Will U.S. Economic Recovery Be Too Late for Obama?

There is no doubt that the economy is slowly recovering, despite every roadblock the GOP could muster, but will the U.S. economic recovery be too late for President Obama? If so, that would be a real shame.

Tax and Spend % GDP 1993-2008

Tax and Spend % GDP 1993-2008 (Photo credit: Wikipedia)

Newly released gross domestic product estimates show the economy growing at 2 percent in the third quarter, up from 1.3 percent in the second. Were these “normal” times, this would hardly be exciting news. Average GDP growth for the last 60 years was 3.25 percent. But we are recovering from a complete financial crisis, not a routine dip of the business cycle. In such cases recovery is noticeably more sluggish, despite what lying Republicans have been spewing in their propaganda We are in  an “L”-shaped recovery not the normal a “V”-shaped one, and the fact that GDP is steadily rising is in itself encouraging.

What effect will this have on the election? A single statistic, like a single opinion poll, is just a snapshot. To understand what is actually transpiring, you have to look at the big picture:

  1. Growth figures, like polls, are open to revision.
  2. There is a predictable margin of error.
  3. Within a month the 2 percent GDP estimate will be revised; historically it has moved within a range of 0.5 percent up or down.

So we could actually be looking at GDP growth of 2.5 percent or 1.5 percent, but we won’t rally know which before Nov. 6. With the general election near, any evidence, however small, is going to be dissected. Standing alone, the 2 percent figure does not sy much, so we should not be distracted by those who make out-sized claims about     it one way or the other. What is significant is that it is part of a growing trend suggesting that the economy is slowly emerging from the Bush collapse. Some of the major  green shoots:

  1. Take housing.
    1. The latest figures, for September, show a surge in new homes, up 15 percent in a single month, the fastest growth in four years. As the current financial crisis was founded on a housing bubble, the fact that builders are speeding up their housing starts suggests the economy in general is steadily recovering. The housing figures are good news for employment, too. For every new house built, at least three jobs are created. Sales of new homes are also on the rise, and inventory has fallen “to the lowest level on record.
  2. House prices are also increasing.
    1. This indicates the glut in inventory is nearing an end after six years. The cheap rates and inappropriate lending that fueled the housing bubble encouraged too many homes to be built in the wrong places is retreating.
      1.                                                 i.     Relief from the worry of owing more to your mortgage company than your house is worth bouys personal borrowing and spending, which increases demand that creates    jobs.
      2.                                                ii.     Certainly there can be more done to encourage house buying. Encouraging banks and mortgage companies to lend more freely by clarifying the federal government regulations about new lending and refinancing existing mortgages would be a great beginning. Fixing that bottleneck should be a priority for whoever wins on Nov. 6.
  3. Another sign that the worst is over is that consumer confidence is at a higher level than at any time since the Bush collapse.
    1. The latest survey of consumers by Reuters shows Americans more confident about their economic prospects than at any time in the past five years.
    2. Consumers think their personal finances are in better shape than at any time in five years. They are less anxious about losing their jobs and more optimistic about finding new ones.  A Wall Street Journal poll confirms this data.
  4. The latest jobs figures also look better.

The remaining barrier of all barriers is that black cloud on the horizon known as the “fiscal cliff” an automatic hike in taxes and deep cuts in public spending triggered if Congress does not act. Many think it’s deterring business leaders from taking decisions to invest in new plants and new products that create jobs. No doubt, the first task of whoever wins on Nov. 6 is to convince Congress to find the middle ground. If Barack Obama wins and the House remains Republican that is a huge question mark.

Of All the “Ifs” The Biggest is Timing

The slow but steady recovery must make President Obama crazy. Six months, maybe a year longer in office would mean that he could enjoy the benefit of a country on the mend. The hardest times are over and whoever is president for the next four years will enjoy an economy in increasingly good shape.

If Mr. Romney wins, and the deficit hawks start testing austerity and deep cuts in public spending, it will all be on the Chameleon in Chief’s table. The UK and the euro zone, have already learned their lessons with sharp public-sector cuts and general austerity that lead directly to double-dip recessions. Unfortunately, the U.S. economic data is looking better than expected, and this may embolden deficit hawks to begin their own austerity program with the newfound knowledge that Citizens’ United will beat the truth and /or the public good and groundswell support.

President Obama has managed to make it over the second to last fence, the GDP hurdle, but has one last big jump to cross; the October jobs figures, to be released on Friday, Nov.2, just four days before election day.

If the figures are OK and he stays in the saddle, it will still be a toss-up with Romney. But after leading the U.S. through four horrific years of economic despair, he may consider that in itself to be something of a victory.

But should Shape-shifting Romney win, it will result in the ultimate irony for President Obama, and the cruelest outcome and a disastrous forecast for the foreseeable future in the U.S.

Harvey Gold

 

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