Great Recession

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Causes

Causes of the Great Recession include:

2007 Minimum Wage Hike

See also Minimum Wage

Democrats ran Congress from 2007-08 the last two years under George W. Bush and even overrode four of his vetoes to pass hundreds of billions of dollars in spending that he disapproved of. See e.g. the Food, Conservation, and Energy Act of 2008, Medicare Improvement for Patients and Providers Act of 2008, and Water Resources Development Act of 2007.[1] Republican Rep. Jeb Hensarling warned the Democrat-run Congress on the floor of the House in January 2007 that they were about to spark a recession with passage of the 2007 Fair Minimum Wage Act.

For other examples of how minimum wage hikes have led to recessions, see the 1967 minimum wage hike from $1.25 to $1.60 which was followed by the Recession of 1969-70, the Early 1980s Recession which occurred immediately after the 1978 wage hike from $2.30 to $3.25, and the 1990 minimum wage hike from $3.35 to $4.25 which coincided with the Early 1990s Recession.

Adjustable Rate Mortgages

1977 Community Reinvestment Act

Adjustable Rate Mortgages, also known as ARMS, played a key role in setting up the housing industry for collapse after millions of poor borrowers had their homes seized by unscrupulous bankers. Adjustable Rate Mortgages began because Jimmy Carter and his Democrat-run Congress had the bright idea to force banks to lend to poor borrowers using Adjustable Rate Mortages via the 1977 Community Reinvestment Act.[3] Nonetheless, Republicans must bear some of the blame as well, since Federal Reserve Chairman Alan Greenspan deregulated the housing industry based on a "fatal flaw," namely a belief in self-correcting and self-regulating free markets.[4] Greenspan was originally appointed by President Ronald Reagan although he also served under Presidents George H.W. Bush, Bill Clinton, and George W. Bush as well. While Republicans were widely blamed for Greenspan's appointment, the fact that he served under Bill Clinton's lengthy 8-year tenure shows that both parties bear guilt for housing industry deregulation. Furthermore, Democrats supported Greenspan to the point they'd even considered him 'untouchable' until he began backing George W. Bush's tax cuts in 2005.[5]

Development

2009 Stimulus

Obama dishonestly sold the 2009 Stimulus as necessary to prevent unemployment from going above 8%.

Obama's massive $831 billion so-called jobs bill, the American Recovery and Reinvestment Act better known as the Stimulus, has proven a debacle. Despite the trillions of dollars of stimulus spending from 2008-10 student homelessness reached an all-time high,[6] the labor force participation rate remains at a 30-year low,[7] and the number of long-term unemployed has increased so much that Obama is calling for further extension of unemployment benefits for those unemployed so long they are no longer eligible.[8] There are at least 13 million more people on food stamps than when Obama took office.[9]

At the time of its passage in January 2009 the Wall Street Journal reported on how much of the Stimulus bill's spending in the name of job creation was actually being used for pork, special interest earmarks benefiting every major liberal agenda of the past 40 years. Wall Street Journal analysis determined that only 12 cents of every dollar was spent on actual job creation:

As Republican Senator Tom Coburn pointed out, “This is about spending money we don't have for things we don't need.” Wasteful spending included $650 million in subsidies to switch television signals to digital, $335 million for STD research, $70 million for non-smoking programs, $50 million for the arts, and $25 million for ATV trails.[11] Despite the bill's original projections that unemployment would stay below 8% if the Stimulus was passed the unemployment rate went above 10%.[12]

According to page 4 of Obama's 2009 report, The Job Impact of the American Recovery and Reinvestment Act, “As Figure 1 shows, even with the large prototypical package, the unemployment rate in 2010Q4 is predicted to be approximately 7.0%, which is well below the approximately 8.8% that would result in the absence of a plan.” The chart then showed unemployment remaining below 8% if the Stimulus was passed, a claim that has failed to bear out in reality.[13]

The Stimulus ended up on 2009 CBO projections before Obama took office only because Obama pressured Congress to pass the bill before he took office.[14] Democrats have since used this fact to dishonestly claim that Obama reduced the deficit, when the 2009 Stimulus spending was clearly his own handiwork. Mitch McConnell aptly summed up the situation in April 2009: “A way of looking at it is we have spent more in the first 23 or 24 days of this administration, in other words, charged more, than it cost post-9/11 for the war in Afghanistan, the war in Iraq and the response to Katrina already.”[15]

Resulting Unemployment

Measures such as 'jobs created' are fuzzy and unreliable, as is the better-known unemployment rate. The commonly used U3 Unemployment Rate does not include long-term unemployed, who stop being counted, or part-time and temporary workers who are unemployed the majority of the time. Those who have given up looking for work and are no longer in the labor force remain invisible to such measures.

