Examiner Editorial: Think the economy is bad? Worse is coming

Economic prospects continue to grow gloomier as the Commerce Department on Friday revised the second-quarter growth rate substantially downward from the initial estimate of 2.4 percent to a mere 1.6 percent. Just to stay on an even keel in terms of job creation, the growth rate needs to be at least 3 percent. It has averaged only 2.9 percent for the past four quarters. Virtually every key economic indicator is pointing in either the wrong direction or is barely leaning to the positive side. Unemployment remains officially at 9.5 percent and is likely to head upward in the near future. If you are counting people who are either underemployed or have given up looking, the unemployment number nears a Great Depression level of 20 percent.

The really bad news, however, is that things are going to get worse before they get better unless President Obama and the Democratic Congress reverse course and abandon their plan to impose a huge tax increase on Jan. 1, 2011. That's the day the 2001 and 2003 Bush tax cuts are scheduled to expire. Tax rates on all five income brackets, not just those paid by “the rich,” will increase by 2 to 4 percentage points, thereby blowing a $921 billion hole in the nation's ailing economy. Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi have sent federal spending skyrocketing, from 20 percent of the gross domestic product to 25 percent. The coming tax increase will drive the cost of government even further into the stratosphere, which will deprive the private sector of nearly a trillion dollars that could have gone to job creation.

Obama and the Democrats argue that extending the Bush tax rates would “cost” the government revenue needed to cut the federal deficit. But the deficit is primarily their doing and is projected to average in excess of $1 trillion annually for the next decade. The way to reduce deficits is to cut federal spending and leave the Bush tax rates in place to generate additional government revenue. As Heritage Foundation economist J.D. Foster points out, when they were implemented, the Bush tax cuts increased government revenues by sparking new growth in the economy. “The 2008-2009 recession reduced tax receipts dramatically once again, yet Obama administration figures indicate that even absent any tax increases federal receipts would reach $3.7 trillion by 2016, more than a trillion dollars above their previous highs,” Foster said.

As detailed in this space on Friday, Obama and congressional Democrats are also moving to enact onerous new tax increases on the energy industry. Those increases will come on top of the job-killing Gulf of Mexico drilling moratorium they've already imposed on the industry, which is projected to cost another 23,000 energy jobs.

So, hold on to your hats, folks, because it looks like Great Recession, Round Two is headed this way.

editorialsOpinion

If you find our journalism valuable and relevant, please consider joining our Examiner membership program.
Find out more at www.sfexaminer.com/join/

Just Posted

A screenshot from SFPD body worn camera
New videos show police shooting man armed with knife, frying pan

Police say Antonio Estrada set fire to apartment building before shooting

Dr. Grant Colfax, director of the Department of Public Health, said he expected San Francisco to enter the purple tier within days.
Chris Victorio/Special to S.F. Examiner
SF still in the red but expects move into purple tier ‘some time soon’

Four more counties moved into highest COVID-19 risk category by state

The area near the Castro Muni Metro Station is expected to be affected by construction work on the Twin Peaks Tunnel, with lane closures on Market Street and some loss of parking. (Kevin N. Hume/S.F. Examiner)
Construction on Twin Peaks Tunnel to begin November 30

Area around Castro Muni Station will see greatest impacts including lane closures on Market Street

Cal Junior Quarterback Chase Garbers completed 28 of 42 passes 315 yards and three touchdowns and two interceptions in his last game against Oregon State. (Kevin Clark / The Herald)
The Big Game: Stanford at Cal

What: The 123rd Big Game When: Friday, 1:30 p.m. Where: Memorial Stadium,… Continue reading

Most Read