THE ECONOMY— BY THE UMOC

This is the first in a series of looks at the issues that will or should dominate the 2012 Presidential campaign as well as many races for seats in the House of Representatives and Senate. To a lesser extent these issues may influence state and local elections.

My purpose is to highlight an issue and to provide an overview of the situation and then grace you with  my suggestions as to the best position to adopt. Remember this blog represents not only the WIT but most especially the WISDOM of The UMOC.

Heed these words.

There is no doubt that our economy remains in turmoil. The deep deep recession that began to take hold in the dwindling days of the George W. Bush tenure in the Oval Office is still in effect, regardless of whether it meets the arbitrary definition of a recession used by economists.

That recession was so deep that it has popularly become known as the Great Recession, deemed second in severity only to the Great Depression.

Unemployment remains unacceptably high, 8.2% as of the latest BLS reports. Job growth still lags though there has been positive job growth in the private sector for twenty-seven consecutive months.

Consumers lack confidence that the situation will improve so spend less. Corporations are holding onto over $2 trillion in cash rather than expanding their businesses and hiring. This fact is attributed to either their lack of confidence because consumer demand remains low, or greed, depending on whom you ask.

Some aspects of the economy belie this notion. U.S. new auto sales are on a pace to reach 14 million this year, up from 11 million. Auto sales are a driver (no pun intended) of other parts of the economy so there is a multiplier effect of a very positive nature.

Housing starts have been up lately but the bursting of the real estate bubble still has a profound effect on all matters financial.

As a public service the other day Politifact produced the chart below that gives the parameters of various facets of our economy in the last year of Bush to this point in 2012 under Obama.

Jobs

2008 2009 2010 2011 January
2012
April/May
2012
Unemployment rate 5% 7.8% 9.7% 9.1% 8.3% 8.2%
Broader unemployment rate “U-6” 9.2% 14.2% 16.7% 16.1% 15.1% 14.8%
White unemployment rate 4.4% 7.1% 8.7% 8.1% 7.4% 7.4%
Black unemployment rate 9.1% 12.7% 16.5% 15.7% 13.6% 13.6%
Hispanic unemployment rate 6.5% 10% 12.6% 12% 10.5% 11%
Total private-sector jobs 115.6 M 111 M 106.8 M 108.2 M 110.5 M 111 M
Total government jobs 22.4 M 22.6 M 22.5 M 22.2 M 22 M 22 M
Median weeks unemployed 9 10.7 20.1 21.7 21.1 20.1
 

Income

2008 2009 2010 2011 January
2012
April/May
2012
Yearly GDP $13.2 T $12.7 T $13.1 T $13.3 T $13.5 T
Disposable personal income per capita $33,229 $32,166 $32,481 $32,667 $32,677
Personal bankruptcies 1,074,225 1,412,838 1,536,799 1,362,847
Poverty rate 12.5% 13.2% 14.3% 15.1%
People receiving food stamps 32 M 39 M 44 M 46 M 46 M

Homes

2008 2009 2010 2011 January
2012
April/May
2012
Median home sale price $232,400 $208,600 $218,200 $240,100 $221,700 $235,700
New homes sold in that month 44,000 24,000 24,000 21,000 23,000 33,000
Existing home sales, annualized 4.2 M 3.8 M 4.2 M 4.5 M 4.6 M 4.6 M
Foreclosure starts 0.88% 1.08% 1.2% 1.27% 0.99% 0.96%

Business

2008 2009 2010 2011 January
2012
April/May
2012
Corporate profits $1.2 T $1.4 T $1.8 T $1.9 T
Bank failures 25 140 157 92 61
Corporate bankruptcies 43,546 60,837 56,282 47,806
Industrial production 100.4 87.4 87.4 92.5 96.5 97.4
Consumer confidence 87.3 37.4 56.5 64.8 61.5 64.9
Dow Jones Industrial Average 13,044 9,035 10,584 11,671 12,397 12,393
Labor productivity 103 103 109 110 111

