You know the economy is in the tank when officials hail the loss of 539,000 non-farm jobs in the U.S. economy during the month of April as good news. President Barack Obama termed the latest unemployment figures "somewhat encouraging," despite the fact that unemployment rose from 8.5 to 8.9 percent nationally. Obama was somewhat encouraged in part because most economists had expected April job losses to be higher than 600,000, as had happened in each of the first three months of 2009.
President Barack Obama revealed new details in his fiscal 2010 budget on May 7, with a statement saying: “We can no longer afford to spend as if deficits don't matter and waste is not our problem. We can no longer afford to leave the hard choices for the next budget, the next administration — or the next generation.”
The hundreds of thousands of Americans who attended Tax Day Tea Parties on April 15 may now be asking themselves, "What's next?" After all, freedom from the unjust taxes of King George III did not end automatically after the original Boston Tea Party. The colonists had much hard work ahead of them.
Speaking on April 20 in a conference call with reporters after returning from the Summit of the Americas, U.S. Trade Representative Ronald Kirk indicated that the administration has no plans to reopen negotiations on the North American Free Trade Agreement (NAFTA). But he also said that NAFTA could be strengthened with labor and environmental standards, without the need to reopen negotiations. During last year's presidential campaign, Barack Obama supported reforming NAFTA, but strengthening NAFTA was undoubtedly not the kind of reform many of his supporters had in mind, particularly those economically devastated by job losses caused by NAFTA.
On April 15, the deadline for U.S. taxpayers to mail their income tax returns, hundreds of thousands of Americans from coast to coast participated in around 2,000 nationally inspired but locally organized "Tea Party" protests. Fox News featured live TV broadcasts from four cities — San Antonio, Sacramento, Atlanta, and Washington, D.C. — featuring Fox personalities Glenn Beck, Neil Cavuto, Sean Hannity, and Greta Van Susteren.
When the Federal Reserve announced on March 19 its latest offensive against the financial crisis — to purchase more than $1 trillion in government debt ranging from mortgage-backed securities to long-term Treasury bonds — Wall Street, the financial media, and the political classes had a conniption. Even the most diehard defenders of Fed Chairman Ben Bernanke and his monetary policies were aghast: surely this latest move would unleash long-latent inflationary forces that would cripple any prospects for a robust recovery. Even the New York Times made note of the danger, worrying that "the Fed was taking risks that could dilute the value of the dollar and set the stage for future inflation." The Times pointed as evidence to the sharp rise in gold prices and a drop in the dollar's value against both the yen and the euro that followed the Fed's announcement.
According to a new report released by the Congressional Budget Office (CBO), the deficits to be generated over the next 10 years by the Obama administration's proposed budget will be much higher than the administration's estimates — unsustainably high, in fact. The CBO foresees an additional $9.3 trillion in red ink per year from 2010 to 2019, which by decade's end would exceed five percent of the gross domestic product (GDP). According to House Minority Leader John Boehner (R-Ohio), "We simply cannot continue to mortgage our children and grandchildren's future to pay for bigger and more costly government."
Economists have long used 1920s Germany as the classic example of what can happen to a nation when monetary inflation gets out of control. So rapid was the inflation of the money supply that the exchange rate went from 60 marks per U.S. dollar during the first half of 1921 to 8,000 marks per dollar by December 1922.
H. Ross Perot used to talk about a “giant sucking sound” in the economy more than a decade ago. Back then, he talked about the North American Free Trade Agreement (NAFTA) taking American jobs away. But now the “giant sucking sound” is the sound of federal debt issuances draining money out of the private sector, where it's needed to finance the recovery.
With the passage of the $787 billion Obama-Democratic Congress stimulus bill, the die has been cast for America's economic future. This, the largest appropriations bill ever passed by Congress, is being variously criticized and applauded from all sides.
Newsweek magazine published the following headline on the cover of its February 16 issue: “We Are All Socialists Now: The Perils and Promise of the New Era of Big Government.” Of course, it’s hard to imagine that we have only now entered the era of “big government” — weren’t we there already? But there is no doubt that both money creation by the Fed and spending by the federal government are accelerating to finance the proliferating bailout and stimulus programs.