June 7, 2011

Obama's economy is a failure

These are just bumps on the road to recovery.  Really?

President Obama, it's your economy now.  You've been President for nearly two and a half years.  The lack of success is your own.  You own it.  You can't go back to blaming Bush or the Republicans.  For two of those two and a half years, you've had free reign with friendly Democrat legislative branches.You've not only not pulled the economy out of a major slump, you've managed to lengthen it and threatened to cause a double dip recession.  In the process, you've managed to demoralize a large segment of the business sector. You've managed to choke off your chances of a solid recovery before 2012. Congratulations.

If you are a small, medium or even large business, right now you aren't doing much hiring. That isn't surprising. While you are supposed to be the driver of hiring right now you can't and it would be foolish to try. Rising unemployment is far from unexpected no matter what the media says. Keynesian solutions don't work, especially when the government can't afford to fund them. They are not a recipe for success, simply a recipe for mitigating a problem, and even then, they only work if the government is in a financial position to attempt them.  Years of government budget surpluses prior to a stimulus, might provide cover for the decision, but even then, the proposition is still at best debatable. In this case, they did produce a temporal effect but it was far too small and far too short to recover the economy.  That's why the idea of stimulus II was bandied about before being dismissed as politically impossible.

What impact has this approach had on the private sector, which represents the lion's share of the economy? Well firstly we have to consider the fact that the stimulus wasn't done in isolation.  Other decisions the Obama White House made also had an impact.

If you can't get an exemption from Obamacare, you now have a higher cost of employing an employee. New hires make less economic sense than they did before Obamacare. Offshoring jobs makes even more economic sense than before too. This is an example of where the President's priorities have superseded the needs of the jobless in this country. The new law makes hiring new staff unattractive. It is a disincentive to hiring. It also makes existing staff more expensive. That pushes inflation. The only way out of that trap for the President is to go to single payer health care and remove the economic burden from businesses and put it instead on taxpayers, present and future. That's toxic and it's not going to be mentioned, at least not unless he gets re-elected in 2012. Then it could 'unexpectedly' become part of his recovery plan. The President is in a position where he has to hope the economy picks up in a big way in the next 18 months because he can't pull any more levers that he's willing to pull. It won't recover though, because there's more damage he's done.

Inflation while hidden is here already. Consumers feel it even though it's reportedly still low.  It's driving up costs and therefore driving down demand.  People draw a wall around food, shelter, medicine  and if possible transportation. Roughly in that order. If you make or sell something else, demand is down. Yet that same inflation drives your costs up. Your margins get squeezed and you can't afford to hire.

Oil prices, a major component in inflationary pressure, are seen as being beyond America's control. It pretty much is, short of dramatically increasing domestic energy supply. Obama is nibbling at the margins with solar and wind power when what is needed is a massive push to increase domestic oil, coal, natural gas and nuclear power. Democrats have a distaste for all of those, Obama seemingly in particular. Once again, an Obama decision is driving the current state of affairs. While Democrats can argue (fairly or unfairly) that they didn't cause this mess they cannot argue that they have solved it. They cannot argue well, that they haven't worsened it either.  While committing to more domestic energy would not have solved the problem immediately, it would drive perception.  And if it had been started in 2009, we'd be much closer to realizing the benefits of those decisions. That was never in the cards in 2009.

Worst of all that massive deficit-funded stimulus and the doses of quantitative easing have buoyed the inflationary pressures.  All that spending did was temporarily boost employment and as the funding dried up, the Democrats could not keep up with the situation and have served only to exacerbate it - in a big way. 

Obviously this is an oversimplification of the details, but clearly Obamacare, deficit spending, the transient nature of the stimulus package (ARRA, pronounced 'ERROR'),  and the distaste for energy independence have all contributed to the national debt, unemployment and the hidden inflation all plaguing the recovery efforts. Obama's economy is a failure.  It's time everyone starts calling him on it.

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