Not Coming From The White House

The editorial board of Bloomberg News put up a recent piece which perfectly summarized the answer to "Who's to blame" for our economy.

CEOs broadly point to overregulation as the biggest economic damper. But the raw numbers of new regulations don't support the uncertainty purveyors, either. The Office of Management and Budget says 931 major regulations -- those with enough economic significance to require OMB review -- were issued by the executive branch during the first three years of George W. Bush's first term, more than the 886 from Obama's first three years.

Right. So why wasn't this a problem during the Bush Administration? But let's get to the main answer.

Companies are also sitting on cash or refusing to hire because, paradoxically, unemployment is a drag on consumer demand, a problem they lay at the president's feet. It's important to note that historical data collected by economists Carmen Reinhart and Kenneth Rogoff show that it takes almost five years for employment to recover from the wreckage of a deep financial crisis. 

Hiring is down because consumer demand remains low as households continue to deleverage. Employers are also using technology and other productivity enhancements to make do with fewer workers.

If there are fewer workers in an economy that is 70 percent consumer driven, then demand is going to suffer because there are less consumers. If the government does not stimulate demand, what entity does it?

The article also has a couple of other things to say of note.

Much of the problem is self-inflicted by Congress. Lawmakers are putting off until after November's elections a crush of expiring Bush-era tax cuts, the payroll tax reduction and dozens of other tax breaks and spending programs. If they expire, and if an approved $100 billion in spending cuts occur at the same time, economic growth would slow to 0.5 percent next year, the Congressional Budget Office says.

This is the elephant in the room that no one wants to tackle. Letting all the tax cuts expire and cutting spending would be a disaster for our economy and we would likely dip into another recession.

Those invoking the uncertainty principle fail to mention that inflation and interest rates are historically low. Federal Reserve Chairman Ben Bernanke has repeatedly pledged not to raise rates at least through late 2014 -- a gold-plated certainty guarantee if we ever saw one.

Yeah, where's the uncertainty again? And how about all those folks that keep saying that inflation is going to happen? Any day now...

So, the issue of uncertainty is not coming from the White House. It's coming from the private sector and, to a certain extent, Congress, for failing to move before the election. Of course, we all know what the goal of the House is so I guess I don't blame them:)