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.

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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.

"'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)

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"?)

So, what does this mean for the economy?

It means that things are going to get worse, much worse, because wages are flat-lining, credit creation is in the dumps and the velocity of money has collapsed. So, where's the money going to come from to stimulate activity to keep the economy growing?

Nowhere. Here's how Nouriel Roubini summed it up in a recent article on Project Syndicate:

"...the first-half growth rate looks set to come in closer to 1.5% at best, even below 2011's dismal 1.7%. And now, after getting the first half of 2012 wrong, many are repeating the fairy tale that a combination of lower oil prices, rising auto sales, recovering house prices, and a resurgence of US manufacturing will boost growth in the second half of the year and fuel above-potential growth by 2013.

"The reality is the opposite: for several reasons, growth will slow further in the second half of 2012 and be even lower in 2013 -- close to stall speed." ("American Pie in the Sky", Nouriel Roubini, Commentary, Project Syndicate)

Look; there's no reason for 8 percent of the workforce to be unemployed four years after the market crashed. In a balance sheet recession -- where households are forced to reduce their spending to repair their balance sheets -- the government has to increase its deficits and spend more money. Everyone knows this. If the government fails to spend, the economy tanks, retail sales fall, factory output declines, jobless claims soar, consumer confidence plunges, business investment drops and the economy slips into a coma.

Isn't that what's happening?

Of course, it is. The way to kick-start the economy when demand is weak, is through government spending. This isn't even a controversial point. It's the way we've always done things in America. (until recently that is) When the private sector CANNOT spend, the public sector MUST spend or the the economy grinds to a standstill. It's that simple. Focusing on the deficits when the economy is in a tailspin is like watering the outdoor plants while the house burns down. It's madness.

Besides the deficits are meaningless in a Depression. Have you looked at yields on the 10-year Treasuries lately? They are presently stuck at 1.49%, lower than the current rate of inflation, which is to say that when you buy government debt, you get less money back (inflation adjusted) than you put in. That's just more proof that we are in a Depression. The credit markets are essentially dead. There's no need to worry about the "bond vigilantes" (pushing up yields) when money is cheaper than it's ever been in history.

Obama's advisors know what's going on, they're not idiots. The reason they don't address the problem with reasonable, traditionally-accepted Keynesian remedies is because those remedies don't fit with their political objectives, which are to dismantle the welfare state by sustaining a crisis atmosphere where they can justify imposing structural adjustment on the country. That's the real goal.

So, what would Obama be doing if he was serious about getting the economy up-and-running?

Well, for one thing, he'd take a few pages out of FDR's Depression handbook and hire more public workers, that would be a good start. Here's a clip from an article by economist Marshall Auerback who details some of the programs that Roosevelt implemented:

"[Roosevelt's] government hired about 60 percent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York's Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown. It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country's entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock." ("No Return to Normal," James Galbraith, Washington Monthly)

Or Obama could do what Paul Krugman recommended and spend another $300 billion per year to rehire the 650,000 teachers and other state and local public workers who've been laid off since the crash. The money spent on those jobs would more than pay for itself by recycling through state coffers via higher revenues increasing the velocity of money into the real economy and boosting activity by many orders of magnitude.

Have you seen a graph of how many government jobs have been lost under Obama? It's shocking!

Take a look...

We need to get these people back to work so they can feed their families and pay the bills. If we can afford $11 trillion to bail out crooked Mafia-bankers, we can certainly afford a measly $300 million for hard-working middle-class families. It's just a matter of priorities.

Did you know that things are going to get worse for the states after the election whether the economy picks up or not? Here's the rundown from the New York Times:

"The fiscal crisis for states will persist long after the economy rebounds as they confront rising health care costs, underfunded pensions, ignored infrastructure needs, eroding revenues and expected federal budget cuts, according to a report issued here Tuesday by a task force of respected budget experts...

"'The ability of the states to meet their obligations to public employees, to creditors and most critically to the education and well-being of their citizens is threatened,' warned the chairmen of the task force, Richard Ravitch, a former lieutenant governor of New York, and Paul A. Volcker, a former chairman of the Federal Reserve. ....

"Washington's focus on deficit reduction -- with big budget cuts scheduled for after the fall election -- has made cuts to state aid inevitable, many governors believe.

"If federal grants to the states were cut by just 10 percent, the report said, the loss to state and local government budgets would be more than $60 billion a year -- nearly twice the size of the combined tax increases that states enacted during the fiscal crisis from 2008 to 2011...States have not set aside enough money to cover the health and retirement benefits they owe their workers." ("Gloomy Forecast for States, Even if Economy Rebounds," New York Times)

Doesn't this whole thing sound like a plot that's been worked out by the greedy MFs who run the system?

I mean, this is just like Europe, isn't it; where all the losses from the financial crisis have been shrugged-off onto working people who are now expected to give up the meager programs that make it possible to get the drugs they need to stay alive or to nab a few bags of groceries to keep them from dying on the streets?

Be realistic. Obama's not going to get us out of this mess. That's a pipe dream. If we don't get it together and figure out a way to fight back, we're going to be up the creek for the next 100 years or so.

Authors Bio:

Mike is a freelance writer living in Washington state.