IBD Editorial: America's Two-Tiered Recovery

From Investor's Business Daily online:

Economy: The recession is over, having ended last summer as we predicted, and now both parties will talk up recovery for different reasons. But it's not that simple. The private sector is only now getting back on its feet.

In March 2009, we predicted an imminent recovery from the brutal recession the U.S. entered in December 2007. It wasn't a tough prediction to make: The Fed had basically started printing money, pushing short-term interest rates to zero in late 2008 and causing the yield curve to go steeply positive.

An upward-sloping yield curve is in fact the most reliable indicator of a coming rebound. Given that, a recovery in GDP was baked into the cake well before the new administration took office.

Which is why we can only shake our heads as President Obama, House Speaker Pelosi, Senate Majority Leader Reid and other Democrats congratulate themselves for the turnaround.

If anything, their $862 billion stimulus and $700 billion corporate bailout, not to mention the $10 trillion in deficits projected over the next decade, have blunted the sharp rebound that would have created hundreds of thousands more jobs than we have now.

Yet Harry Reid has the chutzpah to accuse Republicans of "making love to Wall Street," a laughable claim given that his own party took twice as much from big Wall Street firms as the GOP.

Then there's Nancy Pelosi, touting her party's policies: "It is all about a four-letter word: jobs, jobs, jobs, jobs. We are all about jobs." Really, Madame Speaker? Since Democrats took control of Congress and the White House, we have had one financial meltdown, one steep recession and the loss of 8 million jobs, half of them in the last year alone.

OK, but didn't the economy start to recover last summer? Yes. But which economy are we talking about? The public sector is expanding rapidly and adding jobs. But that's come at the expense of the private sector, the economy in which most Americans live.

Far from recovering last summer, the private economy is only now emerging from its downturn (see chart). It suffered six straight quarters of year-over-year decline — the longest such string since the Depression. In the first quarter, it grew at a modest 2.8% — the first gain since 2008's second period. Hardly rip-roaring.

For those who call this a "V-shaped" recovery, we agree only to a point. Yes, the overall economy has retraced lost ground. But, again, private sector GDP, as the chart shows, tells a different story. It remains well below its peak in the fourth quarter of 2007. Indeed, even after the first quarter's gain, private output is still $233 billion, or 2.1%, below its previous quarterly high.

Better than anything, this explains why we've lost 8 million jobs since the recession began. And why it took until March of this year for the job market to actually start growing again.

In other words, the real economy continues to suffer — thanks to the incompetence of our government and its regulators. What matters isn't the public sector, which only consumes wealth. It's the private economy, where all wealth is created.

Debates over whether this recovery looks like a "V" or a "U" thus miss the point. Our concern is for the future of the private sector, which is grim if current trends continue.

The Fed has added $2.3 trillion to its balance sheet, while flooding the economy with more than $1 trillion in newly created dollars. This is a monetary stimulus the likes of which have never been seen.

What happens when the central bank starts to unwind it? The answer is, interest rates will rise sharply and the recovery will be derailed. This year we'll most likely see a decent rebound with 3% growth or more. But next year is anybody's guess.

The private economy faces so many other imponderables and potential pitfalls that it's safe to say this is the most uncertain period since World War II. What about the collapse of public finance around the world? The planned tax hikes on entrepreneurs? The coming 60% jump in capital gains taxes? What about the soaring new costs to pay for ObamaCare?

For a truly healthy economy, the private sector needs capital, entrepreneurial talent, fair regulation and low taxes. Most of all, it needs a governing class that recognizes that our country was built on free markets, not big government.

Republican Whip Eric Cantor on the Economy, TARP, Jobs and the White House

Shuster Cosponsors Legislation to End the Revolving Bailouts of the TARP Program

“TARP money has been used for its original purpose and the billions of dollars left over has become walking around money for the government, or worse, a political slush fund for the Obama Administration. It’s time to end the TARP program once and for all." -Congressman Bill Shuster

Congressman Bill Shuster has become an early cosponsor of legislation that would end the Troubled Asset Relief Program on December 31st of this year and deny any extension of the program by the Treasury Department, which still has that option unless Congress acts now.

