The President is stomping across the country, including appearing on daytime television’s, The View, in full campaign mode. Obama’s narrative is that his economic policies are working with the following samplings of his claims:
July 2, 2010 – “Make no mistake, we are headed in the right direction. We are not headed there fast enough for a lot of Americans. We’re not headed there fast enough for me either.”
July, 8 2010 – “We’ve got a long way to go. But what is absolutely clear is we’re moving in the right direction.”
July 23, 2010 – “I want to talk about the progress we made today on three fronts as we work to repair the damage to our economy from this recession and build a stronger foundation for the future.”
While Obama’s talk sounds like great progress on the economic front, reality is quite different. Here are comments from people who have a real understanding of economics and our economy.
July 21, 2010, Federal Reserve Chairman Ben Bernanke – The economic outlook is “unusually uncertain.” … “We remain prepared to take further policy actions as needed to foster a return to full utilization of our nation’s productive potential in a context of price stability.”
July 29, 2010, Federal Reserve’s St. Louis Bank President, James Bullard – Bullard warns that the Fed’s policies were putting the economy at risk of becoming “enmeshed in a Japanese-style deflationary outcome within the next several years.”
July 30, 2010, CNN Money – The U.S. economy slowed in the second quarter, growing by only 2.5%. “The big surprise to me was in how weak consumer spending turned out to be,” said Nigel Gault, chief U.S. economist at IHS Global Insight.
Additional claims from the President that are directly contradicted include:
2010 – “Every economist who’s looked at it says that the Recovery Act has done its job“. OK Mr. President, here’s one from the “every” that disagrees: University of Chicago’s Harald Uhlig has estimated that there is $3.40 of lost output for every dollar of government spending.
2010 – “It is largely thanks to the Recovery Act that a second Depression is no longer a possibility.” Come on Mr. President, your own Council of Economic Advisers just estimated the stimulus bill’s effect on GDP at its worst was only 1%-2% in jobs. If correct, that additional unemployment increase would not have made a “second Depression”
The economy is faltering because the Stimulus money has been spent and its effect on the economy is running out of steam, as the graph shows. This was predictable as history has shown that one-time government injections into the economy do not create long-term economic benefits. However, this elixir of government spending is politically expedient and we should expect the President to request more Stimulus in the near future.
The President promised American that with his $787 billion Stimulus Package the unemployment rate would not exceed 8%. Not only did it go to 10% after the Stimulus, a year and a half later it remains at 9.5%. In the real world this is called a failed plan. In Obama’s world it is claimed a success.
It is unrealistic to expect President Obama to admit that his economic policies have failed, especially given the proximity of the upcoming November elections. The American people first need to speak at the elections and then maybe we can begin to undo the damage done to our economy by all of the governmental interventions. That assumes that the Republicans will be ready to lead, an optimistic assumption.
Let’s close with some sage words from economist Friedrich August von Hayek in his Nobel Prize Speech in 1974: “… this economic condition has been brought about by policies which the majority of economists recommended and even urged governments to pursue. We have indeed at the moment little cause for pride: as a profession we have made a mess of things.” ….