Recent data on retail sales, factory output, jobless claims, consumer confidence, business investment and existing home sales show that the US economy is decelerating and may be headed for recession. The Obama administration was been warned repeatedly that activity would slow when the $800 billion fiscal stimulus ran out (The American Recovery and Reinvestment Act) and net government spending became a drag on growth. And this is exactly what has happened. As it turns out, Krugman, Reich, Stiglitz, Thoma, Baker, Galbraith and others were right, and Obama's economic advisors were wrong. The costs to the country in terms of high unemployment, soaring food stamp usage, declining standards of living and outright destitution are likely to be considerable due to Obama's poor judgement.
Not everyone in the Obama administration got it wrong. Christina Romer for example figured that it would take $1.8 trillion to shrink the output gap and to put millions of unemployed Americans back to work. Here's the story from Huffington Post's Sam Stein:
"...members of the president's economic team felt that if they were to properly fill the hole caused by the recession, they would need a bill that priced at $1.8 trillion -- $600 billion more than was previously believed to be the high-water mark for the White House.
"The $1.8 trillion figure was included in a December 2008 memo authored by Christina Romer (the incoming head of the Council of Economic Advisers) and obtained by Scheiber in the course of researching his book.- Advertisement -
"'When Romer showed [Larry] Summers her $1.8 trillion figure late in the week before the memo was due, he dismissed it as impractical. So Romer spent the next few days coming up with a reasonable compromise: roughly $1.2 trillion,' Scheiber writes." ("The Escape Artist: Christina Romer Advised Obama To Push $1.8 Trillion Stimulus," Sam Stein, Huffington Post)
The idea that Summers rejected Romer's plan as "impractical" is pure public relations. More likely, Summers had a different agenda altogether. What he wanted was exactly what he got, a slow, under-performing economy with high unemployment and huge deficits. The soaring joblessness would allow employers to crush organized labor, while the bulging deficits would be used as a justification for hacking away at Social Security, Medicare and Medicaid. This is what big business wants, which is to say, this is what Larry Summers and his Wall Street colleagues want.
As for Obama, well, he probably figured that his $800 billion fiscal package would be big enough to get him through the 2012 election-cycle, but not so big that it would spur the strong recovery that he promised, mainly because he didn't really want a strong recovery. He wanted was the same thing as Summers, a justification for putting the middle class on a crash diet so that more money could be diverted to his 1% constituents.
So, here we are four years after Lehman Brothers defaulted and the economy is headed for the shitter. That's just great. Here's a quick summary from Comstock Partners:
"...The evidence of a slowdown has become so overwhelming that it is difficult to avoid the conclusion that we are headed for a recession....
"Retail sales ... have dropped for three consecutive months. This has happened only five times since 1967 -- four times in 2008, and one now. ...Consumer confidence for both the Conference Board index and the University of Michigan Survey are at their lowest levels of 2012....
"June payroll numbers were weak once again and averaged only 75,000 in the second quarter. The latest weekly new claims for unemployment insurance jumped back up to 386,000 and the last two months have been well above the numbers seen earlier in the year.
"The ISM manufacturing index for June fell 3.8 points to 49.7, its first sub-50 reading in the economic recovery. The ISM non-manufacturing index for June dropped to its lowest level since January 2010. Most recently the Philadelphia Fed Survey for July was negative (below zero) for the third consecutive month.
"The small business confidence index declined in June to its lowest level since October and has now dropped in three of the last four months. Plans for capital spending and new hiring have dropped sharply.
"Despite all of the talk about a housing bottom, June existing home sales fell 5.4% to its lowest level since the fall of last year. In addition mortgage applications for home purchases have been range-bound since October.... The ECRI Weekly Leading Index is indicating a recession is either here now or will begin in the next few months." ("Evidence of Coming Recession Is Overwhelming," Comstock Partners)- Advertisement -
So, it's all bad, right, which is why Obama would rather talk about Bain than the economy; anything to divert attention away from the three things that Americans care about most -- jobs, jobs and jobs.
And what is Obama doing about jobs?
Not much. And for you folks who think that "Republican obstructionism" is preventing Obama from becoming the next FDR, well, not everyone sees it that way. In fact, a lot of people have arrived at the same conclusion as me; that Obama isn't really a progressive at all; that he actually dislikes liberals who he regards as schmucks, wimps and losers. (Remember, the "professional left"?)