The jobless rate has been cut in half (to 5%), but this apparent improvement is largely due to workers dropping out of the labor force. The workforce participation rate is down to 62.4%, the lowest level since the 1970s. Bureau of Labor Statistics news release, 11/6/15.
The following chart shows how the workforce participation rate rose starting around 1970 as more women entered the work force, only to reverse course around 2000 as the employment picture grew less favorable. Labor force participation rate falls to lowest level since 1978, Sam Ro, businessinsider.com, 5/2/14.
Economic weakness has persisted despite a double dose of stimulus. In addition to the aforesaid deficit spending, the Federal Reserve has held short-term interest rates at near zero levels since 2008 and acquired trillions of dollars in bonds to depress longer-term rates. Fed mulls shift in monetary policy, 9/7/15.
The Fed postponed a quarter point (0.25%) interest rate increase in September, but most observers are expecting it in December as a first step in phasing in a return to normal interest rate levels over, say, two years. There is continuing concern about the effects of rising US interest rates, however, as other central banks resort to increased monetary stimulus due to a deteriorating global economy. Risks of global financial crash has increased, warns IMF, Phillip Inman, theguardian.com, 10/7/15.
3. REGULATORY PROLIFERATION – Given all the fiscal and monetary stimulus that has been provided in recent years, why hasn’t the economy (or at least inflation) taken off like a rocket? The answer, we believe, is that the effect of these measures has been counteracted by regulatory burdens imposed on the private sector. Although not precisely quantifiable, the costs are believed to total some $2 trillion per year and the burden keeps mounting as new regulations are issued. Fed mulls shift in monetary policy, 9/7/15.
Take a current annual budget deficit of roundly $0.5T, subtract the estimated cost of regulations, and the indicated net effect would be a governmental withdrawal of $1.5T from the economy every year. No wonder massive monetary stimulus has been seen as necessary to keep the economy sputtering along despite the risks involved.
The top regulatory goal currently is forced reductions in carbon emissions, supposedly to save the planet from global warming. Implementation of these regulations would lead to major energy cost increases for businesses and residential consumers. The administration is pushing for international agreements that would make it difficult to reverse the Clean Power Plan and other regulations decreed by the EPA (without approval of Congress). An international conference on climate change is beginning in Paris today, and it will continue through December 11. Much ado about global warming, 10/26/15.
Health and Human Services, the IRS, etc have issued reams of regulations in connection with the implementation of GovCare. Nevertheless, indications are that the new system will collapse unless substantial subsidies for healthcare insurance companies are provided to cover the losses they have been incurring. As exchanges falter, team Obamacare fights for an insurance bailout, Timothy Carney, Washington Examiner, 11/24/15.
Federal financial agencies (including the newly created Consumer Financial Protection Bureau) were granted vast new powers by the Dodd-Frank Act. In addition to its overall monitoring of the monetary system, for example, the Federal Reserve is now responsible for overseeing the internal operations of individual banks and financial institutions. Fed Chair Janet Yellen spelled out some of the mind boggling details in her recent testimony before the House Committee on Financial Services, 11/4/15.
Many other agencies are issuing regulations as the administration races to implement projects on its to do list before the president leaves office. Obama quietly releases plans for 2,224 regs ahead of turkey day, Michael Bastasch, Daily Caller, 11/23/15.
Some new rules lack support on Capitol Hill, and it might seem Congress could readily block them, but as the following example shows this may be easier said than done.
Two resolutions were introduced in the Senate under the Congressional Review Act and passed by a 52-46 margin. (For whatever reason, the resolutions were not filibustered.) The first resolution disapproved the Clean Power Plan in principle; the second provided that the CPP “shall have no force and effect.” US Senate votes to block EPA’s Clean Power Plan, Barbara Hollingsworth, cnsnews.com, 11/18/15.
The House is expected to vote on the CPP resolutions this week. If the second (substantive) resolution is passed, it will be sent to the president and vetoed, so the entire exercise is purely symbolic. The only realistic chance to block the CPP before 2017 is in the courts, and several legal challenges are pending. House has big energy plans while Obama’s in Paris, Kyle Feldscher, Washington Examiner, 11/27/15.
Going forward, Congress needs to take back the power that it has delegated to 300+ agencies to promulgate sweeping regulations pursuant to broadly stated legislative guidelines. Otherwise, unelected bureaucrats will continue to exercise much of the legislative power that was entrusted to Congress by the Constitution. Here’s an old plan for reining in the regulators, which still seems generally sound. Regulatory common sense requires eternal vigilance, 11/22/10.
Another idea would be to require affirmative congressional approval for major new regulations instead of simply providing procedures for expressing congressional disapproval (subject to presidential vetoes) as the Congressional Review Act does.
Re the sweeping powers of the Federal Reserve, the House has passed H.R. 3189, the Federal Oversight Reform and Modernization [FORM] Act. This bill would provide for greater transparency of the Fed’s monetary policy decisions, subject the central bank to audits, and impose procedural safeguards on its issuance of regulations. House approves GOP-led bill to boost Fed oversight, AP, foxnews.com, 11/19/15.
The Form Act is not likely to go far in the Senate (a veto has been threatened), but it seems like a step in the right direction. We would also suggest elimination of the Fed’s dual mandate (monetary stability and full employment) so as to make clear that the central bank is not expected to serve as an orchestra leader for the entire economy.
4. CHANGE AT THE TOP – We don’t endorse the “if Congress doesn’t act, I will” approach of the current president, but presidential leadership is crucial to keep the federal government working properly. With two houses and a total of 535 members, Congress is well equipped to serve as a review board, but it doesn’t do a good job of formulating coherent policies in the first instance let alone overseeing their execution.
Hopefully, the next president will be more supportive of smaller, more focused, less costly government than most recent presidents. It would be a mistake, however, to expect any of the candidates to miraculously solve the problems that have been discussed in this entry – the seeds for most of these problems were sown long before 2009.
In addition to paying attention to what the candidates say about the issues and trying to elect the best candidate available, therefore, Americans should stay engaged after the elections and let their views be known if whoever is at the helm starts going astray. SAFE plans to continue its efforts along these lines, and we would welcome your support.