The Economic De-stimulus Act of 2009

Webster’s dictionary defines Stimulus as:

: something that rouses or incites to activity: as

a : incentive

b : stimulant

c : an agent (as an environmental change) that directly influences the activity
of a living organism or one of its parts (as by exciting a sensory organ or evoking
muscular contraction or glandular secretion)

February 17, 2009, in a grand signing ceremony in Denver, President Obama signed into law the $787 billion American Recovery and Reinvestment Act saying, “Today marks the beginning of the end, the beginning of what we need to do to create jobs for Americans scrambling in the way of layoffs. What makes this recovery plan so important is not just that it will create or save three and a half million jobs over the next two years, including nearly 60,000 in Colorado. It’s that we are putting Americans to work doing the work that America needs done in critical areas that have been neglected for too long – work that will bring real and lasting change for generations to come.”

At the time of that signing ceremony and speech the unemployment rate was 7.2 percent. Today the President was faced with his most daunting opponent in his re-election bid, the U.S. economy.

Today the Labor Department reported that the unemployment rate which had shown very slow movement in a positive direction, took a distinct move upwards as job growth slowed to 54,000 in May, down from 232,000 in April, representing the smallest gain in nearly a year. The unemployment rate rose to 9.1 percent, the highest level this year and nearly 2 points higher than when the economic stimulus was signed into law.

A lot of folks, myself included, didn’t believe the stimulus bill would  do much to change the trajectory of the economy nor warranted a $787 billion added to the national debt. Now, by all measures, the economy is in worse shape than it was when Mr. Obama took office. Before you explode with words of hundreds of thousands of jobs being lost when Obama took office versus 54,000 being created, you have to look a bit deeper. If you look at the unemployment trends when the stimulus bill was signed into law and then at the months and years to follow, you’ll see it had very little short-term effect on the rates:

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Source: Bureau of Labor Statistics

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In fact, while the Obama administration stated that without the economic stimulus, unemployment would rise above 8 percent. As the table above demonstrates the stimulus did nothing to prevent unemployment from blowing right past 8 percent to a high of 10.2 percent. After the peak of October 2009, unemployment began to recede at a miserable .05 percent per month. The table doesn’t show that a third of the reduction in unemployment rate, measured by people collecting unemployment or new applications for unemployment, was due to people just flat giving up. Today the true unemployment rate is believed to be between 15 and 17 percent. Many of those collecting unemployment during 2009 and 2010 are now out of benefits, making the overall effect on the economy magnified.

Even Mr. Obama’s most ardent supporters are voicing concern that with the current economic woes, specifically the anemic job market, his road to re-election isn’t only uphill, it may well be impossible. Since World War II, no president has been re-elected with an unemployment rate above 7.2 percent. The closest anyone came to that dubious honor was Ronald Reagan, who faced a 7.2 percent rate during his re-election in 1984.

Mr. Obama bought himself time by blaming the dire economic situation upon his predecessor, however the shelf life of those talking points have long since expired. Facing a jobs report that indicates the nation’s weakest recovery and now longest recession since the 1930s, re-election in only 18 months becomes harder and harder to imagine.

Jobs are only a single measure of the economy, but one that garners the most attention as it hits individuals most directly. Unfortunately for Mr. Obama, everything else in the economy is showing the same dismal response to his economic stimulus. Consumer spending slowed in the first quarter of this year and consumer confidence levels have steadily fallen. Manufacturing growth, a consistent contributor to the recovery, weakened in May. The latest housing report showed U.S. home prices in March dropped to the lowest level since 2003.

The hits just keep on coming for the Obama administration as just this past week private economists at firms such as J.P. Morgan, Goldman Sachs and Macroeconomic Advisers cut their forecasts for economic growth in the current quarter. Economic growth shrunk to an annual rate of 1.8 percent rate in the first quarter, nearly half of the prior quarter.

Soaring fuel prices have spread the cracks in the weak economy that failed to gain strength from the $787 billion stimulus, and many believe that the residual potency of the economy has been whittled away by the excessive government spending, devaluing of the dollar by the Federal Reserve and the inability for Democrats to seriously address the federal debt.

Today Obama spoke at a Chrysler plant in Ohio saying, “There are always going to be some bumps on the road to recovery. This economy took a big hit. It’s taking a while to mend.” But wasn’t that the whole point of his $787 billion dollar plan? Wasn’t the largest single discretionary spending bill in American history supposed to smooth out those bumps, to create an environment for “sustained growth?”

All evidence points to an economy facing a “U” shaped recession rather than a “V” shaped recession. Obama’s stimulus may have made for a more shallow recession, reducing the depths of pain, but extending it much longer. Is it better to be hit with a 30 ounce bat once, or would you prefer to be hit with a 15 ounce bat 20 times? I’d take the harsher but quick pain.

Nothing short of a miracle is going to grant Mr. Obama a positive climate for re-election. Even before the recent series of negative indicators, forecasters predicted Obama would face a challenging economic climate for re-election. The unemployment rate in the final quarter of 2012 was expected to be 7.9 percent, according to the median forecast of economists in a Bloomberg survey taken May 2 through 12. Mark Zandi said he expects the Election Day unemployment rate to be “north of 8 percent.”

Ronald Reagan faced an unemployment rate of 7.2 percent on Election Day in 1984, and was the only U.S. president to win re-election with a jobless rate above 6 percent since World War II.

The weak economy also increases the confusion on Obama’s message that the nation is on a positive trajectory. The White House taking points title has morphed into the catchphrase “Win the Future.”

Reagan won 49 states against Democrat Walter Mondale with an unemployment rate that was “really high at the time” because “people believed he had the nation headed in the right direction,” he said.

Public pessimism is on the rise. The proportion of Americans who believe they will be better off in 10 years dropped from 72 percent in 2009 to 54 percent this year, according to a survey by the Pew Economic Mobility Project.

Fewer than half of Americans now believe their children will enjoy a higher standard of living, a centerpiece of the traditional American Dream, the March poll found. That’s down from 62 percent who thought so in 2009.

The comparisons to Jimmy Carter are unavoidable; high fuel costs, sinking real estate values and no apparent plan to return us to prosperous times can be distilled down to one word: malaise.

Even during months when net job gains have been stronger, the labor market has been slow. Typically jobs churn with millions of new employees hired every month during recessions as well as boom times.

Layoffs in March, the last month for which data is available, were at 1.6 million, the lowest since the Labor Department began keeping data in 2001. Hiring has been subdued for an expansion, reaching 4 million new employees that month, lower than the depths of the nation’s 2001 recession.

While workers with jobs face less danger of losing them, it remains extremely difficult for people who were thrown out of work or are looking for a job after graduation, according to the Economic Policy Institute in Washington.

Upward mobility becomes more difficult as that lack of movement has consequences for people who are looking to advance. Through 2008, an average of more than 2.7 million workers quit their jobs every month, often to go on to better positions. On average, 1 million fewer workers have quit their jobs each month of the Obama presidency, for a cumulative total of 27 million through March.

That represents a lot of lost opportunities: higher wages, better skills or interests match, a better commute, all the millions of reasons people quit to take a new job.

By every conceivable measure, the Obama stimulus was an utter failure, only managing paltry growth in the general economy, even less in the employment sector and a financial avalanche about to break free from the slippery slopes blanketed with more regulation and out-of-control spending.

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