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August 11, 2010

The New Normal

Kevin E. Dayhoff

Watching friends, loved-ones and colleagues fight the day-to-day ravages of joblessness has become overwhelmingly disturbing and upsetting. At the beginning of what is now being referred to as the Great Recession in 2007, there was hope that it was just an adjustment in the nation’s economy and that it would come and go as it has in the past.


It has not. It lingers.


The current background at this point in time in the Great Recession is the hopelessness that accompanied a headline in The New York Times last Friday that read, “U.S. Lost 131,000 Jobs as Governments Cut Back.” “Over all, the nation lost 131,000 jobs last month, according to the Department of Labor, which also said that June was far weaker than previously indicated.”


In an August 7, 2010, article in The New York Times, “Jobless and Staying That Way,” Nelson D. Schwartz observes: “The ‘new normal,’ as it has come to be called … envisions an economy in which growth is too slow to bring down the unemployment rate, while the government is forced to intervene ever more forcefully in a struggling private sector.”


In reality the new normal is still being defined and many feel that a profoundly different approach needs to take place before the final definition is defined by history.


There remains a hope that the current failed approach to the economy – Obamanomics – will not be the final word on the new normal, much as the New Deal has come to be understood, by too many armchair political-economists, to have saved our nation from the Great Depression, when nothing could be farther from the truth.


Unfortunately there is little hope in sight for a fundamental change in the disastrous economic agenda of President Barack Obama and the Democrat regime in power in Congress until after the November elections.


However, one-step in the correct direction will occur shortly as the chairwoman of the White House Council of Economic Advisers Christina Romer is about to – mercifully – retire.


An editorial in The Washington Examiner on Sunday, “Time to admit Obamanomics has failed,” explained: “Romer is best known for drafting the February 2009 report ‘The Job Impact of the American Recovery and Reinvestment Plan,’ which the White House used … to gain passage of its $862 billion economic stimulus bill…


“Romer predicted that following passage of the stimulus bill, unemployment would plateau below 8 percent last fall and by this month register at 7 percent.…


“Predictably, the stimulus bill has proven to be an extraordinary waste of borrowed money that has failed to create jobs, generate economic growth or do much of anything other than line the pockets of White House political allies…”


The Examiner editorial ominously observes: “As Romer fades … Obama is adding to the economic misery by creating an environment of regulatory uncertainty. The Wall Street reform law Obama recently signed potentially requires 533 new regulations, 60 studies and 93 reports, according to the U.S. Chamber of Commerce...”


On Monday, small-businessman Michael P. Fleisher wrote in an opinion piece in The Wall Street Journal, “Why I’m Not Hiring,” “We can't pass the additional costs onto our customers, because the market is too tight and we'd lose sales. Only governments can raise prices repeatedly and pretend there will be no consequences.


“As much as I might want to hire new … staff in an effort to grow, I would be increasing my company's vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive...


“A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price.”


The best way to deal with the equally punishing price of the current entrenched joblessness is a totally new approach – an approach that will provide incentives to create a new economy and new jobs.


That new normal – new approach is best found in renewed educational opportunities.


One of the few silver linings of the economic policies of the New Deal was providing the capital for infrastructure projects. It was hoped that Obamanomics would do the same; however, in the end, bricks and mortar improvements were only a small portion of the profligate spending measure passed in February 2009.


To be certain, a synthesis of economic approaches is necessary to end the Great Recession and define the new normal.


In addition to restoring stability in government regulations, lowering tax rates to put more money into consumers’ hand to stimulate product demand, there is a role for an appropriate amount of government spending that is critical to economic recovery.


If the government injects capital into the economy, it would be best-spent working towards energy independence and providing the capital for nuclear power or other forms of clean power generation.


However, the most important plank in any meaningful and lasting definition of the new normal would be providing more government spending on community colleges.


There is a strong argument that the Great Depression was not ended by the New Deal or the massive spending on the war effort in World War II.


The Great Depression was solved by the G.I. Bill, which educated the Greatest Generation, which, in turn, provided the intellectual capital to fuel the post-World War II economic boom in the U.S.


Although Mr. Schwartz may have explained it more eloquently, the hopelessness and despair felt by the millions of unemployed could quickly be turned into hopefulness and optimism by funding the education necessary to retrain the American workforce to face the challenges of the new millennium.


The new normal needs to be a renewed emphasis on the true incubator of new and innovative approaches to the new millennium – community colleges.


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