For those hoping for good economic news out of Washington today, they’re in for a terrible disappointment. According to the latest jobs report from the Department of Labor, the economy created only 69,000 jobs in May — well below expectations — while the unemployment rate rose to 8.2 percent, and job numbers from March and April were revised significantly downward. Meanwhile, Taxmageddon is threatening the U.S. economy and holding back growth, but strangely, President Barack Obama isn’t doing anything about it.
Heritage’s J.D. Foster explains that while a second recession isn’t necessarily on the horizon, the news is nothing for the Obama Administration to brag about:
These jobs figures are consistent with other fairly bleak news. For example, first quarter economic growth was revised down to 1.9 percent, while an important measure of performance in the heartland, the Chicago Purchasing Managers’ Index, fell to its lowest level since September 2009 which was near the bottom of the recent recession. None of this necessarily points to a second recession, more like continued muddling and hardly in a position to withstand an economic shock such as, for example, the developing deep recession in Europe.
Europe’s unfolding recession is entirely of its own making, the product of their own housing bubbles, badly managed public finances, and an experiment in monetary union that went terribly wrong. Unemployment across the eurozone hit 11 percent in April – the highest level since the euro was created 13 years ago.
Much like Europe, the United States economy is being dragged down by crippling debt and future fiscal uncertainty. As former Federal Reserve Board Chairman Alan Greenspan noted, businesses are holding back on investing for the future because, “In short, there is a fear of the future.”
But while Europe wrestles with its euro conundrum, the United States is facing its largest tax hike in history — otherwise known as Taxmageddon — due to hit the American people on January 1, 2013. Through the expiration of existing tax policies and the imposition of new taxes, families and businesses will be hit with a $494 billion tax hike if Congress and the president don’t take action to stop it. Apart from the painful impact that those higher taxes will wreak when they arrive, they’re already harming the U.S. economy today by forcing businesses to hold back investment for fear of what the future may hold for tax policy.
A new survey shows that uncertainty in the tax code is in fact causing businesses to fret that future and sit on the sidelines. According to the tax firm Alvarez & Marsal Taxand, most chief financial officers rate eliminating uncertainty in the tax code as their top issue, as The Fiscal Times reports. “Confidence in knowing precisely what the tax code will require has become more important than how much it will cost them,” said Robert N. Lowe, chief executive officer of A&M Taxand. “As long as proposed changes remain up in the air, companies will be forced to continue to burn fuel operating in holding patterns rather than charting productive courses forward.
Moving the country forward, creating jobs, and getting the economy going again should be goals America’s leaders pursue vigorously and vigilantly. And since Taxmageddon is standing in the way, it would make logical sense for the president and Congress to act now and give the country’s job creators the certainty they need to switch into high gear.
But even with millions of Americans unemployed, dismal job creation, an increasing unemployment rate and Europe sliding into a deep recession, President Obama is silent on the issue of stopping the United States from heading over a fiscal cliff. Absent any leadership from the White House, House Speaker John Boehner (R-OH) has announced the House will vote in July to prevent tax rates from rising. The Senate should do likewise. There is time for Washington to take action, but that time is growing shorter with each passing day.