The best measure for seeing how employment has changed over time is the employment-population ratio, which measures the percentage of the U.S. population employed at a given time. In the words of CNN's Heidi Shierholz, the employment-population ratio is her 'desert-island' indicator or as she put it, "If I'm an economist on a desert island, and I had one measure to look at, this is the one I'd want."[16] The employment-population ratio shows that the percentage of the U.S. population employed has been as follows:[17]

YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2000 64.6 64.6 64.6 64.7 64.4 64.5 64.2 64.2 64.2 64.2 64.3 64.4
2001 64.4 64.3 64.3 64.0 63.8 63.7 63.7 63.2 63.5 63.2 63.0 62.9
2002 62.7 63.0 62.8 62.7 62.9 62.7 62.7 62.7 63.0 62.7 62.5 62.4
2003 62.5 62.5 62.4 62.4 62.3 62.3 62.1 62.1 62.0 62.1 62.3 62.2
2004 62.3 62.3 62.2 62.3 62.3 62.4 62.5 62.4 62.3 62.3 62.5 62.4
2005 62.4 62.4 62.4 62.7 62.8 62.7 62.8 62.9 62.8 62.8 62.7 62.8
2006 62.9 63.0 63.1 63.0 63.1 63.1 63.0 63.1 63.1 63.3 63.3 63.4
2007 63.3 63.3 63.3 63.0 63.0 63.0 62.9 62.7 62.9 62.7 62.9 62.7
2008 62.9 62.8 62.7 62.7 62.5 62.4 62.2 62.0 61.9 61.7 61.4 61.0
2009 60.6 60.3 59.9 59.8 59.6 59.4 59.3 59.1 58.7 58.5 58.6 58.3
2010 58.5 58.5 58.5 58.7 58.6 58.5 58.5 58.6 58.5 58.3 58.2 58.3
2011 58.3 58.4 58.4 58.4 58.3 58.2 58.2 58.3 58.4 58.4 58.6 58.6
2012 58.4 58.5 58.5 58.4 58.5 58.6 58.5 58.4 58.7 58.8 58.7 58.7
2013 58.6 58.6 58.5 58.6 58.6 58.6 58.7 58.7 58.7 58.3 58.6 58.7
2014 58.8 58.7 58.9 58.9 58.9 59.0 59.0 59.0 59.1 59.3 59.2 59.3
2015 59.3 59.3 59.3 59.3 59.4 59.4 59.3 59.4 59.2 59.3 59.4 59.6
2016 59.7 59.8 59.8 59.7 59.7 59.7 59.7 59.8 59.7 59.7 59.8 59.8
2017 59.9 60.0 60.2 60.2 60.0 60.1 60.2 60.1 60.4 60.2 60.1 60.1
2018 60.1 60.4 60.4 60.3 60.4 60.4 60.5 60.3 60.4 60.6

In summary, U.S. employment was 63.3% in January 2003 when Democrats hiked the national minimum wage from $5.15 to $7.25 an hour. By the end of 2007 it had plummed to 62.7%, and would fall all the way to 61.0% by the end of 2008 and to 58.3% by the end of 2009. Claims that jobs were being created were dishonest, as employment would remain stagnant after passage of the Stimulus at 58.7% until the end of 2013. Not until Republicans had taken back control of the House in 2010 (they were not seated until January 2011) and the Senate in 2014 (they were seated in January 2015) did employment truly start rising, coinciding with the government shutdowns caused by Republicans opposed to Obama's destructive agenda.

2014 marked the point at which employment began steadily and consistently rising to 59.3% by the end of 2014, to 59.6% by the end of 2015, to 59.8% by the end of 2016, to 60.1% by the end of 2017, and now most recently to 60.6% current as of October 2018. In less than two years of Republicans controlling the House, Senate, and Presidency, employment has risen from 59.9% to 60.6%, a 0.7% increase.

