OPINION:
The Federal Reserve, once full of confidence about the economy, now says the nation will be in the rut of slow growth for as far as the eye can see. Seven years into the weakest economic recovery since the Great Depression and we’re told not to expect improvement soon. Such growth as there is has been a dismal 1 to 1.5 percent over the past six months and Janet Yellen, the chairman of the Fed, says the growth rate for this year will be 2 percent — or less.
More than a decade has passed since the nation has seen a growth rate of 3 percent. The interest rate on 10-year Treasury bonds has declined to just above 1.5 percent. That’s an indication of low inflationary expectations, which is good, but it’s a powerful sign that investors and businesses are bearish on the future, and that’s not good. Risk aversion and fear are the sentiments driving the economies of the United States and the rest of the world.
While Barack Obama has entertained himself with a bizarre victory dance about the economy, poverty remains at or near-record levels, the American gross domestic product is $2 trillion behind a normal recovery, job growth is decelerating, more than 40 million Americans are on food stamps, wages are flat and have been for a decade. That’s not much to celebrate with song and dance.
One pundit says the economy has slipped into a “soft business recession.” Larry Kudlow of CNBC points to the collapse of business investment, the slowdown in hiring, and the decline of profits. David Malpass, an economist at Encima Global, sees similar gloomy signs, one among them that industrial production fell 0.4 percent in May from April, leaving a 1.4 percent annual decline. He finds industrial production down almost 3 percent since the peak in November 2014.
Many economists now put the odds of another recession in the next 18 months at 50-50, which means maybe yes, maybe no, but by a margin of 2 to 1 Americans say the nation is on a wrong course. Is anyone in Washington listening?
The president and Congress keep looking to the Fed as if Janet Yellen has a magic ignition button under her thumb. That’s a forlorn hope for change. After seven years of near-zero interest rates and four rounds of “quantitative easing,” growth has been anemic. The Federal Reserve has run out of bullets.
President Obama and his protege have no growth agenda at all. None. He and Hillary Clinton mouth words about infrastructure spending but Mr. Obama has exhausted the inventory of “shovel-ready public-works projects” and has produced almost nothing but obstructed streets and an endless procession of road signs proclaiming “road work ahead.”
Where are the Republicans? What is their growth message? Donald Trump has endorsed business tax reform, a pro-America energy strategy, promises of a repeal of Obamacare and regulatory sanity. Easier said than done, of course, but from House Speaker Paul Ryan and Senate Republicans there are only white papers and frothy rhetoric.
What’s needed now, and soon, is a Republican stimulus plan to create jobs, beginning with a revised business tax rate to jump-start growth. This would increase industrial production, pull capital into the United States overnight and put punch into paychecks. A business tax cut is a worker tax cut. Push this through the Republican Congress and send it to Barack Obama. Dare him to veto a jobs bill. He probably will, with Hillary’s concurrence, and that will speak volumes to voters in an election year. A strong Republican voice will only clarify and raise the stakes for November. It’s still the economy, stupid.
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