“All attempts to coerce the living will of human beings into the service of something they do not want must fail.” – Ludwig Von Mises
When Barack Obama took office back in 2009 he pushed for passage of a massive “stimulus” bill to stave of economic disaster. At the time he claimed that if the trillions of dollars in government spending would keep unemployment under 8%. He actually put out a chart showing the projected unemployment rate with and without the stimulus (shown here with actual unemployment up through the election):
It was a clear mistake by the young president. He actually put out projections – put out a measuring stick against which his performance could be scored. The mistake didn’t actually end up costing the president reelection, but it was dangerous. Whenever you put promises out there with numbers attached, there is a record that you can be judged against.
I personally don’t like the unemployment rate (and I’m not alone) because it doesn’t actually measure the right thing. It only shows the percentage of people actively searching for work that can’t find it, but not the health of the job market. It doesn’t count people working part time because they can’t find full-time work, people who have taken early retirement because they can’t find work, or people lying to get disability because they can’t find work.
By the same token, GDP is a poor measure of economic growth. The government could spend $1,000,000 to have a company dig a hole in the desert, fill it with concrete, and bury it again – and that would count as $1,000,000 toward GDP. But it didn’t actually produce something useful. Oh, I hear the Keynesians now: “but the workers will go and spend that money and create more economic activity – it’s a money multiplier!” The economy is not a perpetual motion machine, and if this type of activity produces “good” then we could produce just as much by giving those workers $1,000,000 and not wasting their time. Of course, the $1,000,000 had to come from somewhere – it’s a zero-sum proposition.
I bring up unemployment here because Ben Bernanke may have allowed himself to be painted into a corner by the rather unintended consequences of Obamacare. Bernanke and other central bankers are printing money hand-over-fist ($85 billion a month here in the U.S.). Their goal is to prop up the insolvent banking system … shocking, I know, that the kingpins of the banking cabal want to keep their grip on power. The problem is that they need some form of cover. Feeling some pressure to show that there would someday be an end to the stimulus, the Fed Open Markets Committee recently tied their aggressive easing to a 6.5% unemployment rate. That is, if unemployment gets to 6.5% they’ll start to pare back.
This may have been a mistake. Not that I think stimulus and easing should continue, at all – I do not. But Bernanke’s goal is not low unemployment or stable prices, but rather the continuance of the central banking cabal; the system whereby the wealthy and powerful plunder the workers. The reason it is a mistake for Bernanke is that the unemployment rate may well hit 6.5% long before the economy recovers. This is due in part to the issues mentioned above. Baby-boomers are retiring early rather than continue looking for jobs (not unemployed), and there is a massive uptick in those on “disability” – meaning a massive uptick in fraud.
But there’s more. The unemployment rate also comes down when full-time workers go to part-time status, or when part-time workers see their hours cut dramatically, and firms replace those hours with other part-time workers. Enter Obamacare. The law requires companies to provide benefits (which are expensive) for those working more than 30 hours a week – which is apparently the new “full time” (we’re becoming more like France). As expected, some companies are cutting workers back to less than 30 hours a week in order to reduce costs, and hiring more part-time employees to make up the difference. Does this mean the economy is doing better? No – but it could mean the unemployment rate will continue to drop.
It’s honestly a bit humorous to watch bad policies with unintended consequences run headlong into each other. Obamacare reduces unemployment without actually helping productivity, and will eventually lead to a reduction in healthcare benefits and worker efficiency. Bernanke’s printing leads to boom-bust cycles and asset bubbles, all in the hopes of producing a “wealth effect” and economic perpetual motion. Yet somehow they now find themselves in opposition to each other.
Will Obamacare continue to bring down the unemployment rate by filling the ranks of part-time workers? If so, will Bernanke (or his successor) find a new way around the 6.5% artificial mandate he’s created? Time will tell on both counts.