Why Is American Unemployment Under Obama Rising Faster Than In Other Countries?

Even liberals have begun to come to the conclusion that Barack Obama has been a bust on creating jobs, as evidenced by a recent New York Times piece.  The Russian and formerly communist Pravda has likewise recently excoriated Obama as quintessentially bringing the “change” of economic destruction rather than job creation and prosperity.

Barack Obama and his team assessed the economic conditions, and proposed that the answer was his giant $3.27 trillion stimulus package.  The Obama administration claim was that unemployment – then at 7.2% – would be held under 8% if he got his stimulus.

Now it is at 9.8%, and is expected to continue to climb significantly higher.

Meanwhile other governments – who have in recent months elected conservatives – have turned their economies and their unemployment numbers around.

Meanwhile America, under the leadership of a wise and wonderful messiah who can do no wrong, has increasingly crawled into the toilet bowl.

Why?

John Lott  FOXNews.com    October 22, 2009
LOTT’S NUMBERS: Why Is Unemployment Rising Faster In the U.S. Than Other Countries?

Did all that stimulus money just lead to higher unemployment rates?

The Obama administration claims that it was their passage of massive government spending that saved the United States from another Great Depression.  Last week, Larry Summers, Obama’s top economic adviser, claimed that because of the stimulus:

“We have walked a substantial distance back from the economic abyss and are on the path toward economic recovery.  Most importantly, we have seen a substantial change in the trend of job loss.”

And Vice President Biden declared at the end of September:

“In my wildest dreams, I never thought it [the stimulus] would work this well.”

As President Obama and other Democrats have correctly pointed out many times, this has been a worldwide recession. But if Summers and Biden are right in their assessment of the stimulus measures, one would think that the U.S. economy should be recovering better the many other countries, countries not wise enough to follow Obama’s lead of an extraordinary $787 billion increase in government spending.  It is also particularly timely to evaluate the spending since Christina Romer, the chairwoman of President Obama’s Council of Economic Advisers, told Congress today that the stimulus had already had most of its impact on the economy.

Take Canada. Their stimulus package was nowhere as extensive as ours.  Their $22.7 billion in stimulus spending this year, and $17.2 billion next year, amounts to about 7.5 percent of their federal spending for their 2009 and 2010 budgets — not much more than a third of the per-capita stimulus spending in the United States.

Has Canadian unemployment climbed higher than than ours because of their relative inaction? Hardly. Last September, unemployment in both Canada and the U.S. stood at 6.2 percent. By January, when President Obama took office, the U.S. unemployment rate was 7.6 percent; Canada’s was at 7.2 percent.  But since then U.S. unemployment has gone up much faster. In September, the U.S. unemployment rate had soared to 9.8 percent, while the Canadian rate had only increased to 8.4 percent.

But it is not just Canada where the unemployed are faring better. Other countries, too, decided against a massive stimulus plan. In March, with German Chancellor Angela Merkel nodding in agreement at his side, French President Nicolas Sarkozy declared: “the problem is not about spending more.” Later that month, the president of the European Union, Prime Minister Mirek Topolanek of the Czech Republic, castigated the Obama administration’s deficit spending and bank bailouts as “a road to hell.” The Washington Post wrote that there was a “fundamental divide that persists between the United States and many European countries over the best way to respond to the global financial crisis.”

The unemployment rate in the European Union was higher than in the United States to begin with even before the Obama administration’s spending. By January, the EU unemployment rate stood at 8.5 percent — almost a whole percentage point higher than ours.  So what has happened since the big U.S. stimulus spending spree was passed? We more than caught up with the EU’s high unemployment rate.  By August, the last month data is available for the EU, the U.S.’s unemployment rate slightly exceeded the EU’s — 9.7 versus 9.6 percent.

Germany has particularly been out front resisting the call for more public spending.  Yet, from January through September, the German unemployment rate only rose slightly, from 7.9 to 8.2 percent.

Data on unemployment rates from 27 countries from Japan and South Korea to Brazil and other South American countries to Europe shows that from January to August display the same consistent pattern.  Even in the EU it isn’t just a few countries that are driving the relatively small increase they have experienced.  The U.S. had a larger increase in unemployment than 22 countries — that is, 81 percent of the countries had a smaller increase in unemployment this year than the United States. Unemployment in some major countries such as Brazil and Russia has actually fallen since January (see Table here).  Other countries, from France to Mexico to Australia to Switzerland, have seen unemployment increase by only about half the amount of the U.S. rate. Indeed, the average increase in unemployment for the 27 countries is slightly less than half the US increase.

Table 1 can be seen here.

As Canada illustrates, it isn’t just countries that had higher unemployment rates before we passed our stimulus plan who have had smaller increases in unemployment this year. About half the countries had lower unemployment rates than the U.S. in January and half higher rates, but both groups of countries have seen much smaller increases in unemployment than the United States.

