Our economy took a nose-dive in the first quarter of this year.  According to the government, the economy only grew at a paltry 1.8% annual rate for the past 3 months.  This was nearly 1/2 the rate of the 4th quarter of 2010.

Rather than spending continuing to increase, consumers held on to their money this past quarter as higher fuel prices, a continued anemic housing market and sinking consumer confidence sent economic activity to the lowest level in the past 3 years.

Federal Reserve Chairman Ben Bernanke claims the downturn is a temporary setback, promising that when gas prices stabilize the economy will grow at a 3% pace in each of the next three quarters.  Exactly what does stabilize mean?  Is Mr. Bernanke saying that we’ll become accustomed to $4.00/gallon gas and return to spending?  Is the air so rarified up on Mount Federal Reserve that he doesn’t understand that when it costs $100 to fill your tank the average person simply doesn’t have as much left over to buy TVs, cars and houses?

But unfortunately for Mr. Bernanke predictions, gas prices are still going up and if the stabilization he’s hoping for settles in at, God forbid, $5.00/gallon, there’s nothing an optimistic attitude at the Fed can do to replace the lost dollars in our wallets.  Add to all the other good news coming out this quarter is the consumer price index rising at a rate we haven’t seen in more than a decade.  Everything we purchase gets to the store shelves by vehicles fueled by petroleum products.  So not only does the cost of filling our tanks skyrocket, but so does the cost of a head of lettuce and a loaf of bread.

Consumer spending shrunk to 2.7% down from a 4% the last reporting quarter and the weakest pace since last summer. Consumer spending is of critical importance as it accounts for more than 70% of overall economic activity.

Builders reduced project spending by 4.1% this past quarter and that represents jobs.  A lot of jobs.

Bernanke stated that the crumbing housing market will continue to weigh on the economic recovery, pointing out that home building and commercial construction were both “very weak” in the first quarter. Construction spending is a key indicator of economic recovery and based on current trends the recovery, if it truly even exists, is so shallow that it is teetering on the edge of recession.

Another indicator that the U.S. economy is in a very tenuous position is unemployment.  More people sought unemployment benefits last week, the second rise in three weeks, a sign the job market’s recovery is barely measurable.  The Labor Department says applications for unemployment benefits jumped 25,000 to a seasonally adjusted 429,000 for the week ending April 23. That’s the highest total since late January.  The four-week average of applications, a less volatile measure, rose to 408,500, its third straight rise and the first time it has topped 400,000 in two months.

Mr. Obama is walking a fine-line with the American people.  A majority believe that the country is headed in the wrong direction.  His poor ratings on the economy are only, pardon the pun, trumped, by the ratings of Congress.  Should the economy fall back into recession before this coming winter it is very likely that Mr. Obama will face a primary challenger.  Worse for the President is the fact that no president has been re-elected with a lackluster economy, let alone one in recession.  If President Obama is successful in raising the taxes on upper income earners to the levels during the Clinton administration, in the midst of sagging economy, it may very well be the straw that breaks the camel’s back.