Unemployment

You'd think that $1 trillion in spending stimulus and $2.5 trillion of Fed pump-priming would produce an economy a whole lot stronger than 1.9 percent gross domestic product, which was the revised first-quarter number. 


And you'd think all that government spending would deliver a whole lot more jobs than 69,000 in May. But it hasn't happened. The Keynesian government-spending model has proven a complete failure. It's the Obama model. And it has produced such an anemic recovery that, frankly, at 2 percent growth, we're back on the front end of a potential recession. 


The unemployment rate rose slightly from 8.1 to 8.2 percent [in May]. The so called U6 unemployment rate, tracking the marginally employed or completely discouraged, increased to 14.8 percent from 14.5 percent. And labor earnings are barely rising at 1.7 percent over the past year, almost in line with the inflation rate. 


Barack Obama doesn't get this, but businesses create jobs. And firms have to be profitable in order to hire. Yet the President is on the campaign trail criticizing Mitt Romney by degrading the importance of profits. The Fed may yet launch a new quantitative easing to stop commodity deflation and accommodate the gigantic worldwide dollar demand, but the merits of this move are dubious. On the other hand, an extension of the Bush tax cuts right now would stop the economic and job slide and re-establish certainty. In fact, all the countries around the world should move to the supply side with lower tax rates to spur economic-growth incentives.