The Coming Recession

Posted by Jeff Carter
on September 29th, 2012

David Malpass has an article that echoes what I have been thinking. We are headed for another recession. James Pethokoukis has come to the same conclusion. The reason for the faltering economy is as plain as the nose on your face.

And a well regarded study by two Swedish economists found a negative correlation between government size and economic growth. Where government size grows by 10 percentage points, annual growth rates fall by 0.5 to 1 percent. In 2000, US federal spending was 18 percent of GDP. This year, it’s 24 percent.

The Obama solution to economic woe was to trust government more than individuals and markets. It failed miserably and we are headed for another recession precisely because of Obama’s policies. We never really catapulted out of the last economic downturn. We have proven the multiplier effect of government spending is 0.

ISM Manufacturing Production Index data by YCharts

Malpass points out that the only thing Obama’s economic policies have done is turned the nation into gold investors and the banks into Treasury bond buyers. Production is down, and unemployment persists. When you analyze the statistics it is pretty depressing.

US Unemployment Rate data by YCharts

More and more people are left with no hope, even though we are rapidly making technological innovations that could turn the country around if government would unshackle them. The energy sector could become a vibrant job creator. We could have a lot more manufacturing jobs in the US with a change in tax policy. But instead of putting our faith in people, the proposals on the table increase taxes and spending when we should be cutting both. The incentive to work isn’t there, and people are leaving the labor force. They are frustrated.

US Labor Force Participation Rate data by YCharts

It makes no sense.

My dog has made more shovel ready projects than Obama.

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Thanks for the link Instapundit.

Tip of the hat to Powerlineblog.

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