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Obama's Policies Failing: Dismal Stats Tell Story

Obama's Policies Failing: Dismal Stats Tell Story

By Larry Kudlow - June 2, 2011

With a flamboyant downgrade of the outlook for economic growth, jobs and profits, Wednesday's 280-point Dow plunge to launch the so-called June stock swoon is a warning shot across the bow.

The Dow tanked alongside a batch of dismal economic data. The ISM manufacturing index, ADP employment, Case-Shiller home prices and consumer confidence are all pointing to 2 percent growth or less, rather than the kind of 5 percent growth we ought to be getting coming out of a deep recession.

The economy now looks like a Government Motors engine that's stalling out. Or perhaps, with energy and food inflation, and housing deflation at the same time, the economy is acting like a pinball machine on permanent tilt.

There's a key message here: Big-government stimulus never works.

First there was the massive Barack Obama stimulus spending. Then QE1. And now QE2 is winding down. And what did we get for all this? Slower growth overall, paltry job creation, more energy and commodities inflation, continued housing deflation, and virtually no new business start-up entrepreneurship.

We know the Obama spending package failed to create a 7 percent to 8 percent unemployment rate, as advertised. And now we're learning that the Fed's QE2 has actually done more harm than good.

All that money-printing stimulus worked to depreciate the dollar and jack-up commodity prices, especially oil and gasoline, but also food. So both companies and consumers have been punished.

Some demand-side boneheads on Wall Street want the Fed to move to QE3, allegedly to fight a stalling economy. But if the central bank prints another $600 billion or so, all that will do is sink the greenback another 10 percent and drive oil and gasoline prices higher and higher. And that, in turn, will slow business and consumers even more.

The Japanese disaster is undoubtedly playing a role in the manufacturing slump -- probably a bigger role than most economists predicted. Production supplies are scarce or nonexistent, especially for autos and electronics, but also for many other sectors of the economy.

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Lawrence Kudlow is host of CNBC's The Kudlow Report and co-host of The Call. He is also a former Reagan economic advisor and a syndicated columnist. Visit his blog, Kudlow's Money Politics.

Copyright 2011, Creators Syndicate Inc.

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