Romney Could Use ObamaCare Waivers Against ObamaCare

Romney claims he will repeal ObamaCare on his first day in office. The president, however, has no power to repeal any law. What Romney could do, however, is issue a blanket waiver from ObamaCare to everyone. Better yet, he could issue a waiver to everyone except those Obama has already granted waivers--1200+ labor unions and businesses that contributed to Obama (http://www.theblaze.com/stories/how-many-businesses-are-exempt-the-final-number-of-obamacare-waivers-is-in/)--and thereby force the biggest-spending supporters of ObamaCare to live under ObamaCare. These ObamaCare supporters would doubtless file suit to protest this discrimination against them, and it would be great to hear these big supporters of ObamaCare arguing in federal court that imposing ObamaCare on them oppresses them!

The Incredible Shrinking Workforce

The US Department of Labor Bureau of Labor Statistics (BLS) came out with employment numbers for April (http://www.bls.gov/news.release/empsit.t15.htm). While the official unemployment rate fell from 8.2% to 8.1%, the real employment situation worsened. The unemployment rate fell not primarily because of the lackluster addition of 115,000 net new jobs, but primarily because 342,000 people dropped out of the workforce entirely. As a result of people dropping out of the work force, the share of the population working (which economists call the employment-population ratio) fell from 58.5% to 58.4% (http://data.bls.gov/timeseries/LNS12300000). People debate what's the real unemployment rate. The BLS refers to its measure "U3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)" as the official unemployment rate (as you can see). U3, however, ignores both short-term discouraged workers and long-term discouraged workers. The BLS also calculates U4, U5 and U6, which are broader measures of people who would like full-time jobs but don't have them. U4 includes short-term discouraged workers and remains unchanged at 9.5%. U6 includes short-term discouraged workers and part-time workers who want full-time jobs, and remains unchanged at 14.5%. Even U6, however, understates the real problem of unemployment. The share of the population working has dropped substantially not only since the Great Recession started in 2008 (or "officially" started in 2007), but since the "official" end of the Great Recession in 2009. For the share of population working, in fact, the worst 30 months out of the last 300 (the last quarter-century) have all come since the alleged end of the Great Recession in 2009 (http://www.weeklystandard.com/blogs/under-obama-30-worst-months-employment-past-25-years_645771.html). (Because of two ties among the worst months, the worst 32 months have happened since 2009.) The share of the population working falls during recession and rises during recoveries--during real recoveries. Not since the deep recession of the early 1980s, in fact, has the US suffered such a low share of the population working. While some have tried to write off the substantial drop in the share of the population working as a result of retiring Baby Boomers, it's unlikely that they (or in my case, we: -D) all suddenly and inconveniently decided to retire starting in June of 2009 (basically in the last two years). We can easily enough exclude the impact of retiring workers too by looking at the share of working age population actually working, which economists call the civilian labor participation rate. The share of the working age population currently working actually fell more last month, from 63.8% to 63.6%. Once again we have to go back to the deep recession of the early 1980s to find such a low share of Americans working. The BLS actually has some numbers for civilian labor force participation rates by age, sex, race, and ethnicity (http://www.bls.gov/emp/ep_table_303.htm) that show that, rather than retiring in larger numbers, older workers are remaining in the workforce in larger numbers, as advances in medical care allow the elderly better health, and as the Great Recession's stock market crashes eat into retirement savings and encourage the elderly who can keep their jobs to postpone retirement. So the drops in both share of the working age people working and all Americans working actually understate the shrinkage in employment of people in their prime working years. So what is the real rate of unemployment? Few people argue that it's the official 8.1%. People though have many different estimates. Some people try to take U3 and compensate for the substantial drop in the workforce. Working from U3 and adjusting for the shrinking workforce, people estimate in the vicinity of 11.1% (http://blog.american.com/2012/05/the-awful-april-jobs-report-is-the-real-unemployment-rate-11-1/) or 11.6% (http://www.zerohedge.com/news/real-u-3-unemployment-rate-116). Others start with the U6 rate of 14.5% and add people substantially underemployed, like college-educated workers stuck with full-time jobs at Starbucks. Peter Morici at University of Maryland estimates, working from U6, a real unemployment rate of 18% (http://www.upi.com/Top_News/Analysis/Outside-View/2012/05/04/Outside-View-Unemployment-falls-as-discouraged-Americans-quit-looking-for-work/UPI-91411336137138/?spt=hs&or=an), although he doesn't compensate for the long-term discouraged workers that have shrunken the US workforce to 1983 levels. One estimate starts with U6 and then tries to add long-term discouraged workers, arriving at an estimate of 22.5%. Some people have accused the government of deliberately lying to understate unemployment, but the report of 8.1% simply shows the weaknesses in the measure of U3, which economists have used for many decades, rather than any deliberate attempt to deceive. U3 probably works reasonably well as an estimate of unemployment during an economic expansion, but does though suffer deceptive problems during a weak economy. I should point out too that comparisons between the 18% or 22.5% and the 25% peak unemployment rate during the Great Depression suffer from the same problem: that the Great Depression unemployment figures use U3. Someone made an estimate of U6 during the Great Depression (http://www.scribd.com/doc/13282170/Unemployment-1930s-vs-Today) and came up with a peak U6 rate of 37%. So even if the current 22.5% estimate is correct, we're nowhere near as bad in terms of unemployment as we were during the Great Depression. To say that the Great Recession's unemployment rate is nowhere near as bad as the unemployment rate of the Great Depression, however, is to damn the Great Recession with faint praise. There's no doubt that the employment situation remains bleak today, and it might actually be getting worse. I predict too that the employment situation will not improve substantially until the federal government substantially changes its economic policies. The Federal Reserve System has flooded the economy with new money in a vain Keynesian attempt to increase "aggregate demand" (more on that this semester for my macro students) by tricking the economy into real growth. Since the end of 2008, moreover, the federal government has followed Keynesian policy of trying to increase aggregate demand through massive deficit spending (borrowing to spend more than it collects in taxes). Rather than bringing economic growth, however, these policies, based on fatally-flawed Keynesian economic theory, have brought us essentially a long-term recessionary economy of the sort we haven't seen since the Great Depression. Until the Fed and the federal government abandon the Keynesian policies of long-term recession, we're not likely to see a real economic recovery.

