A Weird Economy

by Victor Davis Hanson

A rising stock market, when employment rates and economic growth are dismal, seems a reflection not of a sound economy, but of a desperate one, here and abroad, in which millions have nowhere else to put their money and retirement contributions — given near-zero interest rates, fears of banks, a discouraging business climate, and a still shaky real-estate market. 

Worse yet, most feel that unemployment, high as it is at 7.7 percent, is vastly underreported, and inflation likewise does not accurately reflect the huge increases consumers have seen in the last year in health-insurance premiums, drugs, or tuition (as well as at the gas pump and on the store shelves).

After the government borrowed more than $6 trillion over the last five years, the economy still only grew in the last quarter at a rate of 0.4 percent. When we look for new measures that might boost economic growth — new energy production, deregulation, tax cuts, or increased business confidence — we see instead negative inducements: Keystone tabled, vast quantities of gas and oil put off limits on federal lands, the huge Monterey Shale Formation in California in suspended animation, a near panic at all the insidious new costs of a looming Obamacare, promises to revisit cap-and-trade, tax hikes on job creators, coupled with new state-income-tax raises like those in California (that hiked its sales, income, and gas taxes), the end of the payroll-tax holiday, unpredictability in the financial sector — from Cyprus-like worries to de facto zero interest paid on passbook accounts to quantitative easing. 

And the result is a private sector sitting on vast amounts of cash, reluctant to buy new inventory and equipment, hire new employees, or take risks — an economic fact far more important than all the hundreds of billions of dollars borrowed and spent on various stimuli, high-speed rail, Solyndra-like boondoggles, etc. 

One can mock the old wisdom about the negative effects of new taxes, regulations, deficits, debt, and government growth in unemployment and disability insurance and food stamps, and one can insist that the endless, boilerplate rhetoric of the last five years (e.g., spread the wealth, no time to profit, at some point you’ve made enough money, millionaires and billionaires, pay your fair share, you didn’t build that, fat cats, corporate-jet owners, etc.) had no effect on thick-skinned, greedy capitalists eager to make a buck, but since 2009 we have taken a natural recovery and turned it into a near permanent European-like slowdown.

If all the textbook progressive stimulatory cures for a sick economy (borrowing vast amounts of money, swelling the size of government and its payroll, expanding the money supply, and reducing interest rates to near zero) have had either no, or negative, effects, then in our fifth year of this experiment perhaps it might be time to try to restore growth by encouraging far more U.S. gas and oil exploration, cutting government, stopping tax hikes, curbing regulations, and suspending Obamacare. 

An economy (“household management”) is the sum total of millions of daily personal votes on whether to buy or not buy, hire or not hire, work or not work, hoard or spend — and right now the proverbial people are quietly choosing to ride this administration out and slow down, when robust economic growth is our only hope in paying down the vast sums we have borrowed and wasted.

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