Shortly the Thanksgiving holiday will be here, the Christmas season will move into high gear, and the year of 2009 will close its books for good. For millions of Americans 2009 will be remembered as a year of high anxiety and looming uncertainty. The economy at the start the year was in a free fall, near to total financial meltdown, and shedding jobs by the millions. By year’s end, the economy has pulled itself back from the precipice of disaster, re-established a degree of financial stability, and found a new equilibrium level of production and employment. Unfortunately, the new economic equilibrium levels are far short of those needed to make even a small dent in the unemployment rate. Although the Economic Stimulus Package has had a short term impact with programs such as Cash for Clunkers and the $8,000 tax credit for first time home-buyers, these programs have not been enough to effect economic growth in any significant way.
What will the year of 2010 have in store for the beleaguered American economy? To start off with, most economists believe that economic growth will stall from the 2.5% rate experienced during the last two quarters of 2009 to around 1.0% throughout most of 2010. This stalling will be largely due to the winding down of government supports that were present in 2009. Federal Reserve Chairman, Ben Bernanke, has warned that tight credit and a weak job market will make consumers cautious in their spending. In fact, many economists are now predicting that the jobless rate could climb to 11 percent by the middle of 2010, before beginning a very slow descent. Some economists have gone so far as to say that it may be four years or more before the unemployment rate returns to more normal levels.
All these dreary economic predictions spell bad news for the Obama Administration, which has been overly-optimistic about the ability of the American economy to rebound from the mess it inherited from the prior administration. There is little doubt that continued high unemployment rates will have a major impact on the 2010 mid-term elections, and may hamper Obama’s ability to accomplish other major campaign initiatives. The truth of the matter is that there is very little the Obama Administration (or any administration) can do to effect the economy in any significant way without changing the American capitalistic system. At this point, the best governmental action is “no governmental action”. The American economy must be left alone, with no further stimulus programs, to find its way back to prosperity. Time has come to put Adam Smith back in the drivers seat, and to let the “invisible hand” guide the economy back to good health.
—Rich
Tags: Adam Smith, American economy, Ben Bernanke, christmas season, ecomony, economic equilibrium, economic predictions, economic stimulus package, equilibrium level, federal reserve chairman, federal reserve chairman ben bernanke, financial meltdown, financial stability, first time home buyers, high anxiety, jobless rate, Obama, precipice, slow descent, stimulus package, term impact, thanksgiving holiday, tight credit, time home buyers, unemployment, unemployment rate
But they’ll still get the blame, won’t they?
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bluzdude,
The Republicans are quick to point out that “Obama now owns this recession”, and I have no doubt that the voters will hold him responsible for all it’s repercussions.
In Shakespeare’s play, Julius Caesar, the character of Marc Antony says “The evil that men do lives after them, and the good is oft interred with their bones.” No matter what Obama accomplishes over the next few years he will probably be remembered as the “President of the Great Recession”.
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Yes, things have rebounded but based on what? Just stimulus money. I’m a big Obama supporter, but in this case, hands off going forward might be the best policy.
Happy Turkey Day!
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I will agree that our problems started long before Obama but to simply drop all the blame at the feet of the previous administration is ingenious. I noticed in reading various blogs like this one (which is excellent by the way) everyone wants to be sure to work in the “blame” on the other side. There is plenty of blame to go around from Bush and his extensive spending policies to the Democratic Congress and people like Barney Frank and Chris Dodd for encouraging/forcing banks to dole out loans to folks who were never going to be able to pay them back.
Obama has to take responsibility for the policies created since he took office, after all he and his party control Congress (at least on paper). As an concerned American I worry about where these policies etc. are coming from. Cap & Trade, Stimulus packages, huge debt levels etc. What are these so called leaders doing? I totally agree with your statement that these politicians have to keep their hands off the Economy. It’s a race between the politicians, the junk science global warmists and the terrorists as to who will destroy this country first. What in the hell are we doing to ourselves. If our grandparents could come back they would all slap the living sh*t out of us and we deserve it.
As an aside to some of your other comments; cash for clunkers will be proven much less effective than first advertised because it cost way more to get those cars off the road to save a mile or two per gallon on there replacements and we are now hearing that some may be working their way back on the streets 9which was never intended) Unemployment in higher that the 10% listed. Those are the folks seeking work, that number doesn’t include those that quit looking or don’t want a job. It’s estimated to be 17-20% if you count everybody. They have to get some decent jobs going to really rebuild things but how can you do it when we have been exporting them over the past two decades> Pretty soon we Americans won’t be able to make a shoebox let alone a quality shoe to put in it
Thanks
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One of the Guys,
I think that is exactly what many economists are worried about. GDP has risen at a rate of about 2.5% during the last six months of 2009, but much of it was related to the stimulus package. Once the stimulus package expires, the increase in GDP will be more like 1.0%. America simply cannot solve its economic problems with government spending; we must become more productive as a nation or we will be left in the dust by China and India.
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Paladin,
Great comment! There is little doubt that Thomas Jefferson would be rolling over in his grave if he could see what a mess we have made of things in this great country. Here we are, the biggest debtor nation in the world, with a national debt of over $10 trillion, debating whether or not to spend a trillion dollars on the health care package, another trillion dollars on the war in Afghanistan, or possibly both.
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I don’t agree with blaming the previous administration, the problem has been going on long before President Bush. There has been a big pattern of cronyism dating back even before Clinton, and it just continues with each administration even though each one promises to be different. Politicians align themselves with big business and political cronies and then they all claim to be working for “the people.”
I think that whenever the government starts talking about messing with the economy we all need to beware no matter who is in power.
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Some points on the national unemployment rate.
The unemployment rate is closer to 22%. During the Clinton Administration, the way that the BLS (Bureau of Labor and Statistics) calculates unemployment was changed dramatically from years past:
1) It excludes workers seeking full-time jobs, failing to find them, and then accepting part-time work that almost invariably pays far less.
2) It excludes discouraged workers who have given up looking for jobs because they can’t find any.
The BLS has an adjusted unemployment rate that makes some adjustment for the above two points. It’s called the “U-6.” And it stands at around 17-18%. That’s almost a 7 percentage point spread!
The most accurate stats I could find on the U.E. rate is provided by Shadowstats.com which corrects for the variables conveniently left out by the official government statistics.
As far as the economy goes, look at bond prices and their yields. That should be enough to send a chill down your spines. Oh well.
Happy Thanksgiving to all.
VH
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The outlook for job creating is indeed bleak. No one creates jobs when a socialist is running the government. If the average person in Cuba knows why there is no hope for jobs with a socialist government in power why is this a mystery to us? In the last post Cherlock was rallying for socialized medicine but now wants a capitalistic solution to the economic problems. Ya can’t have it both ways!
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John,
The last time I checked, the government was being run by a Democrat, and not a Socialist? The outlook for job creation is bleak because the U.S. economy is now operating at an equilibrium level that requires less labor. That’s the long and short of it. America has been exporting jobs to foreign countries for many years now, and relying heavily on exports. In essence, we have been eating the “seed corn”. It’s only a matter of time before the dollar weakens so much that exports to the U.S. will cost so much that we can’t afford them anymore. At that point plenty of jobs will be created right here in the good old USA. This economic reality would be the same regardless of who was President.
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I think you need to check again about who is running the government. When I checked this morning the government was still being run by a Socialist. Putting on a pig the lipstick of “democrat” won’t change what the pig really is.
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