This is Obama’s Economy Now

I’ll say it. The latest economic numbers were just abysmal for a recovery. Abysmal. While President Obama tries to say that the recession is Bush’s fault (why is that again?), regardless of whose fault it was, he has utterly failed to create a sustained recovery. And at this point he’s out of excuses.

I tend to give presidents a bit of rope on economic matters. They can’t create consumer spending. They must rely on the Federal Reserve to set monetary policy. And frankly the business cycle has a lot to do with the timing of recessions and recoveries. But presidents do have some tools at their disposal, and at some point this painfully slow “recovery” is no longer the fault of a prior president. Barack Obama has been at the helm for three and a half years and the “recovery” he tries to take credit for, like a doctor whose patient has temporarily recovered, has not speeded up, but slowed. CBS reported this week the economy is at risk for a double-dip recession: another backslide into negative growth.

Last month job growth was only 1/3 what it was the prior month. And, as the CBS report stated, this week it was reported the economy grew at 1.5% in the second quarter, down from an already slow 2% the prior quarter. The LA Times also reported:

The U.S. economy grew at an annual rate of just 1.5 percent from April through June, as Americans cut back sharply on spending. The slowdown in growth adds to worries that the economy could be stalling three years after the recession ended.

As a result, when July employment numbers come out, one of only four unemployment reports left before the general election, we shouldn’t expect much of an improvement. And seasoned observers know that the unemployment rate of 8.2%, or 12.7 million people, doesn’t tell the whole story: according to the Bureau of Labor Statistics June 2012 report, another 2.5 million are excluded from that count because they’ve stopped looking for work. Another 8.2 million people are considered underemployed, also not counted in the number above.

With this performance you’d think that the Obama White House would be in crisis mode assuring the American pubic that the president has it under control, that he’s got a plan to boost the economy. But what are we hearing? Criticisms that it’s really George Bush’s fault. Or criticisms of Mitt Romney’s “gaffe” of confirming (when asked) that reports of security issues at the Olympics were “disconcerting” (they were disconcerting). Shouldn’t David Axelrod and Debbie Wasserman Schultz be promoting an Obama economic plan rather than manufacturing ad hominem attacks? What is leadership, if not generating, promoting and executing new ideas? Harry Reid repeats unsubstantiated hearsay today about Mitt Romney’s taxes and Democrats start salivating. Meanwhile it’s a known fact the Democrat-controlled Senate hasn’t met its Constitutional duty to pass a budget for three years running because Harry Reid knows it wasn’t in the Democrats’ political interest. And these folks want four more years. To do what, I ask? Continue to blame George W. Bush for the country’s woes? If Obama deserves the credit for temporary growth earlier this year, he deserves the blame for the stalling of that growth now. This is now Obama’s economy.

If you haven’t seen it, I’d recommend Jennifer Rubin’s column in the Washington Post from Friday. In it she says:

[Obama] can blame George Bush. He can whine that he was handed a terrible economy. (Ronald Reagan inherited worse.) But there’s no spin that will make 1.5 percent growth in GDP anything but dismal. It is not a recovery we are in; this is what we need to recover from — anemic growth, endemically high unemployment and record poverty.

What is the president’s big idea? Raise taxes on small business. What is he campaigning on? Mitt Romney’s tax returns. What’s his major rhetorical thrust? Businessmen shouldn’t claim credit for their success.

The latest news only points up how irrelevant, if not absurd, is most of the media coverage of the presidential campaign. The frenzy to highlight the trivial would be bad enough in good economic times. In the current basket case of an economy, it is farcical.

In Ms. Rubin’s article she also quotes Jim Pethokoukis of the American Enterprise Institute. In an article entitled “Sickly second-quarter GDP report puts U.S. economic recovery — and Obama’s reelection — in jeopardy,” Mr. Pethokoukis also reports the US economy is in the “recession red zone,” or in danger of entering into the feared second dip. Likelihood of recession at this point? 70%. If that were the weather report you wouldn’t plan a picnic. Apparently many businesses agree, and aren’t increasing hiring. Meanwhile, 3 years into a recovery, Reagan had nearly triple the GDP growth that Obama has, and that following the Carter years with stagflation and a 20% prime rate holding down growth.

