5/1/2013 8:30 PM ET|
Obama's recovery has failed
Yes, the recession ended, but the pace of the recovery has been slow and now it's stalling out. Where next? No one in Washington, including the president, seems to know.
It wasn't supposed to end like this.
When President Barack Obama came into office on a whirlwind of popular support in 2009, hopes were high his proactive, government-centric approach to the economy would stem the housing crisis, save the banks and reverse the jobs implosion that resulted in 11.3 million full-time positions being lost between 2007 and 2009.
His left-leaning economic advisors touted the lessons of the Great Depression and were eager to apply those lessons after eight years of the Bush administration's more laissez-faire approach. They bailed out Detroit. They used Treasury funds to encourage mortgage modifications. They launched a $762 billion stimulus package. They used the Federal Deposit Insurance Corp. to backstop bank assets.
And they encouraged the Federal Reserve to open the spigots of cheap money on an unprecedented scale, subsidizing the government's $1 trillion-plus deficits, and buying auto loans, collateralized consumer loans and mortgages.
Yes, the economy started growing again. But the results have been disappointing. And now, there are signs this tepid recovery is faltering as both economic growth and corporate profitability turn lower.
We've seen the weakest recovery of the modern area, with annual growth rate of gross domestic product peaking at a meager 2.8% in 2010 before slowing (compared with a Bush-era peak of 4.1%, and a peak of 5.4% under President Bill Clinton). The economy remains far below its full potential. Industrial production remains below pre-recession levels. And we're still facing a deficit of nearly 6 million full-time jobs -- and nearly 13 million if we account for population growth as well as jobs lost during the recession.
Despite the lingering morass, according to a snarky new report by the Government Accountability Institute (.pdf file), a think tank that frequently takes aim at Obama, the president has spent more than twice as many hours playing golf and enjoying vacation as he has working on the economy (976 hours versus 474 hours). Through March 31, the report says, he's spent just six hours this year on the economy versus nearly 50 hours on golf or vacation. Question that if you like, but it seems clear to me he's focused on other issues.
Mr. President, it's time to get serious about the economy again. Here's why, along with an idea of where he can get started.
The beginning of the end
Both earnings and the economy are stalling. I've been talking about the deteriorating economic situation for months, with businesses scaling back spending and hiring as profit margins are squeezed, cash flow dwindles and confidence wanes, while consumers contend with higher taxes, lower savings and the looming impact of the budget sequester cuts.
This is in the context of an economy that's running well below its pre-recession potential, according to the Congressional Budget Office, as shown below. Until this gap is closed, we haven't fully healed.
The details of Friday's first-quarter GDP report, which showed below-consensus growth at a 2.5% annualized pace, illustrate the problem. The report was bolstered by two temporary factors.
The first was a building of private inventories on a scale not seen since 2011. And the other was a massive 1.5% contribution (of the 2.5% total) by personal spending on services -- an area of the economy that has lagged behind throughout the recovery as people cut back on nonessentials. But now, all of the sudden, it has made the largest contribution to growth since 2004.
And this spending spree came in the context of a severe drop in inflation-adjusted, after-tax income that resulted in a similarly steep drop in the personal savings rate as consumers were forced to draw down meager reserves to maintain spending. In other words, it's not sustainable.
That suggests that, correcting for these two temporary items, the economy's true growth rate is nearer to 0.7% a year -- just a slight improvement from the 0.4% pace seen in the fourth quarter of 2012.
Here's the kicker: All four sectors of GDP growth are set to weaken from here. Business investment will keep pulling back as net cash flow growth drops to pre-recession levels. Consumers will be forced to cut spending as savings run dry. Net exports will suffer from the deepening recession in Europe. And government spending will tighten further as the debt-ceiling fight heats up, Washington debates a new budget, and as policy experts at the Committee for a Responsible Federal Budget call for an additional $2.5 trillion in budget cuts over the next 10 years to merely stabilize the national debt.
(The one bright spot has been housing construction, but it's improving from such low levels as to have barely an impact on the other negatives.)
Don't believe me? Consider that manufacturing activity in the Chicago area is now contracting on a month-over-month basis. Order backlogs have plummeted to recessionary levels last seen in July 2009. Or that the Federal Reserve Bank of Dallas regional manufacturing index, shown below, suffered its largest drop and its largest miss versus estimates ever this week as producers cut back work hours in response to a weakening outlook.
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And we're still facing a deficit of nearly 6 million full-time jobs -- and nearly 13 million if we account for population growth as well as jobs lost during the recession
Don't forget to include those that have just stopped looking for work altogether.
President Ocommie never intended the economy to improve.....
People need to realize that a commie marxist ideolog like him needs to destroy capitalism, freemarkets, self reliance and freedom to grow government and maintain power....
.Thanks to all the low information idiot voters and freeriders we are going to suffer the results.
If the Democrats win the House in 2014....welcome to a New Banana Republic.
He only wants to expand the great plantation (as long as he and his contemporaries are in the ruling class)
For those who blindly follow your great leader, good luck.
