“Everybody talks about the weather, but nobody does anything about it” – Charles Dudley Warner
New revised numbers show that the economy, in fact, contracted by 0.7% annualized in the first quarter; not a good number and once again, it seems like we have to write about this bust of a recovery.
This morning, many were quick to blame the weather as the cause. While this had some effect, the fact is it did not contribute enough negative momentum to be a major factor to this bad of a number. I cited it as what people were discussing when the first unrevised number came out in April (1st quarter GDP: Weather, the dollar…recession, April 29, 2015), but a
healthy economy should not go negative due to this factors. After all, we have winter every year it seems.
We have been having an anemic recovery for far too long, and we have only ourselves to blame.
Think about that last sentence, it’s been about six years to the day that the Great recession ended, and we are still calling it arecovery?
The recession was deep six years ago. However, since the end of the Second World War, like a rubber band snapping back, deep recessions have been followed by robust recoveries. It hasn’t happened this time, and year after year we trudge through these anemic economic numbers trying to explain it away with lame excuses.
There are real solutions to this problem. Mostly, it is our leaders in government that stand in the way of the great locomotive that is the American Economy. This locomotive is, and has been, ready to take off.
Here are just a few items holding us in Limbo…
- We have the highest corporate tax ratein the developed world for the past several years, and although some in congress have proposed lowering it to become globally competitive, there is no sign of anything being signed into law in the near future.
- We have increased individual tax rates during a time of anemic recovery. When in history have increasing taxes led to prosperity?
- The tax code itself. It is enormously complex and inefficient.
- Too many productive hours go towards trying to comply with regulations. Not only do we have a huge amount of onerous regulation on businesses, we are adding more and moreevery year.
- We’re not even honest about the real unemployment rate. It is not good, and it is not the 5.4% you’ve been hearing about. Among the reforms we need in our government is to reform the Bureau of Labor Statistics and how they calculate the unemployment rate. The fact is we have the lowest Labor participation rate for nearly forty years, and many of those that have stopped looking for work are no longer counted, creating a false labor number.
Sure we have a lot of retirees leaving the workforce, but we also have a lot of young kids entering the workforce; so it’s not the baby boomers retiring that is the problem.
If you want to get a closer snapshot of employment, just look at the more accurate U-6 rate from the government (which covers the unemployed, underemployed and those who are no longer looking but who want a job), the April 2015 rate was 10.8%. By contrast, in March of 2007, the last year before the recession, it was 8%.
When we are ready to stop shooting our collective selves in the foot, we will get going again.
Even in good times, ocassionally we’ll have bad numbers, but they are bookended by really good ones. This time has been different.
Now stop blaming the weather!