Next Recession

IBD Editorials

 

Next Recession Won't Be Bush's, But Obama's

 Posted 07/11/2012 06:43 PM ET

Slump: Even as the White House pats itself on the back for a nonexistent economic recovery, new data suggest things are taking a turn for the worse. Make no mistake: This will be Barack Obama's recession, not George Bush's.

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'I think we're in recession already," says Lakshman Achuthan, co-founder of the widely respected Economic Cycle Research Institute, a nonpartisan economic think tank dedicated to timing the global economy's business cycles.

How can it tell? The ECRI looks at factory output, employment, income and sales. "When you look at those four measures," Achuthan told Bloomberg TV this week, "they're rolling over."

And ECRI's isn't the only indicator headed South.

As IBD noted earlier this week, the June Small Business Index, put out by the nation's premier small-business group, the National Federation of Independent Business, fell three points in June to 93 — the biggest drop in two years, and the lowest reading for the index since last October. For the record, the index stood at 94 when the U.S. entered the last recession in 2007.

Even more worrisome, the NFIB's jobs index fell for the first time this year, a truly bad sign since small businesses account for at least two-thirds of all job growth.

Still another key indicator, the Purchasing Managers Index, fell to 49.7 in June, down sharply from the 55.8 a year earlier and signaling economic contraction.

Get the picture? Bit by bit, the economy seems to be slipping back into recession.

In the second quarter, businesses added just 75,000 jobs a month, the worst three-month stretch since 2010. And unemployment of 8.2% is way understated. Even the Labor Department says that once you count discouraged workers, real unemployment is 14.9%.

First-quarter GDP growth was a meager 1.9%. Given the abrupt slowing in job growth, many economists say that might be the high point for GDP growth this year. And some, like ECRI's Achuthan, see recession.

Why is this happening? Obamanomics, with its excessive spending, $16 trillion in debt and crushing regulations, is squeezing the life from the private sector.

Worst of all, Obama's renewed threat to raise taxes on families earning more than $250,000 a year could hit 1.2 million small businesses, a new Heritage Foundation study says, all but ending job growth.

Yet, following last week's dismal jobs report, Democratic National Committee Chair Debbie Wasserman Schultz declared herself "pretty happy," while Obama's top economic adviser Alan Krueger said the economy "is continuing to heal."

It's clear the economy isn't thriving under Obamanomics. Yet Obama doesn't change course. Ideologically, for the left, there's too much at stake.

If the economy goes back in the tank, Democrats will again blame George W. Bush. But if we have another recession, this one will be all Obama's. He's earned it.