Conservative Principles Now

President Obama announced a renewed focus on jobs in his State of the Union address.  His budget stated (PDF) “it is critical that we take steps to jump-start job creation”. He’s right, of course. He is also explicitly admitted the failure of last year’s $862 billion “jump-start” stimulus program.  On March 4, the House passed yet another admission of failure as it moved a $17.6 billion mini jobs bill built around an ineffective hiring tax credit and highway spending.  Why another bill?  Because even politicians cannot duck the data forever, such as today’s jobs report released by the Labor Department which means the Obama jobs deficit stands at 8.3 million workers.

According to the latest report (PDF), the U.S. economy shed another 36,000 jobs in February.  The unemployment rate stands at 9.7 percent, almost double the rate thought consistent with full employment.  Further, the only reason the unemployment rate isn’t higher still is that millions of Americans have left the workforce altogether as shown by a drop in the labor force participation rate to 64.8 percent from a peak in 2007 of 66.4 percent.

The economy’s continued poor performance means President Obama is falling further and further behind on his promise to create millions of new jobs.  Obama promised that if elected he would create 3.5 million jobs by the end of 2010 through new economic policies, beginning with the enactment of a massive economic stimulus package. Accompanying his jobs promise, the President also emphasized accountability and measuring his presidency by results. The result of the President’s jobs promise means total employment which in February stood at 129.5 million should be at least 137.8 million by the end of 2010, leaving the Obama jobs deficit at almost 8.3 million jobs.

Fortunately, the economy’s natural resilience spurred by powerful monetary stimulus from the Federal Reserve means the economy is growing again, albeit at a slow trend pace.  Consequently, job losses may persist for months to come.  Even the Administration’s rosy forecast for economic growth for the next two years leaves the unemployment rate around 10 percent through all of 2010 well into 2011.  By his own official forecast and by his own standard, the Obama jobs deficit attests that his policies have failed and will continue to fail.

The federal government can stimulate the economy in the short term not by increased spending and borrowing but rather by improving incentives and the general economic environment.  Businesses invest not when they are manipulated by Washington, but when they are confident enough to take risks in pursuit of opportunity.  Individuals and businesses across the nation see tremendous opportunities for starting new businesses, investment, hiring new workers, expanding into new markets. Understandably, many are holding back due to concerns about the economy.  However, many others are holding back due to concerns about the threatening policies from Washington while others are holding back because existing tax and regulatory burdens are already excessive.  For private sector job creation to “jumpstart” in the President’s words, the first step is to fire Washington’s job destruction machine.   The President and his allies need not repudiate their ideology, as helpful as that would be, but they do need to hit the pause button on their anti-growth policies.

In his September address to the joint session of Congress, President Obama stated he would be the last President to take on health care. Perhaps, but that may be at the cost of everything else, including education.

By expanding Medicaid in the health care bill, Congress will set off political tornadoes across the country that will leave governors and state legislators to clean up afterward. The math is simple. State revenues are still in a slump and will continue for a least a few more years. The two largest state and local expenditures are education and Medicaid. If you have a balance a budget, which nearly every state does, and you cannot touch the entitlement to Medicaid, where will you turn to fill the budget gap? There will be little choice than to go after education.

According to The Fiscal Survey of States, published by the National Association of State Budget Officers, 31 states cut higher education and 26 states cut K-12 education in 2009. Even with additional federal funding for Medicaid, 25 states still made reductions in Medicaid by cutting reimbursement to providers. Next year will be more of the same. Some states are already reporting higher Medicaid costs due not only to increased enrollment because of higher unemployment but also because of packed emergency rooms due to the swine flu. Governors of both parties are wondering whether Washington really knows what is going on around the country.

There are more former governors serving in the U.S. Senate than in the U.S. House of Representatives which means the Senate should be more aware of the Medicaid vs Education cage match. When legislation gets to the Senate floor, it will be interesting to watch whether the “former governor caucus” will work together across party lines to protect all states or only their own.

Congress and the President have incorporated all sorts of budget gimmicks to protect the federal budget. But they will be wrecking havoc on state budgets.

For more on Medicaid and Obamacare see:

Federalization of Medicaid: Health Reform Bill Would Reduce State Authority

Why Congress Wants to Force More Americans into Medicaid

The Baucus Medicaid Provisions: The Senate’s Massive Welfare Expansion