“President Bush proposed the TARP program to help steady our banking system through a time of uncertainty and stress not seen in our economy since the Great Depression,” Shuster said. “The program was designed to be limited but like so many government programs it has begun to develop a life of its own. It is time for Congress to put TARP to rest once and for all.”

It is estimated that of the original $700 billion in the TARP account, close to $317 billion remains unobligated to financial institutions even though the banking crisis has passed. Additionally, questions have been raised over TARP payments to large banks like AIG that have gone beyond TARP’s original mandate. To end any future abuse of taxpayer money, Congressman Shuster believes the TARP program should be ended.

“The American people are tired of bailouts and seeing billions of dollars given to Wall Street banks even though the banking crisis is over,” Shuster said. “The American people want jobs and a robust economy, but that won’t happen quickly while we are burdened by a $12 trillion dollar debt.”

“The money left over in the TARP account shouldn’t be dumped into a political slush fund to pad the pockets of the friends of the Obama Administration or Wall Street executives; the money should be used to pay down our debt,” Shuster concluded.

Shuster statement on October job report

“Mr. President and Speaker Pelosi, the American people don’t want government-run healthcare, they want a job!” – Rep. Bill Shuster

Congressman Bill Shuster released the following statement after the Department of Labor released its October jobs report, which showed the national unemployment rate has increased to 10.2 percent, or 190,000 jobs lost last month. For yet another month, the economy continues to keep pace with the highest national unemployment rate since April 1983:

“Mr. President and Speaker Pelosi, the American people don’t want government-run healthcare, they want a job. American workers don’t want a massive energy tax, they want financial stability. Are you listening?

As we enter the holiday months, American families across the nation are coming to grips with new reports of rising unemployment and lackluster economic growth. President Obama’s estimate of jobs “saved or created” by the stimulus have been found to have been disastrously overestimated and Speaker Pelosi continues to actively ignore the economic warning signs ahead.

To make matters worse, the House is poised to vote this weekend on a trillion dollar healthcare plan that will severely impact small businesses and their employees by raising taxes and insurance premiums on those who can least afford them.

The people of the 9th district and their fellow Americans across this nation want to know why Congress is focused on Speaker Pelosi’s plan to take over healthcare and impose a major energy tax through cap and trade instead of focusing their attention on an economic plan that could create jobs. I saw this concern yesterday as thousands of regular Americans took to the Capitol to demand real action to halt the mismanaged government Speaker Pelosi is presiding over.

I continue to join my House Republican colleagues and a growing majority of the American people in standing for real solutions that will help create jobs, instill fiscal sanity in Washington and lower healthcare costs.”

Congressional Budget Office Says Cap and Trade Would Slow U.S. Economy

An article in the Washington Post today reports CBO Director Douglas W. Elmendorf “testified before the Senate Energy and Natural Resources Committee that the cap-and-trade provisions of the House bill -- in which emitters of greenhouse gases would be able to buy and sell pollution credits -- would cut the nation's gross domestic product by 0.25 to 0.75 percent in 2020 compared with ‘what it would otherwise have been,’ and by 1 to 3.5 percent in 2050.”

Reckless rush to reform - Floor Speech

Earlier today, Congressman Shuster joined his fellow House Republicans in a series of 1 minute speeches on healthcare reform and the economy. Here is his speech:

The economy has been rescued?

The economy has been rescued according to White House Chief of Staff Rham Emmanuel. Tell that to the Americans who make up some of that 9.5% unemployment rate. House GOP Leader John Boehner is right to be skeptical of Emmanuel's claim:

Shuster and Conyers Introduce Credit Card Fair Fee Act

The following press release was issued today after H.R.2695, the "Credit Card Fair Fee Act of 2009" was introduced in the House. In a show of bipartisanship, Congressman Shuster joined with House Judiciary Committee Chairman John Conyers, a Democrat, to introduce the legislation:

Today, Congressman Bill Shuster joined House Judiciary Committee Chairman John Conyers, Jr. (D-Mich.) in introducing HR 2695, the “Credit Card Fair Fee Act of 2009.” This legislation would allow merchants to collectively negotiate with banks for the cost of certain credit card fees, and ultimately reduce the costs of everyday goods for consumers.