Prices

2008 2009 2010 2011 January
2012
April/May
2012
Overall inflation 4.3% 0% 2.6% 1.6% 2.9% 2.3%
Food and beverage inflation 4.8% 5.2% -0.4% 1.8% 4.4% 3.1%
Loaf of white bread $1.32 $1.40 $1.36 $1.40 $1.42
Pound of ground chuck $2.78 $2.99 $2.84 $3.07 $3.32
Gallon of milk $3.84 $3.34 $3.21 $3.39 $3.53
Pound of apples $1.28 $1.11 $1.07 $1.13 $1.18
Pound of sugar $0.51 $0.57 $0.63 $0.66 $0.71
Gasoline prices $3.16 $1.74 $2.72 $3.12 $3.36 $3.73
Residential natural gas per unit $12.24 $12.49 $10.56 $9.79 $9.55 $9.40

Debt and savings

2008 2009 2010 2011 January
2012
April/May
2012
Personal savings rate 5.4% 5.1% 5.3% 4.7% 3.9%
Outstanding credit card debt $948.5 B $955.5 B $856.2 B $794.7 B $800.8 B $803.6 B
Household debt rate 18.4% 18.5% 17.4% 16.2% 15.9%
Mortgage rates 5.76% 5.06% 5.03% 4.76% 3.92% 3.91%

Federal government

2008 2009 2010 2011 January
2012
April/May
2012
Federal discretionary spending as percent of GDP 7.9% 8.9% 9.4% 9% 8.5%
Federal mandatory spending as percent of GDP 11.1% 15% 13.3% 13.5% 14.4%
Annual federal deficit $458 B $1.41 T $1.29 T $1.3 T $1.33 T
Cumulative public debt $5.14 T $6.37 T $7.81 T $9.39 T $10.45 T $10.95 T

Like any statistics in the hands of politicians there is ample room for spin to be applied to these numbers. My own efforts will be limited to pointing out the obvious and that is the economy never behaves according to the strict calendar dates of one person’s Presidency. Reversing any trend does not happen the moment some new policy is put into place. Beyond that, spin to your heart’s content.

Because we have an undeniably huge national debt, many on the right call for severe measures to cut the deficit and reduce the growth of the debt. However, doing so would seriously and negatively affect the economy as even Mitt Romney has admitted.

For an example the austerity measures imposed but some European nations due to their own debt crises exhibit the fact that such measures can be disastrous.

In our own history FDR gave in to pressures to lower spending in 1937 when we were still in the Depression. The economy tanked and unemployment soared.

From the “even a blind squirrel sometimes finds an acorn” department, Chris Mathews of MSNBC’s Hardball may have said something worthwhile the other day.

His statement was that he learned when he was getting his masters in economics at UNC that there are three basic elements to spending that drive the economy. Two, consumers and business, are reticent about spending. The third, the federal government, is facing demands that it slash discretionary spending to the bone. as well as limit entitlements.

Won’t work. If no one is spending, how does the economy improve?

“Cut taxes and jobs will appear out of nowhere” yells the tea party crowd. I call them insane. (Do I have to repeat the cliched definition of insanity?)

The infrastructure needs across the American continent are stupendous. Building and repairing roads and bridges require not only massive amounts of materials…steel, concrete…but are also labor intensive. They take time. There is a bill pending in Congress that would spend over $100 billion on transportation infrastructure. It is a two-year measure. Current spending is dependent on temporary extensions to continue it.

http://in.reuters.com/article/2012/06/07/usa-infrastructure-boehner-idINL1E8H7EMY20120607

Republicans in the House want to tie approval of this bill to approval of the Keystone Pipeline. Nonsense. The benefits of that pipeline in terms of jobs and gas prices have been grossly overstated if not deliberately distorted by backers.

Pass the bill as is. If that is accomplished the economy will improve, though not immediately. But knowing these projects are in the works may loosen consumers’ and businesses’ purse strings.

In light of the contentiousness of Congress, I have little faith any other positive actions can be taken this year.

Both candidates should promote this. If Romney does not, he will be further exposed for the tool he is of the far right wing of his party.

In sum, there is no easy solution to any economic woes we are undergoing. While this is a legitimate topic for campaign ads and debates, If Romney can offer nothing more than the same old rhetoric of lower taxes and no regulation, he should be soundly defeated. Those two policies helped put us in the conundrum we face today. Whether the American electorate is astute enough to realize this remains to be seen.

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