It doesn't end well.
Might want to take a look at the socialist paradise in Venezuela.
They sit on the world's 2nd largest oil reserve and yet they can't keep food on the shelves.
Oh well, as long as the Obama phones keep coming, who cares.
The republic can survive a Barack Obama, who is, after all, merely a fool. It is less likely to survive a multitude of fools such as those who made him their president.
We can see what a Keynesian driven consumption based economy becomes.
Sprinkle in a century of Liberal/Progressive government expanding redistribution nonsense in the name of social and economic justice and we see the results. Central government has as much chance of creating commerce as you standing in a bucket and picking it up. You'll be struggling as long a we have.
We are straining under 20th century beliefs in the 21st century. Our criminal progressive tax system has been tweaked in virtually every possible way and obtunded with a 76,000 page tax code that even the IRS can't decipher.
Growth strapping regulations keep being added with the hope that someday we'll get lucky and they will somehow help. The 2009 edition of the Code of Federal Regulations was the largest ever, encompassing 163,333 pages in 226 individual books. Rarely are any of them enforced, unfortunately.
Trade agreements are more management than any semblance of "free-trade". We don't need free-trade, we need fair-trade.
Unions, and their inherent corruption, have decimated our manufacturing base. Instead of being industry aversive unions need to become supportive. Losing all our consumable manufacturing due to union corruption does neither our economy nor the unions any good.
The lack of a strong all-the-above energy policy keeps us struggling with the 2 biggest invisible taxes, gas and food price inflation.
Unless we realize that government has a contractual basis with the American people. That contract is the Constitution. When we allow our criminal government, and all its feel-good redistribution, social engineering nonsense to usurp its mandated responsibilities we see the cluster f**k that our economy has begun.
Of course the single biggest embarrassment that will prevent us from competing any time soon in the global economy is our dysfunctional government run public education system. But that’s a discussion for another time.
My English must be bad - could have sworn it said "recession ended" Still not counting the unemployed who are no longer counted because their benefits ran out, and gee, the stock numbers look so good in red!
Que the Twilight Zone music please...... thank you
Yes recession has ended, says a stupid asinine in the tank for a commie azzwipe,
recession ended?? recovery slow?? recovery??? that's like saying a dead dog is just asleep but he'll wake up soon, maybe, I think, possibly, well let's wait and see, ahh Geroge Bush, ahhh damn!! played that card already!! ahh oh global warming slowed the recovery, or recession ahh oh that's right the global warming hoax has been outted already as a fraud, ahhhh let's see know who to blame....damn!! nobody left but that pig obama but he's playing golf!
now the reality of the situation: NO THE RECESSION HAS NOT ENDED, WE'RE IN THE SAME ONE WE'VE ALWAYS BEEN IN ONLY WORSE!!, now, are you HIGH tony??!!!!! THIS NATION IS A DISASTER because of obamanomics, beyond disaster, in ruins, God help us all, this idiot is a divisive bitter Chicago thug who's playing with the uber rich, beyonce, jaz z, tiger woods, getting his azz licked and kissed by idiot celebrities with nary a hint of logic or what the hell is going on beyond their little click of a world, and all of this initiated by the guilty self-loathers out there, aka the IDIOT voter, high price to pay indeed to assuage your white guilt ain't it, sad thing is, you ain't seen a damn thing yet, that's the fcuked up part!!!
oh and ah, you dirtbag libs and guilty whites, you might want to check out obama off teleprompter on youtube, without axelrod workin' his head and whispering in his ear on what to say, I can't get enough of it it's soooooooooooooooo funny!! that's what you voted for you rancid commie vermin! THAT's WHAT YOU VOTED FOR!!! 'nuff said!!!
Obama got the egonomy in the tank and HE is just happy where it is at.
Are you kidding...the recession is over????...what's in you glass......kool aid???
This arrogant and divider president elected by people like the black panthers are just to NO GOOD.
Just wait until BengahzObama shows up....he will hit Hillawry in the head.
Millions of out-of-U.S. jobs provide us with a large percentage of goods. That is why employment will not come back - it is gone forever, or at least until energy prices cause transportation of cheap labor goods to be non-economical.
The stock market is at record highs. Many many companies stock prices are at record highs. Many many companies scaled way back on employment and benefits during the past 5-10 years. Many many companies are operating at record or near record profits.
A large percent of our GDP has been off-shored - simple fact.
Do you really think you Tax and Print your way to prosperity? Can you really Borrow and Spend your way out of Debt? Obamanomics is a failed policy.
Obamanomics will not end well... We already are seeing the results... 17 trillion in debt (up 66%), trillion dollar deficits (2x-3x anything W had) after massive tax increases... Unemployment that only decreases because 8 million people are no longer counted... 47 million on Food Stamps (up 70%).... Disability up to 14 (75% increase). M2 Money supply up 71%. 43% of middle class wealth wiped out under Obama...
"57 states" is a Lazy, Inept, Arrogant, CORRUPT Imbecile!
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