In 2008, President Barack Obama was elected into one of the worst economic disasters since Franklin Roosevelt stepped into the Oval Office. The United States economy was shedding approximately 800,000 jobs per month. Home foreclosures were skyrocketing and the stock market plummeted. From continuing the Troubled Asset Relief Program (TARP) and the Recovery Act, to the emergency bailout of General Motors and Chrysler, policies pursued by the Obama administration and the Federal Reserve put a floor on the recession and returned the economy to sustained growth. The GDP growth rate turned from negative 5.3 percent during the first quarter of 2009 to positive growth by the third quarter. Today, the unemployment rate is lower than it has been at any point during Obama’s term in office led by 31 consecutive months of private sector job growth. The stock market indices more than doubled from their low point, observed just six weeks after Obama took office. Corporate profits of the Fortune 500 reached an all-time high in 2011 and consumer confidence is now higher than it has been at any point since 2007. The housing market is recovering, with home prices, sales, and construction rates rising significantly in 2012. Even though the Obama administration’s handling of the economy has not been flawless, their accomplishments have been impressive given unprecedented partisanship in Washington.Read more
When President Barack Obama took the oath of office on January 20, 2009, the U.S. economy was in free fall. During the preceding year and half, some of the nation’s largest and most important financial institutions went bankrupt, including Bear Stearns, Countrywide, and Lehman Brothers, as risky loans and other investments failed. Many other large banks were on the verge of collapse. The downfall of the financial sector had been preceded by a spectacular end to a massive speculative housing bubble that almost instantly wiped out trillions of dollars of Americans’ net worth. When Lehman Brothers and AIG went into bankruptcy during the same weekend in September 2008, panic ensued all across the economy. It felt like 1929 all over again. The Troubled Asset Relief Program (TARP), which was signed into law by President George W. Bush and was implemented by President Obama, stopped the bleeding in the financial sector, but the damage to the broader economy had already been done as other sectors of the economy continued to rapidly deteriorate. The stock markets plummeted, losing more than half of their peak market capitalization just six weeks after Obama took office. Many retirees and workers nearing retirement saw their investment portfolio lose much of its value. Millions of people lost their jobs due to no fault of their own after the U.S. entered a recession in December 2007. Over 1.2 million Americans were laid off between the election and Obama’s inauguration. All told, the Bureau of Labor Statistics estimates that 8.7 million jobs were lost due to the Great Recession. No president since Franklin D. Roosevelt has begun their tenure in the White House under such dire circumstances. An evaluation of each segment of the economy around the time Obama took office compared to now shows that we are definitely better off four years later.Read more
For those of you who read my posts on a regular basis you know I have a deep respect for President Reagan. Not the Reagan fantasized by the Tea Party today but the real Reagan that negotiated with the left instead of holding them hostage, was liberal on social platforms, and used religion only as a tool in the Cold War. Last night I was taking my wife through 30 years of unemployment (yes, I am a boring husband) and was startled by a very remarkable similarity. With yesterday's unemployment rate announcement, President Obama's and President Reagan's first term curves are basically identical.
Both presidents inherited skyrocketing unemployment rates and both, through different measures, were able to start moving the economy again and experienced significant job gains the back half of their first terms. Both presidents inherited 8% employment rates, watched them climb to 10%+, and then fall again to high 7%. Reagan's dramatic direction change came behind Paul Volcker's handling of the Federal Funds Rate, which dropped from 19% in 1981 to 8.5% in 1982 freeing up cash and driving significant capital investment. President Obama also has help from the Fed through quantitative easing and driving demand through deficit spending.
What shouldn't be overlooked, is with the national unemployment rate falling below 8%, almost every economic metric is now better than when President Obama took office. GDP is growing again after watching significant drop in production. The Dow is back to pre-bubble levels and has climbed dramatically in the last three years largely due to record corporate profits. Now the only argument the right has is the skyrocketing national debt, but as I demonstrated here this has very little to do with President Obama's legislation.
