Special props to “Elcymoo”, a companion traveler on the left, who brought the data that follow to your blogger’s attention. Any lapses or errors in the subsequent analysis are mine and mine alone. The numbers to be presented tell a story, but not the whole story and that is why some critical commentary is also needed.
“Five and One-Half Years of Obama: Where are We Now? (1)
January 1, 2009 “Today”
1. Dow 7,949 17,094
2. Unemployment 7.8 6.1
3. GDP Growth -5.4 2.5
4. Deficit : GDP 9.8 2.5
5. Consumer Confidence 37.7 81.3
The five metrics shown above are certainly key indicators of an economy’s well being and clearly, they all point in a positive direction. Are we better off now than when President Obama took office? The answer is “Yes”. But those same numbers, when delved into, reveal just how “soft” our recovery has been and remains. So, let’s take each measure and do some “drilling”.
1. The phenomenal increase in the Dow has been fueled, as much as anything, by two critical variables: historically high corporate profits and the availability of the “free money” that has been created by the Federal Reserve’s “Quantitative Easing” program. As regards the latter, in order to put life into an economy that was deep into a recession, the Fed began pumping money into it. Because the Fed has no authority to dictate where and how the money should be spent, it was snapped up by investors who plowed it into the equity markets. Notice that the money did not belong to the investors; hence the term “free”. The investors simply got to play the market with the government’s money. Make no mistake – that is not the way it should work. Acknowledging that months ago, the Fed began to cut back on its easing. To date, that reduction has not had an appreciable effect on the Dow which remains at an all-time high.
2. Unemployment has dropped in spite of the fact that the public work force has shrunk! That means that job creation has occurred precisely where it should; i.e. in the private sector. But, too many of those jobs are relatively low paying. So, the reality is that we have not yet seen a return of the better paying positions that were part of the economic boom that occurred during the Clinton presidency. Not only must that 6.1 figure descend further, we need to see the reappearance of higher salaried jobs.
3. The two numbers shown reflect a 7.9 reversal of the GDP from negative territory into the positive; a big change! That said, the fact remains that a GDP of 2.5 hardly signals a robustly functioning economy. We can feel a lot better when the GDP lifts to double its present level.
4. This ratio reflects how much of our GDP is being consumed by the cost of running a federal deficit (e.g. paying interest on our debt). The change here is both remarkable and positive. The change from 9.8 to 2.5 indicates that the deficits that we continue to run, are costing us less of our wealth which basically, is what GDP measures. Why has that happened? The answer resides in two developments; i.e. cuts in government spending combined with an increase in revenues flowing into the US Treasury. Simply put, we are expending less while taking in more. Hence, we need to borrow less which results in lower financing costs. In the best of all worlds, this trend would be sustained until outlays are equaled by income such that there is no deficit spending. The likelihood of this happening is very much in doubt. That is because temporary spending cuts that have been in place have lapsed or will end (2) and tax policy is always up for debate with Republicans constantly trying to lower rates while refusing to close corporate loopholes and subsidies. We need a sustained policy of judicious cuts in spending coupled with targeted spending that promotes job growth, otherwise energizes the economy, and tax reform.
5. Consumer confidence essentially reflects the willingness of people to spend their money, especially on “big-ticket” items like homes, cars and major appliances. The significant uptick in this metric points towards consumers’ belief that our darkest days of the recession are behind us and that the mindset of hanging onto every spare dollar is no longer necessary. A rise in consumer confidence typically goes hand in hand with an increment in discretionary spending. Among all five of the metrics, this is the one that bodes well for the continuation of our recovery as nothing boosts our economy like healthy consumer spending.
Even with the caveats cited above, the numbers provided put to lie conservatives’ claims that there has been “no recovery” and that Obama’s economic policies have been an unqualified failure. We are on a better path and the president deserves credit for putting us there. We aren’t where we need to be but we have a good chance of continuing to move in that direction if the GOP-controlled House finally decides to abandon their obstruction and offer concrete and positive adjustments to what the president puts on the table. Just saying “No” is neither policy-making nor governing.
1. D.C. Cherry; 5 1/2 years of Obama: Where we Are Now. The Daily Kos; July 23, 2014.
2. The cuts that that have ended or will end were part of what came to be known as the “sequestration”.