The V-shaped recovery isn't happening this time. Private employers are not adding new employees. Nearly 15 million jobs have been lost and they are not coming back anytime soon. The stock market has made a knee bend to this new, jobless reality. Only the Obama Administration seems to be oblivious to the absence of private sector job creation. Everyone else is all too aware of the problem.
In time, economics will trump politics. Companies will find a way to get around the roadblocks that politicians place in front of them. There will be a growth of off-the-books, black market activity to circumvent the enormous increase in rules, regulations and mandates faced by small to middling businesses. In the meantime, American business will continue to outsource activities that, thanks to the Obama Administration, are no longer economically feasible in the US.
What this means is that very high, long term unemployment will be a permanent feature of the new America created by Obama and the Democratic Congress. We may have several generations that grow up in a world of high unemployment and diminished opportunities. Only in the public sector will there be opportunity for young, highly educated Americans. All of this is the familiar landscape of Europe, where young people with education and talent must hop on a boat to somewhere else to find jobs that that fit their talents.
America has become much more like Europe, just at the very moment that Europe is beginning to realize that their model does not work. The G-20 meeting in Nova Scotia two weeks ago spotlighted the gaping difference in attitude between Barrack Obama and the newly chastened European leaders. The latter have simply run out of money. There is no way to provide stimulus when the markets are questioning your ability to roll over existing debt. That's where Europe is; that's where the US is heading.
The basic premise of the welfare state is that you can borrow from future generations to provide the good life for folks living today. To do that, bond markets have to play along. What is happening now is the beginning of the bond market saying "no." CDS's on European sovereign debt continue to widen; interbanking lending in Europe is collapsing. These are the realities, no matter what strange world Paul Krugman might live in.
Within a few months, perhaps a year or two, the bond markets will begin to question the viability of US debt financing and the debt financing of numerous states within the US. What then? Who bails out the US Treasury? Only then will the Obama Administration begin to realize that the game is over. Fattening the pocketbooks of public employees is not an economic program. It won't create private sector jobs.
To get the American economy going again, you have to loosen the noose that is around employers' necks -- something the Obama Administration is not going to do. It took World War II to convince the FDR Administration to lighten their attacks on private business. As a result, the economy boomed for the next five decades. Sooner or later a new and different American administration will face the realities, reign in entitlements and begin to provide an environment where business can thrive.
Until then, the main program for private business is to find ways to get around the rules and mandates and new taxes. This means don't add new employees unless absolutely necessary. Take no unnecessary risks and keep your head down. That's the Obama legacy and it won't produce an economic recovery of any substance.