Economic Woes - August 2010

In 1980 Ronald Reagan defeated Jimmy Carter by talking about the “misery index” which highlighted Carter’s failed economic plans. In 1988 Bill Clinton defeated George H.W. Bush by focusing on the message “it’s the economy stupid!”

This coming November the Republicans should easily gain seats in the US Senate and US House of Representatives by simply asking “how’s that change working out for your wallet?”

The American public has come to realize that the Obama economic plan has not worked but, worse, has put our country in a grave financial condition for the years ahead. President Obama has amassed two trillion dollars in debt for our country in less than two years since he took office.

And that debt total does not include the complete – and still unknown - implementation cost of ObamaCare which the non-partisan Congressional Budget Office has recently acknowledged will be at least one trillion dollars over ten years.

Obama’s so-called Summer of Recovery celebration is turning into a public relations nightmare for his administration as it continues to tell the American public it created or saved 3 million jobs while at the same time trying to dodge the fact that more than millions of jobs have been lost since the beginning of 2009 when he took office.

Many pundits are very concerned about next year when the Bush tax cuts implemented in 2001 and 2003 will automatically expire if Obama does not agree to extend some or all of them. It is being reported that many businesses are working hard to front load next year’s sales into this year to avoid the higher taxes so if you believe the stock market is based on an earnings multiplier, you should be very worried about next year when earnings could be notably lower.

So what should Obama do to get the private industry economy booming again as opposed to focusing on just growing government jobs? Of course, he could follow the wisdom of House Speaker Nancy Pelosi, who said that unemployment benefits are among the best ways to create jobs, and shoot for a 15% national unemployment rate.

Unfortunately, there is no easy answer for Obama. Much of the private economy is dependent on financing but such will be become tighter and more expensive thanks to the recently passed Dodd-Frank Financial Overhaul Bill. And the still unknown implementation details of ObamaCare are continuing to cause pauses in hiring efforts as business simply do not know how much to budget for healthcare anymore.

In past columns, I had predicted that normal 7 year business cycles would eventually turn positive as built-up consumer and business demand for goods and services kick started the economy. While we are seeing some signs of that in the technology industry, most other industry segments continue to be flat. There is just too much uncertainty because of so many regulatory changes and fees being created by Obama at the same time.

Alan Greenspan, the former Federal Reserve Chairman, recently said he is so concerned about the national debt and budget deficit that it would be unwise for Congress to consider extending the Bush tax cuts. His predecessor, Paul Volcker, has stated that a national sales tax being pushed by leading Democrats may be needed to generate sufficient revenue to cover the crushing government debt being added by Obama.

Wow! For those of us who believe that lower taxes provide the necessary capitalistic incentive to produce and profit, we may not have an opportunity to again prove that strategy unless the Republicans take back control of Congress this coming November and Obama joins that job creating unemployment line in 2012.

President Obama has always admired European society and even visited several European countries in 2008 during his American presidential campaign to bask in their supposed love for him. What is so ironic now is that Obama is trying to remake our country’s economy like European socialism while most European countries are reshaping their economies to be more like ours used to be.

Hopefully American voters will show up at the polls this November and get rid of all of the big government Democrats and Republicans in Washington and put an end to this craziness.