So to say it can’t be done because the mess is too big is to ignore the fact that other presidents have had success in similar environments before. Perhaps it’s not the extent of the disease that’s the problem but the (lack of) skill of the physician? In this economic environment it’s difficult to understand how President Obama can say his plan worked, as he did a week ago Tuesday. Perhaps he’s pointing to temporary job growth financed by the borrowed stimulus’ infusion into the economy. That’s like giving a sick patient a shot of adrenaline and saying “look how much energy he has!” Just pass a stimulus every couple years and we’ll be fine? Ouch. That’s why this ad is simultaneously so painful to watch, and yet hits home so well.

Now this ad has been criticized for taking the underlying Obama quote out of context. The argument is that the president wasn’t referring to his plan per se, but Clinton’s plan of raising tax rates on the highest earners, which Obama credits for the growing economy under Clinton and for which Obama needs to be re-elected. What? Re-elect Obama so he can raise taxes? A couple points here: I’ve yet to see data showing a causal relationship between Clinton’s “success” and a higher marginal income tax rate on the wealthiest. I remember instead that the “irrational exuberance” of the mid 1990s was what led to an internet bubble that ultimately burst in the early 2000s. I also remember that though the highest marginal tax rate was higher under Clinton, his success was attributed in large part to having a balanced the Federal budget, helped by the revenue growth from, among other things, that internet bubble. That kind of growth isn’t coming back and it shouldn’t. Meanwhile, even if Obama’s theory is correct, his tax increases are not expected to raise anywhere close to the money required to balance the budget. As has been said by many, we really don’t have a taxing problem, we have a spending problem. And Obama is holding the rest of the country hostage while “Taxmageddon” approaches, refusing to take the millstone off the neck of the rest of the economy unless the GOP yields to his demand to raise taxes on the highest earners. For more of an explanation of what fueled economic growth under Clinton, see this Politifact article from 2011 testing Obama’s past claims that raising taxes led to increased growth under Clinton. It found the claims only “half-true.” Of course the facts are much more complicated than what the President suggests. The best we can truthfully say is that we tried the Democrats’ plan under Clinton and it didn’t completely kill the economy back then. But some quoted in the same article argue times are different today, and that same plan very well could do damage now. If the past three and a half years are any indication, that plan is already failing, making the President’s claim “our plan worked” laughable on its face.

Further, Obama’s truly the one taking quotes “out of context” by repeating in the same speech that Governor Romney said to “let Detroit go bankrupt.” The story of the auto bailout deserves its own post, but both Mitt and Obama favored letting Detroit go bankrupt, just on different terms. Saying Mitt was in favor of flushing Detroit (the dog whistle claim Obama makes with this statement) is completely out of context. Suffice it to say they had similar plans to let Detroit go bankrupt. But the key difference between the Obama plan and the Romney plan was that the market would have decided who owned GM under Mitt’s plan, while Obama’s plan assured that GM’s ownership went to the Federal government and the United Auto Workers in a government run bankruptcy process akin to the “top-down” economics Obama now decries. One estimate of the cost to US taxpayers of Obama’s approach is $35 billion. And if GM’s stock doesn’t recover, the cost will go higher.

According to Amy Payne at The Foundry:

Had the government treated the UAW in the manner required by bankruptcy law, taxpayers would have broken even. The program would have amounted to bankruptcy financing instead of an outright bailout. The Administration could have kept the automakers running without losing a dime.

Instead, more than $26 billion went out the door and into the UAW’s pockets. Let’s put that in perspective: The amount of the subsidy given directly to the UAW was bigger than the budget of the entire State Department. It was bigger than all U.S. foreign aid spending. It was 50 percent more than NASA’s budget.

None of that money kept factories running. Instead, it sustained the above-average compensation of members of an influential union, sparing them from most of the sacrifices typically made in bankruptcy—a bankruptcy they contributed to. President Obama engaged in special interest spending at its worst.