If some of your older Republican friends have a problem with the unemployment curve under President Obama, ask them if they voted for Reagan in 1984. If any of your friends ask if we are better off now than four years ago, feel free to engage in that conversation.
The Dow, which is a good measure of corporate profits and productivity, has climbed back to it's pre-bubble level. This increased productivity frees up capital which allows companies to expand their workforce. Jobs are a lagging economic indicator, and are being driven by the returns from private industry we are seeing today.
The dramatic decline in GDP productivity came the final year of President Bush's second term. The GDP decline bottomed out halfway into President Obama's first year and has experienced positive growth since. Although they are not quite to the growth levels of the mid 2000's, we are also not leveraging our home equity to pay for big screen TVs.
I am constantly criticized by my Republicans friends about the apparent contradictory position of being a pro-life Democrat. To them this position is contradictory and dishonest. To me voting with this political platform is irrelevant and insignificant. Why? Because whether or not someone is pro-life is a moral argument, and these kind of arguments are mainly used to divide the masses. They are also nearly impossible to legislate. Republicans go to the polls to elect pro-life candidates and what they get in return is the Republican agenda: tax subsidies for corporations, increased military spending, tax breaks for the wealthy, and pork spending for major donors that funded the campaigns. What doesn't happen is any major change in the moral issues that were instrumental in driving voter turnout.
Let me give a couple examples. From 2002 - 2006 the GOP controlled the House, Senate, Presidency, Governorships, and appointed 7 of 9 Supreme Court seats. In 2006 they attempted to pass a gay marriage amendment that did not even garner enough Republican support to make it out of the Senate. They did not challenge Roe v. Wade or push though any lower court case giving the Supreme Court a chance to rule on abortion (they did however find a way to deliver the Affordable Health Care Act to the high court). In four years of total control the only moral law the GOP passed was the 2003 partial-birth abortion bill, which was a minor feat given the overwhelming bi-partisan support.
Abortion rates have been declining over the past thirty years. Directly following the passing of Roe v. Wade, 30 of every 1000 women were having abortions. Today that number has fallen to 19. What's even more interesting is the abortion rate experienced its sharpest decline during the Clinton Administration (from 25 to 20 abortions per thousand) and has been relatively flat ever since. Data suggests abortion rates correlate to the economic conditions of the US (and not who is president). When the economy is tough, the abortion rate rises as couples rethink their choices about having children, given the financial pressures that raising children bring.
Improving economic conditions is not the only lever to drive down abortion cases. In 2006 Governor Romney passed a statewide health reform that contracted private insurance companies to provide care for the state's uninsured. Directly following the implementation of the law, the state's abortion rate declined. The thinking behind this is that expanding healthcare led to greater doctor access, who then could deliver education and access to contraceptives. Brian Fung of The Atlantic wrote extensively about the Massachusetts findings and made the same argument for the Affordable Health Care Act.
I am quite aware of President Obama's pro-choice stance, but like his Republican counterparts, his position is empty rhetoric. President Obama has not signed one piece of legislation or a solitary executive order that expands access to abortion in the US. In fact, the only abortion-related executive order he has signed denied using federal funds to pay for abortions. President Obama has passed a significant healthcare bill that makes access to doctors easier for millions of Americans.
When my Republican friends come and lecture me why I should support their pro-life candidates due to moral obligations, I quickly ask what impact will the candidates have on legislating abortion? Until a reasonable response is articulated, I will continue to vote for the man who made access to contraceptives and doctors available for 20 million additional women.
With the presidential election heating up there is one soundbite we hear from both sides on a regular basis – unemployment. Although each side will lay out persuasive stories to drive awareness to their positions, unemployment is an elusive number driven by multiple levers. Using only one measure to judge economic health is not only irresponsible, but laughable. The GDP continues to grow, the stock market has returned to pre-bubble levels, and corporations are enjoying record profits. Like all business cycles, unemployment is a lagging indicator and is the last measure to reflect economic change.
