President Obama's record, blame game is Democrats' misfortune
By Peter Morici
web posted July 26, 2010
In mid-term elections, Democrats face a harsh reality. Politicians are known by their deeds and judged by the results.
No president since Franklin Roosevelt inherited a bigger mess than Barack Obama, and Democrats in Congress have given him most of what he wants—the $787 billion stimulus package, including clean energy initiatives to create jobs; a free hand with TARP money, and health care and financial regulatory reforms.
The Administration claims stimulus spending saved or created about three million jobs but the actual head count at www.recovery.gov is 682,370 through March 31. Including the multiplier effects of workers spending earnings in the private sector, the total impact is a bit more than one million jobs.
Many stimulus jobs were temporary but more jobs have been added since March, so the total impact remains about 1.1 million temporary jobs, costing taxpayers about $700,000 each—not a good bargain!
The President promised health care reforms would lower costs and permit Americans to keep their doctors. Now, large U.S. companies have taken huge write offs for new obligations, and smaller companies face escalating premiums. Many are preparing to push employees into cut-rate health plans, further limiting choices of doctors and hospitals.
Drug prices are jumping, forcing health insurers to further limit access to the best medicines.
Many businesses are reluctant to add employees, because higher health care costs make it even more attractive to offshore production.
On Wall Street, the big banks are still too big to fail and control a larger share of the nation's deposits than before the crisis. Restrictions on risky bank activities are so vague and far into the future, lobbyists will surely neuter them. The risk oversight board relies on the same officials that failed to foresee the dangers posed by mortgage-back securities, which caused the recent meltdown, and the new consumer protection agency will oversee reforms the Federal Reserve is already implementing.
Ordinary citizens beyond the confines of lower Manhattan don't sense an economic recovery. Stripping out inventory adjustments, GDP growth since July 2009 comes to about $150 billion. In January, the Wall Street paid out $140 billion in bonuses on $300 billion in new profits. The rest of the country has recovered little.
The 8000 regional banks that finance small and medium-sized businesses are cash starved, because the President did not use the TARP to clean up their balance sheets.
Wall Street giants like Goldman Sachs blocked efforts to create an analog to the Savings and Loan Crisis era Resolution Trust, because it would cut into their workout business. Now, small and medium sized businesses that rely on regional banks for credit can't add jobs.
Wall Street executives finance Democratic Party campaigns as generously as any demographic group. Along with using TARP money to award generous chunks of GM and Chrysler to the United Autoworkers, President Obama's industrial policies appear straight from Boss Tweed's handbook on influence peddling.
Eighteen months in office, President Obama should be evaluated on what he accomplished.
On the President's watch, unemployment has jumped from 7.7 to 9.5 percent, the jobless count has increased 2.7 million, and 3.4 million more Americans have quit looking for work altogether.
The economic recovery is flagging.
Retails sales are sinking, private jobs creation, after a brief jolt in the first quarter, is tailing off, and big non-financial companies, sitting on nearly $2 trillion in cash, lack confidence to invest or hire new workers.
President Obama is again blaming Republicans for blocking his agenda, but Congress has given him his head.
From nationalizing GM and Chrysler to coddling Wall Street to placing 19 percent of the economy that provides health care into an ineffective regulatory regime, the President has opted for statism and with predictable results—more unemployment.
President Obama's record speaks poorly for his vision for America, and Democrats seeking reelection to Congress are likely to get a well deserved shellacking for facilitating his agenda.
Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.