Ronald Wilson Reagan“Government is not a solution to our problem, government is the problem”
Barack Hussein OBAMA“Let RUSH HealthCare Reform but take our time helping the TROOPS when asked.”
Angry Americans Still Feeling the Slump
If Barack Obama had been told last November that the economy would have moved out of recession by July – as Thursday’s gross domestic product numbers indicated – he might have broken out the champagne. However, the White House was more funereal than celebratory in keeping with the opinion of most voters.
For most Americans, the return to growth is a pure abstraction. Next week’s jobless numbers, which is likely to see another 200,000 joining the unemployed, will be the more accurate reflection of the public’s mood, which alternates between angry and sullen. Jobs growth always lags behind economic growth and forecasters project unemployment will climb from its current 9.8 per cent to 10.3 per cent by early 2010.
Since jobs and wages dominate most people’s perception of the health of the economy, Mr Obama faces the awkward prospect that most Americans will still feel like they are in recession in the build-up to next year’s mid-term elections. To that extent his difficulties are predictable. Remember George Bush senior, who was defeated by Bill Clinton in 1992 in the “economy, stupid” election even though the US had returned to growth several months before.
However, neither Mr Bush senior, nor any recent US president, has simultaneously had to grapple with a jobless, or job-loss, recovery and an electorate seething with resentment against Washington’s generous treatment of the perceived authors of the recession – Wall Street. Previous downturns were induced by sharp interest rate rises to quell the consequences of overheating. In most people’s view, this recession was caused by the speculative greed of bankers – an entirely different kind of downturn that fits the plot of a morality play.
Unlike most morality plays, however, this one appears to be rewarding the baddies. While the job numbers continue to deteriorate, Wall Street is enjoying good times again and preparing another season of huge bonuses. Goldman Sachs, alone, is on track to pay out $21bn (€14bn, £12.7bn) in bonuses by the end of the year. Since it repaid the direct bailout money it received from Washington – as opposed to the implicit subsidies from which it continues to benefit – it was not subjected to the pay restraints announced last week by Ken Feinberg, Mr Obama’s “pay czar”.
To most Americans such fine distinctions hardly matter. Nor should they. All of which lands Mr Obama in an awkward political narrative. Over the next few months, the miseries on Main Street are likely to continue to diverge from the taxpayer-enabled profit taking on Wall Street. And the electorate’s sullenness could easily spill over again into raw anger – as it did in January and February amid revelations of the extraordinary bonus culture at AIG, Merrill Lynch and others.
The White House’s approach is to maintain a sober tone and keep focusing on jobs. The administration will on Friday unveil estimates of how many jobs the $787bn stimulus has created. But they are unlikely to have much of an impact on public sentiment.
Almost 8m jobs have been lost in the past two years in addition to the many millions more who have either dropped off the measure or been forced to downgrade to part-time work schedules. At best, the stimulus may have created or saved 1m jobs.
Mr Obama will continue to push for the creation of a consumer financial protection agency – something Wall Street hates and which lobbyists have succeeded in diluting from its original blueprint. Then there are plans to create a new tax credit to subsidise the creation of jobs by small businesses.
Mr Obama is likely to support the extension of a tax credit for first-time homebuyers. However, he has virtually no political room to argue for a full-blown second stimulus to keep the economy afloat next year. And the White House has ruled out more populist attacks on Wall Street pay, such as a windfall tax.
Mr Obama may simply have to tough out what promises to be another bout of populist anger. The economy is growing again. The electorate is searching for someone to blame.
