State of Union Will Change Words, Not
Produce Results
Despite Washington's political tinkering for the past 75 months, the
economy is not improving. Tomorrow marks the State of the Union speech from
President Obama, his fifth since taking office. Listen for the new
catchphrase.
In the past, Obama has never left the campaign trail but his theme tomorrow
will be a switch from "inequality" to a base of "opportunity. He expects to
accomplish with words what he has been unable to do as president. He has found
the phrases used in the past no longer motivate his base.
Take three news items from the headlines today on housing, jobs and food
stamps and you will get a bleak picture of the economic outlook for America.
Housing fell more than expected in December, dropping to a rate of 414,000
new-built homes annually. While companies are more upbeat about economic
profits, they are not planning to hire. Food stamp use reached another all-time
high but the surge in usage by college-trained, working-age adults sent alarm
bells off throughout the markets.
The one sector Obama should be counted on to refer to is the stabilization
of the U.S. bond market and the rally of the dollar against other currency. It
is not a barometer of success for the dollar or the bonds but a clear indicator
of how weak the rest of the world economy is. That is why trying to be the
leader of the world rather than the U.S. has effectively neutered his
agenda.
But the switch in tone from inequality to opportunity is doomed to failure
unless he can lead a charge to reverse the current trends noted above. With an
image of lying already in place, more unsupported claims by this Administration
will probably make him the quickest lame-duck in U.S. history.
Since the Rant focuses on housing and employment as the top two indicators
of the health of the general economy, the fact new home sales fell once again is
disheartening. But the fact companies are reluctant to hire more people despite
more profits is a real blow and provides tangible proof the various financial
stimulus programs have not reached Main Street but stopped on Wall Street.
The Commerce Department revised November's new home sales figures downward
from a 464,000 annual pace to 445,000 only to have to report December sales did
not gain but slipped even more than expected. Throughout the late summer-early
fall season, the housing sector seemed to be recovering with glowing numbers
compared to the 2008 bottoms.
Even with the additional gained, housing is nowhere close to being healthy.
In 2006 new home construction hit nearly 1.3 million units. America is still
adding people at more than 220,000 per month yet home sales continue to lag.
Each home lost represents three man-years of labor.
The reason people aren't buying homes is most of them cannot afford the
price. The disconnect in the housing sector is it is supported by no less than
23 types of mortgage/rent subsidy programs. The jobs market--at least in the
private sector--is not. But with private companies reluctant to hire, those on
the outside looking in are probably going to remain there.
Most company execs are not sure how the Affordable Care Act provisions are
going to hurt them if they bring on new employees but almost all are uncertain
how the Fed's announced tapering will affect them both short- and
long-term.
The National Association for Business Economics released a survey which
revealed 43% of company execs plan to raise product prices this year--about
three in every seven. The NABE was practically giddy because that was the
highest reported number in more than a year. The downside for the economy
was even fewer thought they would be hiring. Thirty-seven percent of the
respondents indicated they planned to hire new people this year--the same as in
October but nine points less than November.
The NABE also cited the 6.7% unemployment rate as a positive factor.
But take a real close look at unemployment. In 2006 the U.S., per Bureau of
Labor Statistics, had 153 million jobs. That number is just over 144 million
today. In 2006 the Census Bureau estimates the U.S. was just at 300 million
population. Since then the U.S. has added almost 20 million people.
In 2006, with 153 million jobs and 300 million people, the unemployment
rate was 5.4%. Today with nearly 320 million residents and only 144 million jobs
(less than 100 million which are full-time) we are expected to believe the
unemployment rate is 6.7%. This is adding to Obama's credibility problem.
But the final evidence of continuing economic regression comes from the
food stamp numbers.
The U.S. food programs paid out $80 billion last year. Most of the increase
was in an area that was formerly part of the middle class--working age people
with some college background. One in seven Americans now receive aid to keep
eating.
The problem with the claim the economy is improving by citing increasing
jobs is the number of working people on part-time or temporary jobs. Finally, as
the Rant has been maintaining for years, the government is beginning to take
notice of the discrepancy in job quality. Some economists are starting to argue
having a job is no longer enough to determine self-sufficiency in today's
economic reality. If this gains support, the manner in which the government
figures "unemployment" will have to undergo another change as well.
Oddly, many people who have training or education to qualify for a job
cannot afford to utilize their expertise because the fees to go through the
testing process cannot be covered. One the one hand the bureaucracy doesn't
count these people as unemployed or even under-employed but on the other,
because they cannot get work for which the government trained them through
various programs, the government has to feed them. The socialistic approach to
education, long adhered to by this president, isn't working.
Despite what Obama says or doesn't say in his State of the Union, despite
how he changes language to try and rev up the old base by discarding worn-out
language for new and despite the "official" data coming out of Washington his
teleprompter will try to spin to the Administration's side, America's economic
situation is not improving.
There is no air under the wings of America's economy plane. Without that
lift, the government engine can run as fast as it wants and the plane won't
leave the ground. Private America sector continues to get pinched by red tape it
can no longer afford to complete.
The lack of improvement in the economy is finally starting to make inroads
on the zeal of Obama's youthful bloc. The college students and young adults are
listening with a doubtful filter or have given up listening altogether.
Five years into Obama's reign and the Administration still has no
answers. WH Advisor Dave Pfeiffer brought up the first oldie of the hit parade
Monday morning when he answered a question with "The economy we inherited was
much worse than we thought." What you inherited doesn't matter after you've held
the reins for five years. What you are doing will carry much more weight.
"I have sworn on the altar of God eternal hostility
to every form of tyranny over the mind of man."--Thomas Jefferson
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