The American public gives presidents too much credit regarding the economy. Presidents are powerful legislators but they do not control economic cycles given our market-based system. Understanding changes in the job market has more to do with Federal Reserve policies than presidential agendas. Regardless of what you might think of George W. Bush, his policies had little to do with the banking collapse. Unemployment stayed low during the early Bush years primarily due to the low cost of borrowing money. Credit cards were cheap. Mortgages were cheap. Refinances were cheap. Americans were leveraging personal debt to drive the economy through revolving credit and real estate borrowing. Money was pulled from the housing boom and spent on consumer goods and services.
When the economy finally erupted at the end of the Bush administration and the free flow of capital was capped, the market swung the other direction and debt became a crippling liability. Corporations started cutting costs and consumer good consumption did not meet their growth targets. The stock market began its decline which further eroded any free capital that could be used to keep the economic engine turning. The marketplace friction finally took a toll on employment. The final year of the Bush Administration saw unemployment double due to increased efficiencies and budgetary choices. Corporate hiring freezes led private sector job declines and proactive attrition was used to shrink the workforce. With the sudden loss of investment tax, property tax, and sales tax our state and federal government saw almost $1 trillion in lost revenue. Government was considering cuts in public sector jobs to avoid insolvency.
In 2008, in the middle of the presidential campaign, TARP was passed and signed into law by President Bush (recent polls show only 34% of Americans correctly identify President Bush as the signer) to help banks with capital and drive private investment. In 2009, one month after taking the oath, President Obama signed the American Recovery Act which did several things:
- Sent significant money to states to free up budgets and maintain public sector employees (teachers, police, fire, etc)
- Invested in public and private infrastructure projects
- Paid for a significant tax cut to drive consumer spending
- Paid for unemployment benefits and healthcare cobra accounts due to the unemployment surge.
Between TARP and the Recovery Act capital was freed up to drive private sector growth, consumer spending, and sustain public sector employment. Best estimates by reputable economists believe the Obama Recovery Act created or saved over two million jobs mostly public sector, with TARP and Federal Reserve policies driving significant private sector growth (I know fellow President Obama supporters use the following chart, but the data is not supported by legislation signed by the President).
As the campaigns continue to move forward take a second and really evaluate what the candidates are saying. Unemployment is an important economic indicator, but voting for either candidate solely on this issue will lead to frustration due to lack of control.
I smile every time a pundit tries to link escalating gas prices to our president. Not because I am satisfied with the erroneous connection, but out of amused exasperation at the hypocrisy that continually plagues polarizing talking heads. Gas pricing is a function of market dynamics, meaning that it is driven by supply, demand, and speculation. Any action by President Obama to influence pricing would be governmental regulation, which opposes conservatives’ fundamental advocacy of smaller government. The only organizations that can truly impact pricing are the oil companies whom our tax dollars continue to subsidize. Domestic oil companies are set to rake in windfall profits as pricing continues to rise. It’s time to ask for those subsidies back.
Most Americans do not understand that half the oil consumed by the United States is produced within its borders. The United States consumes almost 18 million barrels daily (MBD), of which 9.1 MBD comes from our own drills. We are the largest oil consumer in the world, using 22 percent of total global production. We are also the third largest producer of oil, just behind Russia (9.9) and Saudi Arabia (9.7). The other half of U.S.-consumed oil is imported from several nations. The largest exporter of oil to the U.S. is Canada, which accounts for 2.3 MBD. Saudi Arabia, Venezuela, Mexico, and Nigeria are all next in line, with each exporting roughly 1 MBD. Surprisingly, and despite all the rhetoric, Iraq ships just 400,000 barrels a day, a mere 2 percent of our total oil consumption. In total, the United states only receives 10 percent of its total oil supply from the Middle East.
So if the U.S. consumes oil almost exclusively from North America, how does the Middle East impact pricing? What consumers need to understand is that the largest global producer of oil has the greatest control on pricing. Even though the United States receives only 10 percent of its imported oil from the Middle East, that region of the world accounts for 30 MBD, or 34% of global oil production. The Organization of Petroleum Exporting Countries (OPEC) is a cartel of participating countries that unify production and pricing to maintain greater control of supply and demand. OPEC supplies the majority of oil to the world’s Eastern Nations (China, Japan, India, etc).
