It’s the Jobs, Stupid

President Obama and the Republicans have got it all wrong about the economy

   

investorpoliticsletters2 Its the Jobs, StupidInstead of trying to figure who can cut federal spending the most in the shortest period of time, they ought to be figuring out who can write the biggest check. The main problem facing the country is the fact that there are more than 10 million people out of work. If we can solve this problem, than everything else will work itself out.

Last month, President Barack Obama declared that the economic rebound had started when unemployment hit 8.5%. The jobless rate has since dipped to a three-year low of 8.3%, indicating that the economic recovery is taking hold.

The draconian plan that Obama unveiled yesterday that would cut the federal deficit by more than $1 trillion over the next decade won’t put a single jobless person back to work. In fact, it will put thousands more out of work.

Under the proposed 2013 Pentagon budget, the Army would lose 9,000 soldiers, the Marine Corps will lose 4,800 personnel, the Air Force will drop 3,900 and the Navy will go down 3,000 sailors. What’s going to happen to these people?

In the past, many ex-service members were able to find jobs in the defense industry. As the Pentagon shrinks, that’s less likely of an option. Lockheed Martin (NYSE:LMT), the largest defense contractor, announced last year that it was laying off thousands of workers.

“This is not the time to be cutting government spending,” said Sophia Koropeckyj, managing director at MoodysEconomy.com, in an interview. “There is not enough hiring out there to absorb the cuts. … The government should cut spending, but not quite yet, not until the economy is on stronger footing” in a year or two.

Indeed, why is there such a rush to slash government spending now besides the fact that this is an election year? Between the third and fourth quarter of last year, the U.S. economy grew 2.8%, which though was its best performance since the second quarter of 2010, was below the 3% level economists say is needed to significantly reduce unemployment.

The U.S. is nowhere close to being in the dire debt situation as Europe. We can afford to pay our debts but at times act like we don’t want to. Some countries in Europe can’t afford to pay their bills. For example, in Greece, the latest austerity measures aim to reduce the country’s debt-to-GDP ratio to 120% by 2020. The figure for Italy is 121% and 109% for Ireland.

Let’s not forget about state and local governments, which have already seen their share of pain in recent years. They may be forced to raise taxes to cover the shortfall in funding from Washington. The public already is getting a lot less bang for their tax dollar in terms of fewer police, fire fighters and teachers.

According to the latest government data, in 2010 there were 16.6 million full-time equivalent employees in 2010, down 203,321 from 2009. Though tax receipts have rebounded somewhat, state and local governments are still suffering. A survey done last year by the National League of Cities found 72% of respondents said they were cutting personnel, 60% said they were delaying infrastructure projects and 41% said they were raising fees.

Politicians of both parties need to have a laser-like focus on jobs. Anything else — the deficit, tax reform and entitlement reform — can and should wait.

The opinions contained in this column are solely those of the writer.

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