Tim Geithner's Empty Cheerleading
Economy: "Welcome to the Recovery," said the headline over an op-ed by Treasury Secretary Tim Geithner in the New York Times. At first we thought it must be a joke, maybe even a parody. It wasn't.
Welcome, indeed. The very same administration that promised unemployment wouldn't rise above 8% if we passed the $862 billion stimulus has dubbed the tepid economic rebound "recovery summer." They seem to think they deserve credit for the mess.
"The combined effect of government actions taken over the past two years - the stimulus package, the stress tests and recapitalization of the banks, the restructuring of the American car industry and the many steps taken by the Federal Reserve - were extremely effective in stopping the freefall and restarting the economy," Geithner wrote.
In fact, the economy's "freefall," as he put it, was stopped by the Fed's essentially printing nearly $1.2 trillion in new money - and, starting in December 2008, holding interest rates at zero, so that banks could essentially mint profits by borrowing at no cost and round-tripping the money into Treasury securities at 3% yield.
What's painfully apparent is that, if anything, the government's hyperactive interventions in the economy have held it back.
The "stimulus" was a farce from the beginning, promising a lot of "shovel ready" projects that would create thousands and thousands of jobs. They never came. But money did go to bail out the states - in essence, a government-to-government bailout.
TARP, as we now find out, was a $700 billion boondoggle, a once-in-a-lifetime opportunity for Congress to raid the public till for pet projects. Now, a new report by Sens. Tom Coburn, R-Okla., and John McCain, R-Ariz., highlights 100 stimulus projects that not only didn't work, but are "being mismanaged or were poorly planned," or are "costing jobs and hurting small businesses."
But what did you expect? Government efficiency?
Even so, Geithner tries his darndest to make the current economic environment seem as if it's good and getting better, thanks of course to government intervention in the private sector.
As support he cites a recent study by economists Alan Blinder and Mark Zandi asserting that government actions since fall 2007 have saved 8.5 million jobs and increased GDP by 6.5% above where it would have been.
What he doesn't say is that the Blinder-Zandi "study" has come under broad criticism for making up numbers. All the estimated jobs saved and GDP created come from a Keynesian model using highly suspect multipliers. That is, the numbers aren't real-world data measuring real jobs; they exist only in a computer model.
Sadly, the economic reality is much starker. U.S. businesses are sitting on a record $1.8 trillion in cash, afraid to invest and expand. Why? They fear the high-tax, anti-wealth, anti-business policies emerging from this administration and don't want to invest if they think it will be taxed or regulated away by Obama's bureaucrats.
GDP growth in the latest quarter was just 2.4%. Economists say we need to grow faster than 3% to show a net increase in the nation's payrolls. This explains why we still have a jobless rate of 9.5%.
Now we discover that last year's downturn was even deeper than first thought, so this year's continued weak growth is particularly bad news for the 15 million Americans out of work.
We hate to sound like a broken record on this, but the federal government's programs - whether stimulus, TARP or financial reform - have yet to show any real gains. They have failed.
Our gross domestic product, at $13.22 trillion in the most recent quarter, is still below its peak in third quarter 2007. Jobs? We've lost 7.5 million of them since the recession started in December 2007, and 3.9 million since the dawning of the Obama era.
These are real numbers, by the way, not from a computer model or made up. And contrary to Geithner's remarks, the government's spending isn't helping the economy - it's put us in grave danger. Just last week, the nonpartisan Congressional Budget Office warned that out-of-control spending is pushing U.S. debt to levels that raise the "probability of a sudden fiscal crisis."
Right now, we're $13 trillion in the hole. Based on the government's current insane spending trajectory, our debt will reach $23 trillion by 2020.
It's time we left the fantasyland of Keynesian fiscal stimulus and enter the real world of an economy where markets rule and incentives matter. If we don't, the economic pain we'll feel won't be found in an economic model - it will be all too real.