So why are gas prices rising? Bordering Iran is the world’s greatest natural choke hold of oil transportation. Almost 17 MBD pass through The Straits of Hormuz on their way to consuming nations. Iran has threatened to close the Strait, which would result in incremental increases in cost to transport oil out of the region. Since OPEC nations control the largest collective supply, any price increase due to their control will impact the worldwide marketplace.
American oil companies do not have to raise prices as no incremental production costs are being reflected, as in the Middle East. The problem is increased market demand for cheaper U.S. oil can drive prices up (i.e. China would prefer to buy our cheaper oil instead of OPEC’s more expensive offering). U.S. companies understand competition, and would much rather raise pricing with OPEC than undercut competition in the short term. Why? Oil is highly inelastic and consumers will pay for gas regardless of price. Over the next several months, as oil prices stay high, U.S.-based oil companies will deliver some of the most profitable quarters for their shareholders, taking full advantage of Middle East instability.
There is no better time to withdraw the subsidies our government pays to domestic oil companies. Each year domestic oil companies take $4 billion of taxpayer dollars and add it to their bottom line. As noted previously, subsidies have no impact on domestic oil prices, nor does increasing U.S. production through additional drilling. Any incremental oil production will be sold at the market prices, regardless of those subsidies, unless companies are willing to break away from OPEC direction. As gas prices continue to climb at the pump, understand that capitalism is in full swing. Oil company shareholders could not be happier, and they should thank both Iran and the American taxpayer.
More has been added to our national debt under President Obama than all the other presidents combined. Partially true. However, of the $5.1 trillion added to the National Debt from 2009 to 2012, only $1.5 trillion is due legislation signed by President Obama. Of that $1.5 trillion, only $500 billion in incremental spending carries past 2010. The rest of the debt, or $3.6 trillion, can be directly attributed to legislation passed under previous administrations.
On January 20, 2009 President Obama walked into the oval office and was handed a negative annual deficit of $1.3 trillion. This was a stark contrast from his predecessor, who began his eight years in office with a $200 billion dollar surplus. However, through healthcare entitlements, unfunded wars, wealth redistributing tax cuts, and TARP that surplus had turned into the largest fiscal deficit our country had ever experienced. Obama was handed this budgetary disaster, coupled with a collapsed economy with the expectation of immediate change. Little did he know three years later, he would be held responsible for the gap he inherited, and full blame for the skyrocketing debt. Before we can understand what Obama was expected to fix, we need to first understand where our government spends money.
The federal budget is broken into five major categories; healthcare, defense, social security, interest, and everything else. The first four categories equate to 80% of the total federal budget consistently over the past 20 years. The “everything else” category includes spending from education, governmental programs, appropriations, earmarks, federal departments, etc. The “everything else” category dominates 90% of federal budget debates and discussions, and is leveraged in political perversions of reality. Here is the last 20 years of governmental spending broken down by category:
President Obama signed two major pieces of legislation that grew short and long term spending. In 2010 President Obama signed the American Recovery Act. This legislation accounts for $800B of new debt through $224b in entitlement spending, $275b in grants, and $288b in tax cuts over 2009 - 2010. You can see these amounts reflected in the 2009 and 2010 budget lines as the “everything else” category spikes and then declines the following years.
The second piece of legislation that President Obama signed into law was the Patient Protection and Affordable Care Act, also known as Obamacare. In crafting the legislation, House Democrats worked closely with the Congressional Budget Office (CBO) to ensure the new legislation would remain deficit neutral. The potential increase in spending was offset by penalties due to mandates and some additional taxes directed at the super wealthy like "cadillac" healthcare plans. The CBO produced a report confirming President Obama’s claims. The only credible report opposing the neutral claim came from the highly conservative Heritage Foundation, providing a high side of $75 billion annual increase around the legislation (roughly 8%). Since Obamacare was created to be deficit neutral, repealing Obamacare has a negligible impact on our Nation’s budget.
