Wednesday, June 01, 2011

Are You Better Off Today Than You Were Two Years Ago?

Investor's Business Daily says no--two years after President Obama proclaimed that happy days are here again:
Without a lot of fanfare, the Obama economic recovery officially turned 2 this month. Anyone think we're better off than we were two years ago?

On Tuesday, a trio of reports gave fresh evidence that the answer to this question is no.

Single family home prices dropped in March to their lowest level since April 2009; the consumer Confidence Index tumbled to a six-month low of 60.8; and regional manufacturing is slowing. In the Chicago area, it fell to its lowest level since November 2009.

Yet if you listened to President Obama and his cheerleaders in the press over the past two years, the answer should have been a resounding yes.

Obama promised way back in February 2009 that his $830 billion stimulus plan would unleash "a new wave of innovation, activity and construction" and "ignite spending by businesses and consumers."

In June 2010, he announced that the recovery was "well under way" and that it "is getting stronger by the day." A couple months later, Treasury Secretary Timothy Geithner penned a New York Times op-ed headlined "Welcome to the Recovery."

And all along, media simply parroted the White House line, extolling every "green shoot" they could find, celebrating every time a handful of jobs got created, while constantly acting surprised by the ongoing "unexpected" bad economic news.

But the fact is that the Obama recovery is one of the worst ever. Certainly the worst since the Great Depression. It's so bad, in fact, that even 24 months after the recession officially ended there are few places beyond the stock market and corporate profits that have shown much, if any, improvement. A few examples:
Bush-bashing starts in 3...2...1...


mazenko said...

Interestingly, Obama is polling better than Reagan was at this point in 1983 - and Reagan was dealing with a far less significant economic meltdown. Hopefully, people will weigh the ideas - especially when they can point to conservative positions about extending tax breaks to corporations that are increasing profits and stock prices and sitting on trillions in cash reserves while not hiring workers because they can demand more productivity from workers while cutting wages and benefits.

Left Coast Ref said...

Does the act of becoming wealthy make others poorer? How much of what I earn is mine? When does capitalism have to stop for "the betterment of others"? Why should workers be allowed to work less diligently and expect all the perks? If my employer cuts my wages and benefits, then I had better make some cuts in my personal spending habits (which I have had to do in the last 4 years).

If socialism/communism is all it's cracked up to be then why did so many people leave Cuba on rafts hoping for freedom here? Why won't NKorea let its people have the internet, or let Americans visit? Why are we (capitalist pigs that we are) still so powerful?

mazenko said...

LCR, what a myopic and ridiculous underestimation of the workings of an effective capitalist system. Henry Ford - and ardent capitalist - knew he had to pay his workers well enough for them to buy his cars. By contrast, Walmart pays its workers so poorly they have no choice but to shop at Walmart and draw public assistance from Medicaid.

The Ford mentality, buoyed by corporate cooperation with organized labor, built the middle class and the progressive society in which you so comfortably live. By contrast many companies today are perpetuating a stagnant drive to the bottom in terms of standards of living.

You should look to CEOs from Whole Foods and Starbucks and Google and Honeywell, who know that corporations must be stewards of their community - for if people can't live well with disposable income to purchase consumer goods, the system will regress. Some would rather screw the workers now for short term gain, while others have a long-term growth model - the type that has fueled US expansion for nearly a century.

Socialism from Cuba and NK? Really? That's the best you got? Why are we not hit immigration from a mass exodus from Canada, Norway, Sweden, Germany, Netherlands, France, Singapore, Japan, Taiwan, etc.?

Sounds like you need some real education on history and economics that doesn't come from the Sean Hannity show.

Anonymous said...

"...Reagan was dealing with a far less significant economic meltdown."

By which metric? The early 1980s recession (which I would credit or blame on Volker, for what it is worth ...) had a peak unemployment of 10%. Inflation got to the low teens and the prime interest rate managed to get into the twenties.

Bank and S&L failures were on the rise (because all the fixed rate mortgages that they had written at 6% were losing money in a 13%+ interest rate environment). Congress' "fix" for this led to the S&L disaster a few years later, but the problem in the early 1980s was quite real.

We haven't seen 10% unemployment in this one and I'm pretty certain that our inflation and interest rates are still lower.

