts and logically support their opinion.
By liberty
July 12, 2010 1:46 PM | Link to this
There is no evidence government spending does anything to end a recession. Show me evidence not opinion. The bottom line is the stimulus did not work as promised by Obama period. If it did work we wouldn’t be talking about another stimulus. Unemployment can not be extended forever. There are jobs out there that pay as much as unemployment these people are just being lazy and would rather get free money than work for $8.5 per hour.