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Ah, another indication that Wash DC is really out of touch. A “vastly improved” economy has produced an unemployment rate of 9.2%, plummeting home prices, declining housing ownership anxiety and plenty of pain and the President owns it all.
White House Press Secretary Jay Carney: “Well, two things remain incontestably true. The economy is vastly improved from what it was when Barack Obama was sworn into office as president.”
But as any sentient being knows, that is hogwash. In fact the raw numbers tell the story:
As pointed out in the New York Post,
“Here are the unvarnished numbers, courtesy of economist Lacy Hunt:
“In the three years 2009, 2010, 2011, US federal spending was an astounding $2.2 trillion more than in the three years ending 2008.” The deficit in the first three years of the Barack Obama administration will total 28.3 percent of GDP, versus 6.3 percent the last three years President Bush was in the White House.Looked at another way, if the Obama-era spending increases had just been cut in half to, say, $1.1 trillion extra, the president wouldn’t have had to even face a debt-ceiling debate until a second term.”
And the credit rating of the US would not be threatened with a downgrade.
Obama blames Bush for massive spending, deficits and debt, yet never seems to connect his own spending programs as the cause.
Yet recently in the WSJ (here) that argument is put into perspective:
Mr. Obama blamed President George W. Bush’s “two wars” for the debt buildup. But national defense spending was 7.4% of GDP and 42.8% of outlays in 1965, and only 4.8% of GDP and 20.1% of federal outlays in 2010. Defense has not caused the debt crisis.
A curiously convenient mental oversightgiven his alleged intellect and given the time elapsed since his election. Yet a potential credit downgrade seems to be just around the corner? Since January 2009 GDP increases have been driven primarily by massive government spending and deficits. In just two years between January 2009 and January 2011, the US Gross Domestic Product rose from $14 Trillion to $15 Trillion or a seven percent increase. Between January 2009 and January 2011 the Obama Administration incurred cumulative deficits of $2.7 Trillion (and plans another ~$1.7 Trillion in deficits over 2011) and increased the debt by a comparable amount in an attempt to stimulate economic growth. So explicitly, the Federal Government incurred budget deficits of $2.7 Trillion (19% of GDP) to generate a 7% growth in GDP and yet unemployment still climbed.
THE NUMBERS:
GDP Increases driven primarily by massive government spending. (here)
Gov Income & Expends: (here)
Percentage of GDP: (here)
Unemployment stands at 9.2% in June 2011 and is currently rising, compared to a 7.6% rate when Obama took office in 2009 (here). Anemic job growth over the past two and a half years has resulted in 14.1 million unemployed Americans compared to 11.4 MM unemployed in January, 2009 or a 24% increase. Additionally in 2011, some 8.6 million Americans are employed in part time capacity and 2.7 MM are classified as marginally attached to the labor force by Department of Labor since they want work but have given up HOPE according to the July 8 2011 Report. (here).
Recent unemployment numbers are on an upswing with recent mass layoff announcements from major employers like Cisco, Lockheed Martin and Borders adding 23,000 to the ranks of the unemployed (here)..
Further uncertainly is created by Federal initiatives like DOL’s actions against Boeing in South Carolina. And the massive changes scheduled in the Medical Industry under Obamacare will likely result in added volatility in the job market, especially when fully implemented in 2013. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, who reports that prominent among the hurdles to hiring “is the lack of clarity about the cost implications of” ObamaCare. Lockhart goes on to say about job generating small businesses, “We’ve frequently heard strong comments to the effect of ‘my company won’t hire a single additional worker until we know what health insurance costs are going to be.” (here).
The most recent CPI inflation rate stood at 3.6 percent rate year to date. The core consumer price index posted a month-to-month rise of 0.3 percent in June or an annual rate of 3.6%, the largest since May 2006. However, the increase in core CPI stood at 2.4% YTD (here). As we go to press, it has been announced that the core rate of inflation has now increased to 2.1% per annum year over year, above the Federal Reserve’s upper target limit of 2%. (here). The inflation rate in January, 2009 was 0%. (here). 2008: (here). 2011: (here).
And to the bane of most consumers energy costs have led the way with energy prices up 20% this year to date and the cost of gas has doubled since January, 2009 when Obama took office when the price was $1.85 per gallon (the one promise he has kept). This year auto prices have increased 8.4% and the price of an airline ticket have ascended 13% YTD.