So let’s lay aside accusations of taking quotes out of context. He said “our plan worked.” If what he meant to say was that it was Clinton’s plan that worked in the early 90s, is he saying he deserves four more years to try and convince Congress to go back to the Clinton income tax rates, because he’d have liked to implement that plan but couldn’t over the past three and a half years? Isn’t it a sign of leadership to be able to convince people who disagree to go along with you? Or to compromise for the greater good? Even believing for a moment that’s what he meant, he has utterly failed on this measure. Even if you say the GOP has been too stubborn to work with, why would we give an incompetent negotiator another four years and assure more gridlock? Can we really afford it? In neither case is four more years a solution.

The bottom line is this: President Obama hasn’t gotten it done. Whether his fault or that of Herbert Hoover, we’ve got less than 100 days to replace him. If you want economic growth, there’s only one choice. If you want to repeal Obamacare, there’s only one choice. If you’re tired of gridlock, there’s only one choice. For our economic future, and to preserve economic and even religious liberty we’ve been blessed with (effective today Obamacare begins forcing companies “at the beginning of their next health plan year, to pay for coverage of abortion-inducing drugs, contraception, and sterilization—regardless of moral or religious objections”), there’s only one choice. This is now undeniably Obama’s economy. To fix it, we need Mitt Romney for President.

About Paul Johnson:

Paul Johnson is an attorney for venture capitalists and their portfolio companies by day, husband and father of three teenage boys by night. He’s an avid supporter of Mitt Romney for president and, as a graduate of Brigham Young University, a BYU football and basketball fan. Paul also enjoys competing in triathlons. Because he’s in the “Clydesdale” (over 200 lb.) class, he has even had podium finishes from time to time. Paul also has the distinction of being a big enough U2 fan to be willing to travel to Dublin to see them in their native environment.

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7 Responses to This is Obama’s Economy Now

  1. Geraldine Weber says:

    It doesn’t take a brain surgeon to know this is one of our countries most important elections with the state our economy is in. I am not tied to any party. I listen to what they say and what they don’t say and cast my opinion on accomplishments. To let you know how important this email is to me let me give you a little bit of info as to what it is taking for me to put it together with the circumstances I am living with. My mother has been a stroke patient for over eight years and is completely on home care now. My son is working two part-time jobs trying to just make it and I have been on disability for some time due to a condition called meniers syndrome which the doctors have been unable to treat with any success. I ust turned 65 in April so I am now on ocial security but still with disability status. I have two areas I would like to bring to Mr. Romney’s attention that might help get votes. He picked up very nicely on Mr. Obama’s comment “you didn’t build that” there’s another on I would like to seem him get and that’s about everyone paying their fair share. I believe in that so would you please tell me why in his administration the women are paid less for doing the same job as a man? What a hipocrit. I got this tidbit from VARNEY &CO., fox news if you want the info verified. Second to get college votes maybe they need to know that out of last years graduates 50% of graduates majoring in law were unable to find jobs. Isn’t that just great. You go to college to get an education, take out loans and get over your head in debt to pay for it and when your finished there’s no job. Would you vote for that? Got this tidbit on VARNEY & Co. on fox news it you need verification. He keeps knocking the Bush administration but let me tell you Bush got the prescription drug program passed and let me tell you with the health issues my family alone have he has saved us alot, alot, alot, alot of money so don’t tell me the Bush administrtion didn’t do anything for the elderly. What have we got from the Obama administration would you tall me please? I’m still waiting. I don’t know if any of this will help but if it does please use it. I’m pulling for Mitt Romney all the way. I know my email is long and you are all extremely busy sith the campaign growing closer and closer but if you do have time I would just appreciate a short email to let me know if my input was at all helpful. Thank you,. Geraldine Weber

  2. Jennifer VanBuskirk says:

    August 1, 2012, Thank you, Geraldine Weber for writing a comment. My Dad is 87 years old and he has been a Republican all of his life and he raised me to be a good Republican too and I also believe Conservatives and the Tea Party People are also doing their best to help to keep America from falling down these days. My Dad has a Hernia and I am here to help a little. I do not have an employable Job yet I am a Seamstress by Trade and Talent and I do some small Sewing and Crafts projects to sell. And I have read about all of the United States Presidents and I have to say that Barack H. Obama is by far the very WORST President that America has ever had to SUFFER under. Obama is even worse than Adolf Hitler. The ABORTIONS that Obama didn’t even try to put a stop to that at least George W. Bush was doing his best to end in his Presidency years. I honestly believe that most Republican Presidents are of a Higher Standard of Living and of a Noble Principle, with GOD Almighty and His Divine Son, Jesus Christ and the Holy Spirit as our Supreme Guidance. Thank you. GOD Bless Mitt.

