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 thereâ€™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 â€” anemic growth, endemically high unemployment and record poverty.
What is the presidentâ€™s big idea? Raise taxes on small business. What is he campaigning on? Mitt Romneyâ€™s tax returns. Whatâ€™s his major rhetorical thrust? Businessmen shouldnâ€™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 â€” and Obamaâ€™s reelection â€” 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 UAWâ€™s pockets. Letâ€™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 NASAâ€™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 bankruptcyâ€”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 sterilizationâ€”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.