Jan 24 2015

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SOTU and Reality

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Not Telling It Like It Is...

Not Telling It Like It Is…

President Obama’s State of the Union (SOTU) was notable for its bold and optimistic pronouncements and  statistics, as he took credit for “turning the page” from the after-effects of the 2008 economic crisis. A more careful analysis would show that President laid out a dangerously artificial picture and shamelessly took credit for results he was not responsible for – revealing a deep divide between Obama optimism and reality.

Here are the numbers that POTUS failed to mention in SOTU which provide sobering context to his cherry-picked stats:

7.5 trillion: that is the amount of debt that President Obama has run up on American’s credit card since 2009, including four, back-to-back years when the deficit exceeded $1 trillion per year – the first time in US history.

When Obama assumed office, the official US debt was slightly more than $10 trillion. During the ’08, campaign, Obama had this to say about President George W. Bush’s deficits.

The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion dollars for the first 42 presidents — number 43 added $4 trillion dollars by his lonesome, so that we now have over $9 trillion dollars of debt that we are going to have to pay back — $30,000 for every man, woman and child. That’s irresponsible. It’s unpatriotic.”

In less than eight years, Obama has added almost twice as much as Bush, and he still has two years left in his term. It is true, as POTUS states, that the deficit has been cut in half. But that is from his gargantuan $1 trillion level. Obama’s lowest deficit is still higher than Bush’s highest.

And consider this. In 2008, the US government took in $2.5 trillion in revenue, producing a deficit of $458 billion – at the time, the largest in history.  In 2014, the US government took in $3.020 trillion, and still had a deficit of $483 billion. That’s nearly $1 trillion in new spending, half of it on a credit card from the “Bank of China.” When Obama or the Democrats talk about how the government is “starved” for revenue, look at how the feds pocketed a half trillion and continued to spend.

Today, because of anemic growth and prolific spending, the total US national debt is more than the entire GDP of the US for 2014.  $18.1 trillion in debt. $17 trillion in GDP. It is the first time that the US national debt has exceeded GDP in peacetime.

73 million: according to the Bureau of Labor Statistics, that’s the number of Americans who are not in the workforce, leading to a Labor Force Participation Rate of 62.8%, the lowest level since 1978. if the economy is “back,” why hasn’t this number decreased?

47.5 million: this is the number of Americans currently receiving benefits under the SNAP 0r Food Stamp program. There were 32 million Americans in SNAP in the recession year of 2009, but the rolls have increased nearly 50 percent since then, to the highest levels in the history of the program. If the economy is “back” why hasn’t this number decreased?

11.2%: this is the U-6 unemployment rate. As POTUS touts, the official unemployment rate is 5.6 percent, down significantly from recession highs of near 10 percent. But this number does not include the full picture of the unemployed.

U-6 is a broader measure of unemployment, counting, 1) “Marginally attached workers” – people who are not actively looking for work, but who have indicated that they want a job and have looked for work (without success) sometime in the past 12 months. This class also includes “discouraged workers” who have completely given up on finding a job because they feel that they just won’t find one. 2) People who are looking for full-time work but have to settle on a part-time job due to economic reasons. This means that they want full-time work, but can’t find it.

U-6 is 11.2% – double the official unemployment rate.

This is why a large cohort of Americans still believe the nation is in recession, despite the rosy statistics deployed by Obama.  Pay attention to the second component of U-6 – people who are looking for full-time work but have to settle for part-time.  That is a direct reflection of Obamacare’s mandate that anyone working 30 or more hours be covered.  Employers create part-time jobs to get around the requirement, forcing people into more jobs to make try to make the same money. If the economy is back, why is this number still so high?

Booming Economic Growth: Q3 of 2014 showed the impressive growth rate of 5 percent, after a strong Q2 of 4.6 percent. This is the reason for POTUS’ optimism.

But setting aside for a moment that Q1 actually showed a decline of 2.1 percent in GDP, and that the most recent Q3 results were artificially lifted 16 percent increase in spending by DoD, as the department raced to make purchases before the end of the fiscal year, what is the reality of the Obama recovery?

