August 2013

The Unemployment Crisis Continues: Another Dismal Summer of “Economic Recovery”

By John R. Hendrickson

Some of the economic news this summer is unduly positive. The optimists are claiming victory over the Great Recession as unemployment has fallen to 7.6 percent and the federal deficit is projected to be smaller, which they claim means that the debt crisis is on the road to being solved. This rosy economic picture does not match reality. The economy continues to grow at a very slow pace, unemployment remains higher than reported, and the national debt is over $17 trillion. In a recent article in The Wall Street Journal, Mortimer Zuckerman, who is the Chairman and Editor in Chief of U.S. News and World Report, wrote that “the longest and worst recession since the end of World War II has been marked by the weakest recovery from any U.S. recession in that same period.”[1] The nation still is suffering from the Great Recession as the slow economic growth and continual high unemployment demonstrates.

Zuckerman argues that the 7.6 percent unemployment rate “is utterly misleading,” and that “an estimated 22 million Americans are unemployed or underemployed; they are virtually invisible and mostly excluded from unemployment calculations that garner headlines.”[2] If those who are either underemployed or discouraged from even looking for work because they have been out of work for so long were counted, the actual unemployment rate would be, as Zuckerman notes, “14.3 percent.”[3]

The cause for the continual high unemployment and slow economic growth is directly the result of the failed economic and regulatory policies implemented by President Barack Obama and Democrats in Congress. As a recent editorial in Investor’s Business Daily stated, “President Obama and the progressive wing of the Democrat Party plunge recklessly ahead with their plans to regulate, tax, and control the economy to death.”[4]

The reckless spending, which is fueling the debt crisis, along with a significant increase in regulations over the economy have prevented economic expansion and job creation. Businesses continue to remain uncertain as to what will happen in regard to the economy as well as policies being implemented and those that are in the process of emerging. One major factor is the regulatory and cost impact of the Patient Protection and Affordable Care Act, which through its government mandate, forces individuals and employers to purchase health insurance. The Affordable Care Act is not only going to be another costly entitlement — placing further pressure on the federal budget — but it is also causing businesses to exercise caution on hiring full-time workers.

As Zuckerman notes:

The health-insurance law requires employers with more than 50 workers to provide health insurance or pay $2,000 penalty per worker. Under the law, a full-time job is defined as 30 hours per week, so businesses, especially smaller ones, have an incentive to bring more part-time workers.[5]

Zuckerman correctly argues that “hesitation to hire is part of a larger caution among employers unsure about the direction of government policy — and which has helped contribute to chronic long-term unemployment that shows no sign of easing.”[6]

John A. Allison, President of the Cato Institute, wrote that “government policies are the primary cause of the recent Great Recession and the related slow economic growth.”[7] If government policies are responsible for the current economic malaise then the solution is to reverse the current policy trend. This includes cutting spending, reducing tax rates, eliminating excessive regulations, and repealing the Affordable Care Act. Reforming entitlement programs (Social Security and Medicare) is also a priority.

The 14.3 percent true unemployment rate is devastating, and proof that the tax and spend policy of President Obama’s administration is not working. The economy will only start to respond when stability is returned to policymaking.

John R. Hendrickson is a Research Analyst at Public Interest Institute.

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation. They are brought to you in the interest of a better-informed citizenry.

[1] Mortimer Zuckerman, “A jobless recovery is a phony recovery,” The Wall Street Journal, July 15, 2013, <http://online.wsj.com/article/SB10001424127887323740804578601472261953366.html> accessed on July 22, 2013.

[2] Ibid.

[3] Ibid.

[4] Editorial, “Jobs crisis far worse than official data show, former official says,” Investor’s Business Daily, July 19, 2013, <http://news.investors.com/ibd-editorials/071913-664481-unemployment-far-worse-than-official-data-official.htm> accessed on July 22, 2013.

[5] Zuckerman.

[6] Ibid.

[7] John A. Allison, The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy’s Only Hope, New York, McGraw-Hill, 2013, p. 251.