Originally published by Politico here.
by Jeb Bush, Jr. and Justin Vélez-Hagan
Amid mounting evidence, stacking confessions, and officials pleading the fifth, many find it hard to understand why the Obama administration’s best retort is to shrug off so-called scandals as “fabricated” and “phony.” The truth may be more ingenious than most of us realize. Continued bickering serves as a distraction from what should be the biggest scandal of all: the phony recovery.
Several years ago, one of Federal Reserve Chairman Bernanke’s speculated successors, Current Vice-Chair Janet Yellen, stated that the “pace of the recovery will be frustratingly slow.” Despite what administration cheerleaders may say, that would be a kind description of today’s anemic growth rate.
See, for example, the Commerce Department’s recent downgrade of first-quarter annualized growth — from a modest 2.4 percent to the paltry 1.1 percent. Second-quarter growth rates, although an improvement over the terrible first quarter, aren’t much better, with pre-revision numbers just released at 1.7 percent. The real problem is that we expect these numbers to either decline or remain stagnant once the Treasury (finally) decides to stop printing money.
As further evidence of a slowing economy, corporate earnings, retail sales, and existing home sales have all stalled in the first part of the year. Google, whose sales are considered to echo the health of small businesses, failed to surpass earnings expectations for the first time in quite a while. Retail sales only grew 0.4 percent in June, while restaurant jobs fell in the same month, signaling a pullback on discretionary spending. Unexpectedly, home sales also fell in June for the first time this year.
Hiring continues to be weak, arguably exacerbated by businesses’ reactions to the Affordable Care Act. As predicted, companies seem to be circumventing the act’s intent by keeping or hiring employees at part-time levels to avoid higher health-care costs.
And the real unemployment rate – U6, a broader measure that includes some part-time and underemployed workers – is more than twice U3, the number preferred by the Obama administration. U6 increased by 0.5 percent in June and has been stagnant throughout the year.
Even if employment makes a drastic turn for the better, unemployment and household wealth is worsening for African-Americans and Hispanics, further dividing the country and increasing the oft-touted “wealth gap.”
Four years on, the recovery has been anything but. Unemployment and economic growth are so poor that they are seemingly defying the laws of supply and demand, keeping prices from growing notwithstanding more than $2.8 billion of new cash injected into the economy every day. Underemployed families’ inability to spend is keeping prices (i.e. inflation) low.
As Treasury bond rates have increased substantially this year, overseas investors again see the return necessary to justify the historically safe investments. Treasury bond demand benefits overseas investors and strengthens the dollar, yet runs the risk of slowing housing sales and hurting average Americans.
This is not a strategy for long-term growth.
Advocates of the Fed’s easy-money policies and increased government spending cite the current economy as their evidence. Without these measures, they say, growth would be even slower than it is now. If the slowest recovery in our nation’s history is their idea of a victory, is there any real hope for American greatness again?
If we want to make some real, significant changes to the economy, we are going to have to unleash the beast that is the spirit of American entrepreneurship.
Step one: Roll back Obamacare. This complicated law has done nothing but hurt employment and confuse small-business owners and investors.
Step two: Give Congress a say on executive-branch regulations that have the largest economic impact. We can start by passing something similar to the REINS Act, which will help give entrepreneurs the freedom they need to succeed.
Step three: Enact fundamental tax reform. A more certain, long-term tax structure that closes unfair loopholes for the well-connected will allow for the innovation needed to finance and grow the businesses that hire the most workers.
Step four: Boost America’s high-skilled labor force. We need to allow more of our expert, immigrant brethren the opportunity to help us grow, and we need to teach our kids the value of STEM and entrepreneurial knowledge. We need more Albert Einsteins and Sergey Brins and fewer A-Rods.
With these four steps, we can get America booming again. The first day of any presidency that makes these simple promises, and means it, will be the first day of one of the greatest boons our economy has seen, and an instant turn from the phony recovery that exists today.
Jeb Bush Jr. is managing partner at Jeb Bush and Associates and co-founder and chairman of National Hispanic Outreach Inc.
Justin Vélez-Hagan is executive director of The National Puerto Rican Chamber of Commerce and an adjunct professor of economics within the University System of Maryland.