At the very beginning of Obama’s watch, the economy contracted 5.9 percent in two, back to back quarters, before returning to growth in Q3 of ’09, when the recession “officially” ended. In the next 21 quarters after, the economy contracted twice (Q1-’11 and Q1-’14), and met or exceeded 4 percent growth 4 times, including the last two quarters. Even if you eliminate 2009 from the calculations, growth under President Obama, from 2010-2013, has averaged a post war, post-recession low of  only 2.2 percent. Obviously if you add in ’09 the figure is lower.

In contrast, in 1981-82 recession, the US economy shrank a total of 7.9 percent in back-to-back quarters. But with Ronald Reagan’s policies, the economy took a much different path to growth than under Obamanomics, nearly 30 years later.

During Reagan’s presidency, GDP grew by more than 9 percent in one quarter, by better than 8 percent in four quarters, more than 7 percent in one quarter, better than 6 percent in two quarters and more than 5 percent in three quarters. Reagan’s record is proof of what the US economy is capable of when provided with the proper incentives. In contrast, the high point of Obamanomics was last quarter, with 5 percent growth for the first time, in the fifth year after the recession was declared over.

By the end of the fifth year of Reagan’s presidency, US GDP had grown 35 percent from Reagan’s inauguration. The same number for President Obama is 16 percent.

Obama’s shameless cheerleading for a paltry and hollow performance is down right embarrassing.

Free From the Grip of Foreign Oil/Falling Gas Prices: this was presidential chutzpah displayed on an entirely new level, even for Obama.

Team Obama has been the most anti-energy Administration in American history.  The Obama White House has consistently pushed to raise taxes and increase regulation on the oil and gas industry since his first day in office. After the defeat of “cap-and-trade” legislation, Obama also catered to the environmental lobby by going around Congress and letting the U.S. Environmental Protection Agency write its own rules for limiting greenhouse gases.

For the president to now take credit for an American, private sector, fossil fuel energy renaissance, which in a few short years will transform geopolitics and the costs of energy for American citizens and businesses for the next half century,  is nothing short of preposterous. Fracking and other energy extraction methods that are putting the US on course to energy independence have succeed despite the Obama administration, not because of it.

But the American energy story is only part of a more sobering picture that the President did not fully mention.

A 55 percent drop in oil prices in only six months is relatively unprecedented. Indeed the last time that it occurred was in conjunction with the Great Recession, where prices fell from a summer high of $140 to a January low of less than $40.

Right now, the US is contributing to a glut in world oil production with other major sources of fuel such as Iran, OPEC, and Russia. The collapse in prices shows various geo-political agendas and knock on impacts – from the Saudis trying to destabilize the Iranian economy that requires oil prices at $136 a barrel to keep its budget in balance, to the welcome impacts on Vladimir Putin’s Russia, which has had to launch far-reaching austerity in order to adapt to the new price structure.

But there is also the other side of the coin, demand is slowing. China’s GDP decreased in 2014, impacting everything from oil to commodities.  Japan in trying to emerge from full-fledged recession. The EU barely grew last year. Emerging economies in India and Brazil are dependent on the very countries that are showing weakness. Already, the International Energy Agency (IEA) has cut its forecast for global demand growth for this year by 230,000 barrels a day.  That means the strong possibility of a global slow down that will sooner or later catch up the US.

Conclusion: President’s looking to the brighter side in a SOTU address is nothing new. Every president does it to one extent or the other.

But this SOTU was more than just simple polishing. It was a deeply distorted and selective vision of America that is at odds with reality, whose primary purpose appears to have been proving that Obama’s policies have been right from the beginning – both at home and abroad.

It leads to the sad conclusion that Obama has learned nothing in six years as president. That his commitment to thoroughly failed policies that have hobbled the economy and expanded the creaking regulatory state, has not changed in the least. That POTUS still prefers the comfort of bromides and cherry picked stats to legitimate analysis and the admission of failure.

It does not bode well for the nation in the next two years.






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