Furchtgott-Roth to Moneynews: Economy Might Shrink Again in First Quarter

Friday, 01 Feb 2013 06:37 PM

By Dan Weil and David Nelson

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The January job numbers reported Friday are weak, and gross domestic product (GDP) growth stands a good chance of remaining negative in the first quarter, says Manhattan Institute Senior Fellow Diana Furchtgott-Roth.

Non-farm payrolls gained 157,000 last month, a bit lower than expectations, and the unemployment rate rose to 7.9 percent from 7.8 percent in December.

Meanwhile, the economy contracted 0.1 percent in the fourth quarter.

“Employment is not strong. We might have negative GDP numbers the first quarter too,” Furchtgott-Roth tells Newsmax TV in an exclusive interview.

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Job growth is stuck at about 150,000 a month, with unemployment just under 8 percent, she notes.

Forbes Columnist: ‘Who the Hell Cleared This?’

“We might have a negative GDP in the first quarter because of rising taxes and the increased effects of the new healthcare law.”

The Obamacare problem is that it penalizes employment, because employers who don’t offer the right kind of health insurance will have to pay $2,000 per worker per year, Furchtgott-Roth says.

“That means in essence they want to hire fewer workers. So it’s not the job numbers that lead to a perception or probability of negative GDP growth in the first quarter, but the taxes that have gone up on top of these weak job numbers.”

Congress could help the economy by rejiggering the employer penalties for Obamacare so it doesn’t discourage them from hiring, she explains.

In addition, Congress should “do immigration reform so that we can get more entrepreneurial immigrants in to create companies and create jobs that hire native-born Americans,” she says.

“We want Congress to make some tough choices and do something to get the economy going, like stopping the war on fossil fuels, encouraging hydro-fracturing. Let’s hope these numbers are a wakeup call for Congress and President Obama.”

Part of the payroll weakness stems from reductions in government jobs, and government cutbacks are a good thing, Furchtgott-Roth maintains.

“The fact that our government is getting in a stronger fiscal position, is adjusting its balance sheet just like a household should, that is good news.”

But it’s also important that money is returned to taxpayers, so they can spend and thus counteract the negative effect of government cutbacks on the economy, she adds.

Additionally, Congress should refrain from making budget cuts across the board, Furchtgott-Roth says. Figuring out which specific programs to cut would be better.

“For example, why do we have public television subsidized by the government when there are so many private TV cable channels for us to choose from? This is not something the government has to do.”

Moreover, the National Weather Service could be replaced by the private sector too, she says. And, “we don’t need to be pumping money into high-speed rail when only about 2 percent of Americans use public transit,” Furchtgott-Roth says. “Most of them prefer to drive.”

Forbes Columnist: ‘Who the Hell Cleared This?’

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