References

  1. "Vetoes by George W. Bush." U.S. Senate.
  2. Hensarling, J. (2007, January 10). “Congressional Record, V. 153, Pt. 1 (p. 750).” U.S. Congress.
  3. Carney, John (2009, June 27). "Here's How the Community Reinvestment Act Led to the Housing Bubble's Lax Lending." Business Insider.
  4. Naylore, Brian (2008, October 24). "Greenspan Admits Free Market Ideology Flawed." NPR.
  5. Milbank, Dana & Henderson, Nell (2005, March 5). "Some Democrats Say Greenspan Has Gone From 'Maestro' to Partisan." Washington Post.
  6. Ellis, B. (2013, October 24). "Student Homelessness Hits Record High." CNN. <>
    Rhodan, M. (2013, October 25). "Record Number of U.S. Students Homeless." TIME Magazine.
    Strauss, V. (2013, October 24). "Record Number of Homeless Children Enrolled in Public Schools, New Data Show." Washington Post.
  7. Sigdyal, R. (2013, November 8). Some Scary Numbers in the Jobs Data. CNBC. <http://www.cnbc.com/id/100610528>
    Sanders, K. (2014, January 26). Under President Barack Obama, "We’ve got the lowest labor force participation in over three decades, since 1978." PolitiFact. <http://www.politifact.com/truth-o-meter/statements/2014/jan/26/ted-cruz/labor-force-participation-its-lowest-point-1978-sa>
    Hargreaves, S. (2013, September 6). Labor Participation Lowest Since 1978. CNN. <http://money.cnn.com/2013/09/06/news/economy/labor-force-participation>
  8. Madhani, A. (2014, January 7). After Vote, Obama Urges GOP to Extend Jobless Benefits. USA Today. <http://www.usatoday.com/story/news/politics/2014/01/07/obama-gop-unemployment-insurance/4354819>
    Kaplan, R. (2014, January 7). Obama Pushes Congress to Extend Emergency Unemployment Benefits. CBS News. <http://www.cbsnews.com/news/obama-pushes-congress-to-extend-emergency-unemployment-benefits>
  9. Boyer, D. (2014, January 7). That’s Rich: Poverty Level Under Obama Breaks 50-Year Record. The Washington Times. <http://www.washingtontimes.com/news/2014/jan/7/obamas-rhetoric-on-fighting-poverty-doesnt-match-h/?page=all>
    Cox, J. (2012, September 4). Record 46 Million Americans Are on Food Stamps. CNBC. <http://www.cnbc.com/id/48898378>
  10. A 40-Year Wish List (2009, January 28). The Wall Street Journal. <http://online.wsj.com/article/SB123310466514522309.html>
  11. Andrews, W. (2010, September 1). Breaking Down Stimulus Opposition. CBS News. <http://www.cbsnews.com/stories/2009/01/30/eveningnews/main4765261.shtml>
  12. Kadlec, C. (2012, August 13). President Obama's Smashing Success Story: Greatly Increasing The Power Of Government. Forbes. <http://www.forbes.com/sites/charleskadlec/2012/08/13/president-obamas-smashing-success-story-greatly-increasing-the-power-of-government>
  13. Get The Facts: The Unemployment Rate Has Been Higher than 8% for More Than 2-and-a-Half Years. VoteFacts.org. <http://www.votefacts.org/has-the-unemployment-rate-been-higher-than-8-for-more-than-2-and-a-half-years>
    Voodoo Economics, Part 2: The Unemployment Fiasco. MoveLeft.org. <http://www.moveleft.org/unemployment/index.html>
  14. Associated Press (2009, January 3). Obama Urges Congress to Pass Stimulus Plan. NBC News. <http://www.nbcnews.com/id/28479998>
  15. Bash, D. (2009, April 27). Bipartisanship Didn't Last Long in Obama's First 100 Days. CNN. <http://www.cnn.com/2009/POLITICS/04/27/congress.100.days/index.html>
  16. Kurtz, Annalyn (2013, June 6). "Employment is Still Near a 30-Year Low." CNN.
  17. Bureau of Labor Statistics (2018, November 4). "Databases, Tables & Calculators by Subject: Labor Force Statistics from the Current Population Survey." United States Department of Labor.