For thirteen countries in the Organization for Economic Co-operation and Development it is possible to use estimates of the size of different countries stimulus programs and compare it to the change in unemployment rates. Countries with larger stimulus spending tended to have bigger increases in unemployment.  Each one percentage point increase in a country’s GDP that is spent on a stimulus was associated with unemployment increasing by about a third of a percentage point.  The impact isn’t statistically significant, but any increase in unemployment hardly comforts nations that are piling up huge debts.

Figure 1 can be seen here.

So why would more stimulus increase unemployment? Spending almost a trillion dollars on various stimulus projects means moving a lot of resources from areas where the private sector would have spent it to the public sector thus eliminating the jobs many people currently have.

Jennifer Psaki, a White House spokesperson, declined numerous requests to answer any questions from Foxnews.com regarding the findings shown here.

The unemployment data from other countries raises serious questions about the large government-spending program, especially since the U.S. program that was primarily sold as a good way to create or save millions of jobs. With the Obama administration and Congress already talking about possibly providing another $200 billion to extend these government-spending programs, these data raise real questions about the efficacy of this spending.

John R. Lott, Jr. is a Foxnews.com contributor. He is an economist and author of “Freedomnomics.”

So it wasn’t just the Republicans (who voted against the porkulus and predicted it would utterly fail) who opposed Obama’s policies.  It was much of Europe.  The Europeans compared Obama’s “change” to “a road to hell.”  And they said, “the problem is not about spending more money” in direct contradiction to Obama’s fundamental economic philosophy.

And the Republicans and the Europeans were right, and Obama was wrong.

Now Obama seems to reasoning, “if your going to be wrong, be spectacularly wrong.  And don’t stop digging that hole deeper.”

But it’s not enough that Democrats are taking all the money out of the private sector and giving it to the government to dole out on useless pork projects; now they’re talking about encouraging the rich to shelter their money rather than invest it in future economic growth, too.

After offering the ridiculous argument that ending the Bush tax cuts wasn’t actually a tax increase because (after all) the Bush tax cuts were “controversial,” Pelosi continued to wax idiotic:

What about allowing those tax breaks to expire at a fragile time in an economic recovery, the speaker was asked.

“I don’t think many people here see, nor do the American people see those tax cuts at the high end as being job-creating,” she said. “They don’t… think that that’s part of the reason we’re in the fiscal, the budgetary situation that we’re in, because those tax cuts cost money. And… they were… a cost to our budget, without any commensurate impact on the economy for job creation. To return money to the treasury. So, nobody sees those as a job-creator.

The thing is that Pelosi and the Democrats are simply factually wrong.

From the New York Times, in an article entitled, “Sharp Rise in Tax Revenue to Pare U.S. Deficit” published July 13, 2005:

WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion. […]

Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.

It’s amazing that mainstream media liberals always seem to see both successes for Republican policies and failures for Democrat policies as “unexpected.”

Pete Du Pont wrote in Opinion Journal that:

Tax rate reductions increase tax revenues. This truth has been proved at both state and federal levels, including by President Bush’s 2003 tax cuts on income, capital gains and dividends. Those reductions have raised federal tax receipts by $785 billion, the largest four-year revenue increase in U.S. history. In fiscal 2007, which ended last month, the government took in 6.7% more tax revenues than in 2006.

Americans in high tax states are voting with their feet and leaving.  And the states with the highest income taxes such as New York, California, and Hawaii, are facing the biggest revenue shortfalls.

In spite of being warned that liberal class-warfare tax-the-rich-to-extinction policies would lead to Dodo-bird results, New York attacked the rich with a 31% income tax hike.  And all they have to show for their eat-the-rich tax policies is record revenue shortfalls.

Gary Alexander writes in an article entitled, “Texas is Winning the New Economic War Between the States“:

Don’t look now, but there’s a new War Between the States under way, and the south is winning. The most dramatic winner is Texas. The cover story of a recent (July 9) issue of The Economist compared California with Texas and implied that the Golden State is falling apart, while the Lone Star State is leading the nation out of the recession.  Then, in a mid-July issue of National Review, Kevin D. Williamson said the nation is “Going Alamo,” with new jobs and businesses tipping southward, draining California, the Midwest, and Northeast of their former economic glory.

One indicator of the trend, according to Williamson, is the cost of renting a U-Haul truck for a one-way move.  From Austin, Texas to San Francisco, California, the cost is $900, while a one-way rental from San Francisco to Austin is $3,000, due to the exodus of trucks from California.

All this makes sense.  We are a mobile nation.  People can move easily enough (especially if they rent), and capital can move even faster.  Capital, jobs, and businesses will go where they are most welcome, while capital leaves places where it is punished by higher taxes and over-regulation.

Since all 50 states have a common currency and no border guards or toll gates, relocation is purely an economic decision.  Capital says to governors: “Hurt me enough and I’ll divorce you.”

Texas is Now America’s #1 Economic Engine

When Barack Obama and Nancy Pelosi get their way and raise Americans’ taxes, instead of capital flowing to Texas, it will flow overseas, and into tax shelters.  And the money that would have been available to invest in job creation will never materialize.

Conclusion: Vote for fewer jobs and more taxes.  Vote Democrat.