Since 1960 the unemployment rate has exceeded 6% only five times on the date of a presidential election. In all but one of those times the incumbent or the candidate of the party in power lost. The exception was 1984 when the unemployment rate was 7.2% and Reagan won re-election. That can be explained by the fact that it was over 10% when Reagan took office and it had declined by 3 percentage point in the two years leading up to the election. Reagan got the credit for that.
With a current unemployment rate of 9.4%, that has climbed to that height under his watch, Obama is looking at considerable trouble if unemployment remains that high in November, 2012. The rate was 4.3% when Democrats took over Congress in 2006; it was 6.5% when Obama was elected; and it was 8.5% when he was inaugurated.
Obama promised that the stimulus package would lower unemployment below 8%, but the stimulus has been a colossal failure. John Taylor has an excellent article in the current issue of Commentary in which he explains exactly why the stimulus was such a failure. Besides the fact that fiscal stimulus seldom delivers the hoped-for results, this particular stimulus package may have been the worst of all such boondoggles in history because the money was spent in all the wrong places. Even if it had been spent as intended it would only have saved or created government jobs. But it didn’t even do that because the states that received the money just put it in their general fund where they used it to pay off debts. The government jobs, mostly teacher positions, did result in some layoffs but most of the teachers kept their jobs because the state governments did what they always do: They borrowed to make up their deficits. Now we hear talk of finding ways for states to file bankruptcy which is expressly prohibited under current law.
Remember these things as Obama makes big promises of a rosey future tonight. When he talks about “investment” in high-speed rail and renewable energy, think money down a rat hole for another boondoggle (high-speed rail) and a fantasy (renewable energy). Even The New York Times has been putting “investment” in scare quotes as Obama tries to avoid saying the obvious: Another trillion dollars of new and unnecessary spending.
None of what he will talk about tonight will lead to a reduction of unemployment from 9.4% to 6% or below by election day 2012. That’s going to be a huge problem for him that he cannot escape or blame on anyone else. Apparently, this has not dawned on Obama yet. Time is fast running out.
To be sure, the president and the government cannot create any jobs, except government jobs and those don’t equate to economic recovery. It’s the private sector that creates jobs, but employers won’t start hiring unless and until the government adopts pro-growth economic policies. That would mean lowering taxes and getting rid of needless and economically damaging regulations. Listen carefully tonight and see if you hear anything about that. It’s doubtful.
Watching the “show” tonight one might want to remember these words from Ronald Reagan’s first inaugural speech:
In this present crisis, government is not the solution to our problem; government is the problem. From time to time we’ve been tempted to believe that society has become too complex to be managed by self-rule, that government by an elite group is superior to government for, by, and of the people. But if no one among us is capable of governing himself, then who among us has the capacity to govern someone else?
— Ronald Reagan, January 20, 1981
UPDATE: Colorado unemployment rate up to 8.8%, highest in 30 years. Story here.
Unemployment line in the Great Depression