Remember the misery index summing the unemployment and inflation rates? CNBC announced that it stands at the worst level since the early 1980’s. (here). It’s such a pervasive notion that a rock group has taken on the name!
In January, 2009 the misery index stood at 7.6% unemployment + 0% inflation or 7.6%; June, 2011 it stands at 9.2% unemployment + 3.6% inflation or 12.8%. But relax, the misery level is only 68% higher than in Jan 2009. And all this despite lower housing prices and rising unemployment. Vastly improved?
And housing prices the primary source of most American’s wealth have declined 30% since 2006. Contributing to the housing decline, home financing which is now nearly exclusively limited to Fannie Mae, Freddie Mac and the FHA, is down 60% from 2007 levels to $1 Trillion annually; with activity primarily limited to refinancing and minimal purchase financing which is generally either financing of distressed sales or all cash investor purchases. Housing inventories are significantly higher with loans defaulting or in process of foreclosure estimated at nearly 6 million homes nationwide. High available housing inventory supply levels are increased by the Administration’s HAMP, Hope Now programs which prolong resolution of the foreclosure process and cause a potential housing supply overhang on the market. Standard and Poor’s and other sources now estimate that there is a 4+ year inventory on market.
Shiller predicted up to a 20% price decline last Fall (we are down 5% – 10% nationally since) is predicting a further housing price declines and the possibility they will lease to a double dip recession. “Robert Shiller said the recent uptick in unemployment is not yet enough of a sign as to which way the recovery is heading. But if unemployment continues to rise in the coming months, it could suggest another recession.” And, “My gut feeling is we might see a continuation of the decline” in home prices, Shiller said earlier Thursday at a Standard & Poor’s housing summit. He added that a 10 percent to 25 percent slump in real home prices “wouldn’t surprise me at all,” though he cautioned that was not a forecast.” (here) and (here) And reinforcing his concern, sales of previously owned U.S. homes unexpectedly fell in June to touch a seven-month low at an annual rate of 4.77 million units. June existing home sales dropped 8.8 percent year over year. (here).
Not surprisingly Consumer, Investor confidence is dropping dramatically according to Rasmussen. (here). This was reinforced by Friday’s release of the Thomson Reuters/University of Michigan’s consumer sentiment index which came in at 63.7, an 11% decline from June and the lowest reading since March 2009 (here).
And who can blame consumers for their funk, since their personal income increases have failed to keep up with inflationary pressures from food and energy over the past two years despite the fiscal and monetary stimulus. (here). Disposable income stagnation has also forced increasing numbers of Americans to seek Federal assistance from programs like unemployment insurance and food stamps. The USDA reports that the total number of Food Stamp recipients has increased from 28 Million in 2008 to an estimated 40 million in 2010, over a 40% or $30B increase in just 2 years (here).
Why is the individual suffering under the Obama Administration’s two and a half year old tenure? Wall Street Economist Lacy Hunt stated tin the NY Post,
“Why didn’t the massive federal stimulus work, and why is it the last thing we need more of in the summer of 2011? Hunt, long one of the best economic forecasters on the Street, puts it succinctly: “In the broadest sense, monetary and fiscal policies have failed because government financial transactions are not the key to prosperity. Instead, the economic well-being of a country is determined by the creativity, inventiveness and hard work of its households and individuals.” (here).
So this “Vastly Improved” economy is better for whom – Washington, DC, Wall Street, or Main Street? To anyone watching the spectacle in Washington, DC over the past week, it is obvious that the political class has little clue what the average American thinks. And the Administration spokesperson’s lack of understanding of the suffering of most Americans simply accentuates that ignorance. But then in Washington DC where housing prices have resisted the national housing price declines and where business as usual promotes limousines, free flowing food and drink insulates the political class from recessionary and inflationary pressures that plague main street, one can understand their lack understanding of the economy. But 2012 provides voters with an ideal opportunity to assure that most Washington DC politicians can receive a first hand lesson in impacts of unemployment and recession!
Tell ’em where you saw it. Http://www.victoriataft.com
Obama blames Bush for massive spending, deficits and debt, yet never seems to connect his own spending programs as the cause.
