There is a lot of talk about Mr. Obama trying to run for re-election on anything except the economy, jobs, the federal deficit, the national debt, etc. All these have to do with his record in office. The Obama campaign would rather talk about the War on Women, contraception, gay marriage, Bain Capital, and any number of ancillary issues of only marginal interest to most voters. Who could blame them?
It is not entirely true, however, that Mr. Obama is not running on the economy at all. Certainly he avoids speaking of his stewardship of the economy over his nearly four years in office. That would be beyond even his political abilities. But he is running on small increments – what mathematicians like to call “deltas” – of economic activity when they seem to indicate positive directions for the economy.
Typically, these deltas are reports for a calendar month. Earlier in 2012 these reports looked positive, month by month, because the unemployment rate kept falling by a fraction of a point each time. This trend was touted by the administration as a signal that the economy was on the upswing – a claim most of Big Media unfailingly repeated.
At length, however, some reporters began to realize that the official percentage of unemployed workers was dropping not because of jobs being added, but because large numbers of unemployed workers were being subtracted from the overall worker population each month. This was because they had stopped looking for work. In the vernacular, they were called “discouraged workers.” Their subtraction from the worker population (i.e., the denominator of the employed fraction of workers) made that fraction increase – thus producing a progressively lower unemployed fraction.
Over the course of the Obama presidency, some 2 million workers have been eliminated from the worker population in this way. Economists estimate that their restoration to the worker population would produce an unemployed fraction between 10% and 11% instead of the current official figure of 8.2%.
The “code of silence” in Big Media on this “engineering” of the unemployment data was finally broken by Reuters when the news agency reported that the drop in the April unemployment to 8.1% was almost entirely due to the erasure of 342,000 workers from the official worker population. Other news outlets picked up the story, giving widespread public exposure to how an apparently lower unemployment measure has been reached, despite poor job-growth across the country.
In May, erasure of hundreds of thousands more workers could not save the Obama administration from a higher unemployment figure. Job growth was so low that the official unemployment measure actually ticked upward to 8.2%. The subtraction of discouraged workers from the official worker-population explains why the Obama administration’s story of an economy “on the move” has been at odds with public perception since 2009. Working people knew things were not getting better, but the official numbers seemed to say otherwise.
Now the public perception is vindicated, and the Delta Strategy is in ruins. The numbers-tinkering revelation has thrown the Obama re-election campaign into panic mode, both because of that revelation and because the economy is almost certainly slouching toward a second recession due to both international and domestic factors.
The European financial situation is exceedingly complex. You don’t see many attempts to reduce it to understandable terms because not many reporters understand it. I wouldn’t dream of trying to explain it – even if I fully understood it. What I do know is that the European Union has attempted to lash together a dozen and a half countries of disparate cultures and fiscal attitudes via a common currency. Some of these countries, like Germany, have the fiscal maturity to operate independently, and some do not. Several of the latter group have gone overboard on public employment – committing to lavish pay and benefits without proper accounting for where the money to pay them will come from. Deep recession has slowed their tax revenues to a trickle, creating a financial crisis.
Greece, for instance, wants a “bailout” of as much as $100 billion to keep its public and private sectors afloat. Spain appears to be next in line for similar assistance. As a condition of receiving this help, both countries will have to exert unaccustomed financial discipline on their public employees to rein in costs. The elements of that discipline are meeting with fierce – sometimes violent – resistance from public employees and students. In Spain, unemployment stands at 25%, with no real prospect of improvement anytime soon. Several other countries are in similar straits. The collapse of the Euro as a multi-national currency is a distinct possibility.
The source of the money for these bailouts is the 64 zillion-dollar question. Europe wouldn’t be Europe if it didn’t hope the United States would put up the money, but that seems pretty unlikely, since we are Tap City ourselves. Our public debt already exceeds our Gross Domestic Product, and is growing at 10% a year. We can’t pay our own bills. How could we possibly pay the EU’s? The uncertainty of the whole situation is putting a damper on the worldwide economic climate, including ours. This is one of the reasons why our economy doesn’t seem able to get off the ground. Mr. Obama is certainly right about it.
The more proximate reason for our economic stall, however, are the counter-growth policies of our Beloved Hope and Change president, who swept triumphantly into the Oval Office without anyone seeming to notice that his dossier of financial experience was extremely thin – nonexistent, really. Acolytes seemed to expect him to speak financial healing into being by the word of his mouth. (At the start of his term this was tried without notable result.)
It is now abundantly clear that Mr. Obama is a committed socialist who really believes that the federal government can “stimulate” the economy and create jobs by federal taxing and spending, and by borrowing the difference between income and outgo. He has increased the federal debt by 50% in just 40 months of his term – a new presidential record.
During the president’s 2008 campaign, a rally-spectator whom the media dubbed “Joe the Plumber” engaged Mr. Obama in a brief conversation where the latter unguardedly said he wanted to spread the wealth around – from people who had earned it to others who “needed it.” The protective media proceeded to mau-mau the questioner – an Ohio businessman named Samuel Joseph Wurzelbacher, who is now running for Congress – and cover up Mr. Obama’s revealing comment, but there is now no doubt that redistributing wealth is what his presidency is all about.
Spending borrowed money can produce some jobs – usually at tremendous cost – but experience shows that they will not be long-lasting private-sector jobs that build a robust economy. Mr. Obama’s fixation on this represents a profound misunderstanding of how an economy actually works. It can expand and move into high gear only when private businesses expand their commerce and hire more employees. Jobs are the byproduct of business activity, not the objective of that activity. Not in my lifetime have we had a president who seemed so fundamentally to miscomprehend this economic principle.
His fixation on spending public monies to “grow” the economy has caused Mr. Obama to be equally fixated on raising taxes – despite widespread understanding, even within his own party, that raising taxes during a recession is a no-no of the first water. Mr. Obama wants the so-called Bush Tax Rates to expire at year-end for people who earn over $200,000 a year – as a condition for extending those rates for earners of lower incomes. He appears prepared to let the rates revert to pre-2000 levels for all income levels, unless Republicans agree to his conditions.
Economists say this would send the economy over a cliff, but Mr. Obama sails serenely onward, playing his game of “chicken” with the nation’s economy – advocating more programs and more spending to energize key constituencies to vote for him. He evidently wants to go where Greece and Spain are now. In terms of deficits and the national debt, we’re already halfway there.
There is more to say about Mr. Obama’s disastrous energy policies, for example, whereby he intends to send energy costs sky-high, discourage the use of fossil fuels (especially in cars), destroy the coal industry, and create a new industry of “green jobs.” He has poured billions of taxpayer dollars into the latter, only to see many of his pet projects fail. Gasoline has doubled in price over his term, causing real hardship among the people of lesser means that Mr. Obama claims he is “fighting for.”
Without question, all this has created a climate of deep uncertainty across the country that is inimical to economic expansion. A child could see this. By some economists’ estimates, businesses are sitting on upwards of $2 trillion that they refuse to invest in business expansion unless and until the taxation picture is clarified. In a nutshell, this is why business is becalmed.
The Delta Strategy was Mr. Obama’s last best hope for delivering good economic news in the run-up to the election – chimera though it was. Its collapse has caused a deep gloom to fall over his campaign. Desperate situations sometimes cause desperate men to take desperate measures. What might those measures be for the Obama campaign? My crystal ball is broken, but experience tells us anything is possible. Stay tuned for developments. And keep your powder dry.