  3. AfricansforRomney says:

    Obama, Demos party are bankrupting the economy, you read/hear weak domestic, global economy, things are really bad out there and then you ask what’s the GOP plans? Basically, none. King Obama is sitting pretty, his clever, cost free strategy is blaming Bush for his own another 4 years survival.

    I’m indep’t, vote conservatives, however GOP leadership these days sucks. John Bohner, Mitch McConnell got to go! I like them being fair for both sides, but very weak selling the party brand, idea. Queen Pelosi don’t cry, she’s not afraid of standing what she beleives in, she sells Demos crappy idea in very bold, agressive way. The same with looney Harry Reid.

    I beleive, the new “anti-establishment”, Palin alike activists are killing the GOP party. These groups are have no interest uniting the party, they show no interest for the party future survival, have no shared solution for the problem we’re facing as a nation for the near future. Obama is clearly taking advantage of the GOP party divide, the new anti-establishment fights. The radical right can talk, scream all day long being anti-establishment, so, what’s the point if their message don’t bring constructive solutions. I’m afraid the so called anti-establishment fights are taking the party to its own grave. How you win as a party with these nonsense anti-establishment fight in Nov? It is the time for GOP leadership to stand for a common goal. My head is spinning…..

  4. Tom says:

    This is not completely true.

    From the Bloomberg article:

    >>Former U.S. Senator Byron Dorgan, a North Dakota Democrat who warned in 1999 that repealing Glass-Steagall could lead to “massive taxpayer bailouts” in 10 years, said in a telephone interview that the so-called firewalls that exist between regulated banks and affiliates are like “tissue paper.”
    “It’s just absurd for anybody now to make the case that having these entities under the same corporate umbrella doesn’t pose substantially greater risk,” said Dorgan, who retired from the Senate in 2011 and is a senior policy adviser at law firm Arent Fox LLP. “Phil is just wrong about this. He was wrong 13 years ago and he’s wrong now.”<<

    Does anyone think the current economic problems are Obama's fault?

    The Bush administration and the congressional GOP from 1997-2007 have left one of the worst legacies in government in American history that is being felt today and will continue to resonate well into the future. We are left with the worst economic recession since 1930s and perhaps the worst fiscal crisis since the 1790s thanks to increased expenditures due to two mishandled wars and an insensible tax cut policy that carried over into 3-4 years of the Obama presidency.

    We are still living with the Bush legacy more than we are living with Obama’s presidency. This mess is so great that it will take more than the next four years to clean up no matter whoever becomes president.

    Yes, it is fair for Obama to blame the Bush years for today’s problems and those of the immediate future. People who can’t see this are very much unaware of the larger issues.

  5. Tom says:

    It will take many more years to clean Bush’s mess. But the problem is much more strategic than you think. What is causing this economic stagnation and will continue to cause it down the road is shrinking supply of oil. Energy is the juice of the modern economy. Without a sufficient supply (which has been increasing less), it can’t run well. Modern civilization should have done it a long time ago. One of the biggest mistakes it ever made was not balancing the energy spectrum. We use too much energy by developing technological products from light bulbs to cars to to i-Pads over the last 150 years, but did relatively little to advance the supply side of the energy spectrum. So much so that it has been said that if Thomas Edison came back, he would recognize today’s power system. One reason why is that petroleum has been historically cheap with the exception of the 1970s and in the last 10 years or so. It is also very reliable and relatively easy to implement into an energy source like through the internal combustion engine. But we are running out of them. There has been little profit incentive for private industry to create alternatives.