The *recovery* for this one is going quite slowly, but Reagan's early 1983 polling numbers were before that recovery took off, too.

If things are clearly better economically in 18 months (say, a 1% to 1.5% drop in unemployment and the economy growing at 2-3%), then Obama has an excellent chance of getting re-elected. If not, then probably not.

But it isn't like he has been given a worser [ :-) ] economy to take the blame for.

-Mark Roulo

Anonymous said...

"Henry Ford - and ardent capitalist - knew he had to pay his workers well enough for them to buy his cars."

This is not quite correct.

Turnover was so high prior to Ford introducing the $5/day wage that the employees quitting was a real problem.

Henry Ford solved the problem by (a) doubling the daily wage, and (b) reducing the work day length.

But the goal wasn't to give the employees enough money to buy his cars. This was a nice side benefit, but it was not the goal. The goal was to increase profitability by reducing employee turnover. It worked.

He pitched it as something else because saying, "Yes, we pay our employees much better because the working conditions are such that they quit if we don't," sounds a lot worse than presenting the higher wages as a virtue.

Wikipedia has a page on Harry Bennett, hired by Henry Ford. Henry Ford didn't hire people like this because he was a benevolent person just looking out for his workers.

-Mark Roulo

mazenko said...

Mark, as always your comments are astute, and I concede your points on Ford. I didn't mean to portray him as an altruistic labor supporter. Yet, the reality of his conceding labor's more pragmatic requests was good for America. And Ford was more astute about workers buying cars than you give him credit for.

While 1983 was a tough time in which to face re-election, Reagan did not face an economy with such massive defaults that it threatened to tank the world economy on a scale of the Great Depression. He wasn't facing the implosion of the three auto companies, massive mortgage defaults, and the destruction of multinational banks who were too big too fail. The S&L crisis was significant - but it wasn't AIG or Lehman Bros. And you can blame/credit Volcker because inflation did need breaking - and it worked. Ultimately, the potential for economic catastrophe was far greater in 2008.

Anonymous said...

"Yet, the reality of his conceding labor's more pragmatic requests was good for America."

Oh, no argument :-)

"And Ford was more astute about workers buying cars than you give him credit for."

I'd have given him more credit if that had been my point :-) Actually, I'd say he was more astute about *EVERYONE* buying cars than all of his competitors. He had a conscious strategy of lowering prices over time to make his cars more affordable, figuring that he would make it up in volume. For that time and industry, this was amazing. We take this strategy for granted today.

So, yes, he was quite astute. Just not nice or altruistic!

"...Reagan did not face an economy with such massive defaults that it threatened to tank the world economy on a scale of the Great Depression."

I'd score this one as a 'maybe.' There is a really good book on the Federal Reserve titled Secrets of the Temple, which covers the history of the Federal Reserve and spends a lot of time covering the 1970s, the early 1980s and the recovery after that recession. According to the author, the Federal Reserve governors were *VERY* scared that they had squeezed the economy too hard while killing inflation and that the economy would *NOT* restart after they eased up on interest rates.

Maybe they were overly worried, but I think it is fair to say that at the time people in the know were just as worried about GD2 as our policymakers a few years ago were.

Yeah, they didn't have two of the big three automakers go bankrupt, but Chrysler had been bailed out only a few years earlier. The banks were in trouble (although quite possibly in better shape then a few years back) to some extent. *Farmers* were getting killed, though, which isn't a concern this time around.

My read is that unemployment is a problem for "normal people" this time around, but in the 1980s the concern was both unemployment *and* inflation [which *was* going down at the time, that was the point, but still high].

Banking got hit harder this time around, but in the 1980s farming and rust belt industries got creamed. And the banks weren't exactly untouched by the 1980s recession [see the Penn Square Bank, as an example].

It is quite possible that the recent recession was worse, but I think people often underestimate the nastiness of the 1980s recession. Probably because it was long ago and not the great depression.

-Mark Roulo

Ellen K said...

Read the comments. While the far left contingent is still in evidence, especially in the NYT, the tide is turning. People are angry. And it's not even August yet. It's going to be a very long, very hot summer. And if employment doesn't pick up soon Obama will be forced to either abandon his base and negotiate on the budget, or watch his administration go up in flames.