Barack Obama sure works hard. This Tuesday, he’s doing six different fundraisers for his re-election effort. If only he would inject the millions he’s raising into the US Treasury, the country might stave off another few seconds worth of debt.
Quite how aware the Prez is of the scale of America’s economic problems is unclear. On Friday he made a big gaffe when he said, “The private sector is doing fine. Where we're seeing weaknesses in our economy have to do with state and local government.” That’s an astonishing statement, implying that the issue isn’t the health of the market but the miserliness of the GOP. Sensing that he had made a mistake, Obama clarified that while he is convinced the private sector has “momentum,” he understands that the “economy is not doing fine.”
No sir, it is not. It is true that in the last 27 months, 4.3 million jobs have been created in the private sector. But the pace of this recovery has been slow and compares unfavourably with that of other post-recession periods. Since 1970, the average post-recession growth rate has been 8 percent (11 percent after severe shocks). Since 2010, it’s been just 2.8 percent. The growth doesn’t even make up for half the jobs lost since the Credit Crunch, although it does replace what was lost during the first two years of Obama’s administration. Job losses were much smaller within the public sector than the private (407,000 vs 4.6 million) and the figures are massaged by the fact that lots of folks are dropping out of the workforce (labour force participation is back to the level of the 1970s, when women were starting to enter the marketplace). The people hurt the most are those who Obama’s Democrats traditionally represent: blue collar (construction has lost 2 million jobs since 2008), women and small businesses.
On top of all of this, middle-class wealth is evaporating. The Federal Reserve calculates that the median net worth of American families fell by an astonishing 40 percent from 2007 to 2010 – equivalent to the loss of an entire generation’s gained capital. Only half of the middle-class did not lose anything. Credit card borrowing is down (sort of good); education loans are up (worse). Mortgages and house values took the biggest hit (down by about 42 percent). America hasn’t seen this kind of financial cataclysm since the stagflatory 1970s.
And the cost of the recession has been staggering. A study by Deloittesays that the US debt problem is bigger than we thought if you add on interest payments. These are set to top $4.2 trillion in the next decade. If interest rates went up just 3 percent, it would add onto the bill the equivalent cost of both the Afghanistan and Iraq wars combined. That will probably be passed onto the tax payer in the form of tax increases or spending cuts. Even if the private sector was doing as well as Obama hopes, the accrued debts of the public sector would strangle the recovery yet further.
What does all of this mean for Obama? James Carville – a Democratic strategist – says that he has to move the election narrative away fromthe illusion of economic growth and back to protecting what meagre assets people have left. Carville’s interviews with folks from Ohio and Pennsylvania make heart-breaking reading. A quote: “While we hear some optimism, this is framed mostly by the sense that this has to be rock bottom. A non-college-educated man in Columbus professed this kind of pessimistic optimism, saying, ‘I don't think it’s wishful thinking but it has to get better. It really kind of has to … A couple of years ago, it looked like it was turning around just a little bit. And then it really… went downhill … And now, it’s probably about the leanest that I’ve seen in what I do. And you know, it – I can only think that … it’s got to get better sooner or later here.’”
Carville’s recipe for re-election is to offer yet more “hope.” But while the hope of 2008 was based on ambition, the hope of 2012 is a poor man's desperation. “Vote for Barack Obama because we have to hope that things can’t get any worse.” That's not the American dream.
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