This morning as I was getting ready for work, I was welcomed by our omnipresent President (nice to see him back in Washington, D.C.). He was giving a press conference on the ills of the European debt crisis, what they should do, and what the US should do about it. While I’ve always been aware that President Obama is an economic light-weight, President Obama made three comments this morning that gave me serious pause and should concern any voting American as well. These three comments show us exactly how little he understands what peril his big-government agenda will do to the American economy.
2nd Runner Up: What Europe is going through is the same as what we had to deal with in 2008-2009
I don’t have the exact quote for this line since at the time of writing this the official transcript was not available, but this is roughly what Obama said.
In 2008, the American economy hit a wall because bad private debt (mostly in the form of sub-prime home mortgages) seeped uncontrollably and unnoticed into the general financial market. When the housing bubble burst all of this bad debt became toxic and the market on which to sell it froze. The root of the American financial crisis lies within the housing bubble of the late 1990’s and early 2000’s (who to blame for the bubble and its related effects is another discussion).
The European debt crisis is solely the result of ballooning government deficit spending over the course of decades of welfare state building. True, it has serious implications within the private financial markets, but the underlying problems lies solely with how European governments constructed their social welfare states over the last generation – economies based on government spending and not on private productivity, innovation, and growth.
The two problems are not the same. And what is worse, Obama does not appear concerned that the United States is barreling toward a European-style problem. The CBO released its long-term budget outlook earlier this week and assuming current policies remain in place, its analysts determined that by 2022 debt as a % of GDP would reach 90% and balloon to 200% of GDP by 2037. This projection doesn’t even account for the slowing effect debt accumulation has on economic growth, which most economists would happen around the 100% mark. By comparison, in 2010 (roughly when the European debt crisis really started hitting the news), Greece’s debt as a % of GDP was 144.9%, Italy’s was 118.4%, Ireland’s 94.9%, Portugal’s was 93.3%, and Spain’s was 61%. If the White House continues to think the two problems are the same, we can quickly find ourselves in a similar situation Europe does making the solution to the problem even more difficult. We should be addressing the issue now when the solutions are more palatable.
1st Runner Up: “The fact is job growth in this recovery has been stronger than it was in the last recession.”
This is just FALSE. According to the NBER, the Early 2000’s recession began in March 2001 and ended around November 2001. The Great Recession began in December 2007 and ended in June 2009. Let’s compare the state of the economy roughly 3 years from the month the NBER determined the recession ended.
In November 2004, unemployment stood steady at 5.4% and non-farm payrolls had increased by 112,000 since the previous month. Unemployment for men was 4.9%, women: 4.8%, teenagers: 16.6%, Hispanics: 6.7%, African Americans: 10.8%, and white: 4.7%. The labor force participation rate was 66.7% with only 392,000 discouraged workers. Total non-farm payroll stood at 132.1 million (out of 224,422 million in the civilian non-institutional population).
In May 2012 (the latest month when numbers are available from the BLS), unemployment rose to 8.2% (from 8.1%) with non-farm payrolls increasing only 69,000 from the previous month. Unemployment for men was 7.8%, women: 7.4%, teenagers: 24.6%, Hispanics: 11%, African Americans: 13.6%, and white: 7.4%. The labor force participation rate was 63.8% with a whopping 830,000 discouraged workers. Total non-farm payroll stood at 133,009 million (out of 242,955 million in the civilian non-institutional population).
True, the Great Recession was a worse recession than the Early 2000 recession, but the rule of thumb is the steeper the recession, the steeper the recovery. Most economists view this recovery as the slowest since the Great Depression. We can debate why that is the cause, but the facts remain, this recovery IS NOT stronger than the last.
The Winner: “The private sector’s doing fine.”
When answering a reporter’s question, President Obama made this outrageous comment. Coming off the horrible May jobs report (some of which was noted above), this statement is just pure ridiculousness. If the private sector is doing just fine, why is unemployment stuck above 8% (has been above 8% since February 2009), why are 23 million Americans struggling to find a job, and why are small businesses deciding against expanding? If the private sector is doing just fine, why is this the slowest recovery since the Great Depression?
If President Obama considers this economic environment a success and just fine, then it is no wonder that all he is concerned with is more government spending, regulating, and taxing. It is apparent that President Obama has little regard for private industry and continues to see government as the solution to the ills of the world. Considering the fact that the economy is basically the aggregation of private industry, maybe the President would be better served if he focused his energies on actually helping the private sector, instead of considering his approach to be working just fine.
While I’ve already come to the decision that new leadership is imperative in Washington D.C., I hope this morning’s press conference helps to convince other voting Americans the same.