The rest of the budget growth relies on legislated “stabilizers” that kick in based on marketplace conditions. For example, spending on Social Security will continue to increase as more individuals reach the threshold, unless we restructure the program. Defense will continue to increase unless we make changes to our policies. Medicare costs will continue to skyrocket as more individuals reach the required age. Welfare costs should hold flat unless unemployment grows, and interest expense will continue to rise as more debt is issued to pay for all of these programs. This entire group has little to do with any of President Obama’s policies, and would be growing at the same rate regardless of who sat in the Oval Office.
One of the most overlooked causes of our budgetary problem is due to governmental income, or receipts. Like our own household budget, when our income stays flat, so should our spending. Over the last decade this has not been the case. From 2000-2009, budgetary spending increased almost 96% and our nation’s receipts (income) only increased 3%. Imagine doubling your household spending after receiving a 3% pay raise! In 2000 receipts were roughly 20% of GDP. In 2009 receipts were 15% of GDP. If the 2009 receipts were equal to 2000 levels, our annual deficit would decline by $700 billion.
What caused this shortfall in income? The collapse of the economy and the 2002/2003 tax cuts. In 2002 and 2003, tax cuts were signed into legislation based on the premise that the red hot economy of the 1990’s would continue through the next decade. The collapse of the housing market and war spending were not part of the equation, nor was TARP funding and other bailouts. Even more problematic was when President Obama extended these tax cuts compromising with the Republicans to avoid a governmental shutdown. Declining receipts due to the economic collapse is straight forward; less income tax is being collected due to unemployment and less is being spent by the consumer.
As we go into the 2012 elections voters beware. You might be inclined to blame President Obama for the rising National Debt. However, if Governor Romney takes office in 2012, he will have four years of continuing rising deficits unless the big four spending categories are re-legislated. Why? Because minimal has been proposed in controlling rising spending, and any additional tax cuts will only expedite the problem. Of course the desire will again be to blame President Obama, but that will fall on deaf ears due to lack of rhetoric consistency.
If you still believe President Obama is to blame for $5 trillion in new debt, feel free to comment below identifying what legislation he signed to deliver such a disastrous fiscal decline. Whatever your belief, cut through the media’s rhetoric and read the actual budget. http://www.whitehouse.gov/omb
After losing the South Carolina Primary to Newt Gingrich, possibly in part due to his waffling at the pre-Primary debates about releasing his tax returns, Mitt Romney released his tax returns for the past two years, which show that he paid about 14% in federal taxes on income of nearly $43 million. The timing of Romney's tax return release was impeccable- for Democrats. For months, President Obama and Democrats have been attacking Republicans for wanting to maintain tax breaks and loopholes for the super-wealthy. Last August, Warren Buffet pointed out in an op-ed that he paid a lower federal tax rate than his secretary in 2010. He paid about 17.4%, whereas his office staff paid an average of 36%. Buffet rightly pointed out that this simply isn't fair. He added, "it’s time for our government to get serious about shared sacrifice."Read more
President Barack Obama visited Osawatomie, Kansas last week to speak about the danger of the growing economic inequality in America and the threat this currently poses to the middle class and our country as a whole. I thought this was the most important speech of his Presidency thus far because it clearly illustrated the monumental challenges we face in dealing with a weak economy, high unemployment, and an eroding middle class. He emphatically connected the success of the middle class with the success of America and described how investments in education, infrastructure, and science and technology along with tax and financial industry reform are critical to our economic recovery. The speech was 55 minutes long, so I highlighted what I thought were his key points:Read more
How can the GOP claim that it seeks to repeal the Affordable Health Care Act if the GOP frontrunner, Mitt Romney, is the architect of a plan that is almost identical to the one Obama signed into law? This is compounded by Romney's quote in the video below where he acknowledges applying a similar program at a national level would be a good idea. How can Republicans claim that economic stimulus act destroyed our economy and aggravated the recession when the GOP frontrunner supported the notion of economic stimulus in the form of government spending in 2008 at the height of the recession? Any Republican who supports a politician like Romney but attacks Obama for these signature pieces of legislation is guilty of immense intellectual honesty.