Thursday, July 9, 2009
HT: James Pethokoukis
The unemployment rate peaked long after the end of the prior two recessions (1990-91 and 2001). The Obama administration may be starting to worry that the current recession could play out the same way. And they should worry, particularly if they consider what the past three recessions all had in common: ineffective fiscal policies.
Bush Sr. famously raised taxes in 1990, and the breaking of his no-new-taxes pledge coupled with a relative weak recovery helped elect Clinton in late 1992. Bush Jr. championed an ineffective stimulus policy in 2001 (mainly tax rebates), and the economy suffered through a "jobless recovery" until he passed a genuine tax-cutting stimulus bill in mid-2003, after which the economy almost immediately boomed. And now Obama has overseen a raft of tax rebates and income redistributionist policies, and his spending plans all but guarantee higher taxes.
I've argued that the current recession is most likely over, but I don't see a strong recovery, nor do many people. Unless we get a rather strong recovery, the unemployment rate is unlikely to peak anytime soon, and I've said before that it could be a year or so before we see any significant improvement in the job market.
The best way to solve this looming disaster for Obama's approval rating is to recall the current stimulus bill and replace it with a genuine stimulus bill, one that relies mainly on cuts in tax rates for workers, investors, and businesses.
Posted by Scott Grannis at 2:17 PM