    How did this current crisis come about and affected our economy today? In the 1950s, the U.S. government created incentives to expand energy usage. Title 1 made it easier for suburban communities to be built and middle class families rushed out into them. The new suburban homes used up more power and people started to drive more as the new suburbs were complemented by the construction of the National Highway System under the Eisenhower administration, perhaps the biggest man-made project in history. Energy usage spike. This led to the biggest economic expansion and the biggest expansion of the middle class in American history. Furthermore, growth in polymer-related industries like the wider usage of plastic and rubber in the 60s and 70s caused further demand for petroleum. However, this all came at a price. In 10-15 short years, the United States hit its peak in the domestic production of oil in the 1970s. An energy crisis hit which was further exacerbated by the Arab oil embargo.

    In the late 1970s, an alternative energy program was created by the U.S. gov’t under the Carter administration that included renewable energy in respone to the energy crisis. That program was scraped in the 1980s in favor of importing more oil under the Reagan administration. The economic stagnation (or stagflation) of the 1970s and the subsequent Reagan’s years of the 1980s also changed the political culture of the United States which it become gradually institutionally conservative. Liberal economic policies of “taxing and spending” were discredited and blamed for the economic downturn of the 1970s by conservatives like Reagan. He and others misidentified or overlooked the real problem that caused the downturn: SHORTAGE OF ENERGY RELATIVE TO DEMAND. Namely, oil. Energy is the juice of the modern economy. It was no coincidence the stagflation in the 1970s happened during the time of the energy crisis when the U.S. hit its peak in domestic production in the the “black gold” and started to rely more on foreign oil during the time of heightened world tensions. Instead, conservatives MOSTLY wrongly blamed it on liberal policies of too much government. When it was clear that oil was not for the far future (like in the 21st century), Reagan scrapped the alternative energy programs in the 1980s and decided to rely more on imported oil.

    Admittedly, the problem with alternative energy like solar and wind is that the current technology is not capable of providing enough BASE POWER to supply society with energy 24/7. Speculatively, government wasn’t given much of a chance to develop better storage technology for alternatives after its program was scrapped in the 1980s. It could have been done. After all, this is the same government that built the Panama Canal, the Hoover Dam, the Alaska Pipeline, the National Highway System, and helped build the Erie Canal, Transcontinental Railroad, and the suburbs. Putting a man on the moon was a comparatively more difficult task which by the way helped lead to the development of solar power. So was the Manhattan Project that led to nuclear energy. However, because of the polarized political atmosphere in the United States in which conservatism has become gradually extreme since the 1980s and ignorant and dismissive of climate change and alternative energy and even what government has done in the past and can do presently as well as the current budgetary problems due to reckless government fiscal policies in the first decade of the 21st century, little as has been done. Ironically, the institutional conservative movement of the Reagan Revolution that started with conservatives mostly falsely blaming the economic crisis in the 1970s on liberal policies has culminated in the political polarization we have today that is hindering efforts to stem global warming and find alternative energy solutions.

    You can look at it for yourself. Every time the economy is showing growth, oil prices rises higher disproportiately in response to growing demand because of higher economic activity. It would knock down growth; continuing economic stagnation. It’s like the 1970s all over again, except it is more gradual, unlike the 70s when it was a sudden shock because of the Arab oil embargo (remember the long gas lines?), but this time it much more perpetual because we can’t simply import our way out of high oil prices like we used to. We had this much trouble in the 50 years because of our over dependency on oil. imagine what the next 50 years would be like if we stay on this current course.

    These are Reagan’s true legacies. That is why Obama is having a much tougher time now than Reagan did. While the 70′s oil shock was a big “death” blow that was remedied with more oil imports at the expense of alternative energy programs, the the economy is suffering from death by a thousand cuts.

  6. Tom says:

    Geraldine Weber,

    I agree that Bush years did see passage of the medicare supplement. It was actually a very “liberal” act. However, there were conditions that restricted the drug being used are to be from more expensive U.S. drug makers rather competing ones from Canada and Europe, making things more expensive for the customers and the taxpayers. Furthermore, Bush and the GOP Congress didn’t raise revenues to pay for the drugs. That’s one of the reasons why the country is such fiscal trouble today.

  7. Tom says:

    Who GOT us in this Energy Mess? Start with Ronald Reagan …

    Why did Reagan kill off alternative energy programs and research in the 80′s? Why didn’t Bush/Clinton revive?