Thursday, January 28, 2010

Obama's Trickle Down Economics Not Working

From President Obama's State of the Union address yesterday:
One year ago, I took office amid two wars, an economy rocked by severe recession, a financial system on the verge of collapse, and a government deeply in debt. Experts from across the political spectrum warned that if we did not act, we might face a second depression. So we acted -- immediately and aggressively. And one year later, the worst of the storm has passed.
In part this is true (leaving aside that Bush's Iraq war was already a success). The stock market dropped a total of 4,400 points from mid-September 2008 to early March, 2009. About a third of the drop was after Barack Obama's inauguration.

The stock market has come back to a little less than 70% of what it was in early September, 2008. (10,100 today vs. 14,500 then) So, that part of the economy, though not great, is doing better.

But, stock market gains haven't "trickled down" to the workplace. Neither have the $787 billion in stimulus funds. The unemployment rate has gone from 6.2% in September, 2008, to 10% today. In fact unemployment gains have significantly beaten stock market gains and any other major economic indicator.

Unfortunately, as President Obama acknowledges, his unemployment, business and home value record is one in which "devastation remains":
"But the devastation remains. One in 10 Americans still cannot find work. Many businesses have shuttered. Home values have declined. Small towns and rural communities have been hit especially hard. For those who had already known poverty, life has become that much harder."
The "worst of the storm" hasn't passed. Besides unemployment, business and home value/mortgage problems, the nation's debt is significantly worse than when Obama took office.

When implementing the most important element of his economic plan Obama said that the $787 billion stimulus package should be judged first and foremost by the number of people working.
"'That's bottom-line number one, because if people are working, then they've got enough confidence to make purchases, to make investments,' Obama said last week before the bill's passage. 'Businesses start seeing that consumers are out there with a little more confidence, and they start making investments, which means they start hiring workers. So step number one, job creation.'"
[emphasis added]
Using his own measure, the Obama economics plan has failed badly. Obama "trickle down", government spending economics hasn't worked. It's time for the President to acknowledge that failure and change. One step in that direction would be to stop disbursing the unspent stimulus funds and use those funds either to cut taxes on businesses or pay off the stimulus share of the national debt.

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