NEW YORK ( TheStreet) -- Anti-growth policies continue to frustrate the aspirations of working Americans. The economy is likely growing at less than 2% in the second quarter, making prospects for a better job market remote.
Higher payroll taxes and income taxes paid by the wealthy took away $165 billion in purchasing power. Consumers reacted but with a lag, because they need to keep driving to work and feeding their children -- now car dealers and shopping malls report slowing sales.
Overall, the fiscal drag of about $165 billion in higher taxes and another $44 billion in federal outlays mandated by sequestration are subtracting a tidy sum from aggregate demand, but the focus on short-term budget policies fails to reckon with a tougher issue.
Before these, even with record government spending and rock bottom interest rates, the economy has averaged only 2.1% growth since mid 2009.By contrast, the Reagan recession was just as deep and wrenching as the Obama recession, but the Gipper accomplished 5.3% growth over the comparable period. Simply, what was broke and caused the financial crisis has not been fixed.
Banking is increasingly concentrated on Wall Street, with the top five or six firms controlling about half of all deposits nationally. Even as the Federal Reserve pumps record amounts of money into the economy, these mega-banks have difficulty assessing local business projects. Small businesses that formerly relied on independent regional banks constantly complain "banks will give us a loan when we don't need one." Big banks are happy to lend to multinationals like General Motors (GM) but much less so to their suppliers, and they are hamstrung by litigation and adopting to excessively cumbersome Dodd-Frank regulations. Banks are not alone. Manufacturers complain that federal and state regulators make building, running and hiring increasingly difficult. Either CEOs can spend their best talent building their businesses, or fencing with regulators and in court -- the Obama Administration has made that choice for them. Obamacare ladles on mandates, taxes and higher health insurance premiums, leaving consumers with fewer dollars to spend, and making businesses of all sizes even more reluctant to hire.