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More Bad News for 2011

Yesterday the Commerce Department came out with the 2nd quarter estimate of US GDP growth. The so-called "consensus" forecast of economists has predicted an anemic growth rate of 1.8%, but the actual growth rate fell to only 1.3%. You might recall that when the Commerce Department 3 months ago estimated the 1st quarter GDP growth rate at 1.8%, I predicated they would revise it downward, closer to 0%, and indeed they did revise it yesterday down to 1.4%. I predict that they will downgrade the 2nd quarter GDP growth rate from their initial estimate of 1.3% to close to 0% too.

Since GDP actually overstates national income by the amount of new investment that merely replaces old investment (sort of like calculating the income of a business without subtracting depreciation), in reality even aggregate national income isn't growing, and on a per-person basis it's clearly shrinking. We're not in any sort of recovery--we're living in the long-term recession state of the sort we haven't seen since the Great Depression.

We're likely to stay in the long-term recession economy too until the Federal Reserve Board stops inflating the money supply in a vain Keynesian attempt to trick the economy into real growth, and until we have a president and Congress willing to cut marginal income tax rates and at least slow the growth rate of federal spending.

McConnell Leads the Charge to Save Earmarks

It's no surprise that mushy moderate Mitch McConnell, with his National Taxpayer Union average of only 72%, leads the charge to save earmarks--they are the only way he can get his Kentucky-only horse socialist bailouts!

http://online.wsj.com/article/SB10001424052748703514904575602690040454972.html?mod=djemEditorialPage_t

Hensarling Could Be an Actual (Mushy?) Conservative

Tea Party favorite Michelle Bachman has dropped out of the race for the number 4 position in the House Republican leadership, the House Republican Conference Chair. She has endorsed the establishment candidate, Jeb Hensarling. So how good does Hensarling sound? For that matter, how good to the other three likely Republican leaders sound?

Hensarling has a substantially more conservative lifetime average from the National Taxpayers Union than Boehner and Cantor, 86% to their 70% ratings. Like the two mushy moderates, Hensarling's record, however, improved drastically in the three Democrat-majority years over his previous performance, in his case from 81% to 93%. The likely third-ranking Republican, Kevin McCarthy of California, bucked the Democrat tide of 2006 to win his first election and so has a record only under Democrat majorities, with an average of 81%, so he falls between the Boehner and Cantor on the one hand and Hensarling on the other hand, into the zone I call mushy conservative.

Breaking down their voting records into the period when the GOP had a majority and the period when the Democrats had a majority, moreover, we see a startling change in their voting patterns: both Boehner and Cantor actually had liberal Republican voting records (64% and 63%) when their votes actually determined spending, taxes and regulation. Boehner and Cantor rose a stunning 20 points to the mushy conservative range only when their votes, under the Democrats, could no longer determine spending, taxes and regulations. Hensarling had a smaller increase, but still 12 points, taking him from mushy conservative when his votes could determine the outcome to solidly conservative then the Democrat majority rendered his votes irrelevant. While McCarthy has no record under a Republican majority, we can see that he voted marginally worse than Boehner and Cantor under the Democrats. I've summarized their voting records below.

We don't yet know how conservatively Tea Party favorite Michelle Bachman will vote, nor do we know whether Boehner, Cantor and Hensarling will revert to their previous records when their votes once again determine spending, taxes and regulations. We also don't know if McCarthy will continue to vote mushy conservative or fall down to the previous levels of Cantor and Boehner. I do know two things: that I would have felt more confident of the Republicans if they'd chosen Michelle Bachman as their 4th-ranking House leader, and that we need to watch the four of them--like a hawk.


Analysis of NTU Averages of Likely House GOP Leadership
Name Likely Position NTU Avg Avg Under GOP Majority Avg Under Dems
John Boehner (OH) Speaker 70% 64% 84%
Eric Cantor (VA) Majority Leader 70% 63% 83%
Kevin McCarthy (CA) Majority Whip 81% - 81%
Jeb Hensarling (TX) Conference Chair 86% 81% 93%


http://www.politico.com/news/stories/1110/44976.html