For each consumer payment card purchase – at the mall, at the grocery store, at a gas station, or on the Internet – the merchant is charged a fee. As much as 90% of this fee comprises a so-called "interchange fee," which is the payment made by the merchant's bank to the consumer's bank. These fees are ultimately passed on to all consumers in the form of higher prices for goods and services. The fee percentage is set by the credit card companies, generally Visa or MasterCard, and averages 1.75% of the total purchase.

In 2008, interchange fees from these two companies totaled approximately $48 billion, an increase of 189% since 2001. Visa and MasterCard control over 73% of the volume of transactions on general purpose cards in the United States and approximately 90% of the cards issued. Merchants are forced to deal within this system because it is simply not an option to refuse to accept Visa or MasterCard from their customers. They are presented with take-it-or-leave-it options and are not part of the process by which the fees are set.

“It is time to level the playing field for merchants and consumers,” said Conyers. “This legislation will give merchants a seat at the table in the determination of these fees. It is not an attempt at regulating the industry and does not mandate any particular outcome. This bill simply enhances competition by allowing merchants to negotiate with the dominant banks for the terms and rates of the fees.”

“I thank Chairman Conyers for his leadership in sponsoring this important legislation and I am proud to offer my support,” Shuster said. “Many of the merchants who get hit by interchange fees are small businesses that can’t absorb the charges as easily as their larger competitors. For far too long, merchants were locked out of the decision making process between banks and that needs to change. This legislation will give merchants a much needed seat at the table to negotiate a better bargain on credit card fees and charges that will help businesses and consumers alike save money.”

Thursday morning editorial

Karl Rove's Editorial in today's Wall Street Journal - "It's the Economy, Stupid!" worth a read on a rainy Thursday morning. Here's an excerpt:

However, at the beginning of January, 134.3 million people were employed. At the start of May, 132.4 million Americans were working. How was Mr. Obama magically able to conjure this loss of 1.9 million jobs into an increase of 150,000 jobs?

As my former White House deputy press secretary Tony Fratto points out on his blog, the Labor Department does not and cannot collect data on "jobs saved." So the Obama administration is asking that we accept its "clairvoyant ability to estimate," and the White House press corps has let Mr. Obama's ludicrous claim go virtually unchallenged.

Shuster’s Remarks On President Obama’s Speech

Congressman Shuster released the following statement before the President's speech this evening:

“We are facing tough times and the American people are looking to President Obama and Congress for clear leadership to move our nation forward. My Republican colleagues and I are ready and willing to work with President Obama on this historic challenge. I believe the President knows this and I will be listening closely to what he will say.

I also hope that Congressional Democrats will listen as closely as I will tonight. If the recent stimulus debate is any indication, Congressional Democrats seem willing to pay lip service to the President and then squander his good will to pursue their own narrow liberal agenda.

While Republicans are willing to work with the President, there are certain principles we will not abandon for the sake of political expediency. First among these principles is the idea that government should not spend money we simply do not have. The recent economic stimulus bill passed by the House is a prime example of the failed notion that we can spend ourselves into prosperity.

Nor can we mortgage our future on the backs of working families and small businesses. They should not be conscripted to pay for reckless government spending. Congress cannot pour sand in the gas tank of America’s economic engine. Increasing taxes on America’s job creators and working families is not the path to prosperity."

Finally, the Republican Party will continue offering commonsense solutions to our nation’s challenges. We will fight for smaller, more accountable government. I will continue to work with my Republican colleagues to first right the ship of government and then set it on a course that benefits all Americans.”

Posted by: Press Secretary