Don’t look now but the country may be headed into a recession. It would be an Obama recession that he couldn’t possibly blame on George W. Bush—though that wouldn’t keep him from trying.
The Bureau of Labor Statistics (BLS) on Thursday released its second estimate of first-quarter U.S. economic growth, and it wasn’t good. BLS’s first estimate said the economy contracted by -0.1 percent in the first quarter; the new estimate puts the contraction at -1.0 percent.
Though most economists seem to think the economy will bounce back this quarter, if it also contracts we will likely be in an economic recession. (Note: Two consecutive quarters of negative economic growth is the general definition of a recession.)
Interestingly, nearly half of the country (45 percent) thinks the U.S. is already in a recession, according to a recent Rasmussen poll. And that concern shouldn’t be easily dismissed. President Obama’s 2012 campaign agenda was similar to Franklin Roosevelt’s when he ran for his first reelection in 1936. FDR won and pushed through his campaign promises.
What did he want?
(1) The “Wealth Tax.” FDR proposed what he dubbed a “Wealth Tax.” As he explained to Congress in June 1935, “Our revenue laws have operated in many ways to the unfair advantage of the few, and they have done little to prevent the unjust concentration of wealth and economic power. … Social unrest and a deepening sense of unfairness are dangers to our national life which we must minimize by rigorous methods.” Sound familiar?
FDR got his wealth tax on high-income individuals, and so did Obama.
(2) Economic uncertainty. FDR’s push for new regulations, taxes and mandates created huge uncertainties in the business community, and so businesses hunkered down and sat on their cash, unsure what challenges and costs they would face when hiring and expanding. Again, sound familiar?
(3) The government-spending binge. FDR ran up government spending from 6 percent to 9 percent of the economy, while Obama increased it from about 20 percent of GDP to nearly 25 percent.
To sustain that level of spending the government must dramatically increase the tax burden and/or borrow like a drunken liberal. Obama has done both, as did FDR. Both actions suck capital from markets and the private sector that is needed to boost real economic growth.
FDR’s policies led to what’s called the Roosevelt recession of 1937. Obama has followed the same path. Will we get the Obama recession of 2014?