President Barack Obama clearly doesn’t like how the threat of sequestration, an idea he owns but now dishonestly wants to disown, is working out.
In a Tuesday speech, Obama went into campaign mode overdrive, claiming that — as summarized in a brilliant Tuesday evening Wall Street Journal editorial with the even better title “President Armageddon” — “if Republicans don’t raise taxes in return for more spending, the world will end.”
Despite a fiscal cliff deal which included $15 billion in spending “cuts” (actually “reductions in projected spending”) and over $600 billion in tax increases, the president is still demanding more from “the wealthiest Americans and biggest corporations.” Despite the fact that his administration’s has spent 26 percent more during its first four years than the George W. Bush administration spent during its final four, Obama and Democratic leaders continue to insist that the federal government doesn’t have a spending problem. Despite running up $5.9 trillion in additional debt, much of it driven by congressional and executive actions during Obama’s first two years which have unfortunately never been reversed, Obama contemptuously refers to the “so-called debt ceiling.”
As to the inane argument that a roughly 1.2 percent reduction in projected spending ($44 billion, not $85 billion, compared to annual spending of about $3.6 trillion) will all by itself, in Obama’s words, “hurt our economy … add hundreds of thousands of Americans to the unemployment rolls … (and) the unemployment rate might tick up again,” all of this is already happening. House Speaker John Boehner’s current and hopefully future firm position on sequestration has nothing to do with it.
The economy is already in a “hurt” condition. January’s initial reading on the nation’s gross domestic product (GDP) during last year’s fourth quarter was that it contracted by an annualized 0.1 percent. Though it appears that this number may go positive in subsequent revisions, the fact remains that the economy is closer to going back into recession than it has been at any other time since the last one officially ended three and one-half years ago.
Last week, Bloomberg News exposed internal emails revealing how Walmart executives are nearly panic-stricken about early sales during its February reporting period, describing the results thus far as “a total disaster.” I have separately confirmed that top management’s serious concerns have been shared with frontline store managers.
The internal company correspondence largely blamed the slump on the end of the two percentage point Social Security payroll tax cut which had been in place for two years. Obama agreed to allow this effective tax increase on 77 percent of Americans to happen during December’s fiscal cliff negotiations, representing a complete about-face from his and his administration’s warnings about the horrors which would ensue if reinstatement were to occur just ten months earlier.
Worriers at Walmart and other retailers (“Where are all the customers? And where’s their money?”) have another serious concern: gas prices, which as of when this column was submitted had risen for 32 straight days. According to USA Today, “Experts say prices should continue rising at least 5 cents a week until early April.” If so, they will break through the psychologically impactful $4 per gallon barrier. Additionally, note that the true national average gas price is probably six cents or so higher than the figure on which the establishment press usually relies. The average disposable income reduction caused by the payroll tax hike and the projected gas price increase on a family earning $50,000 per year is at least $150 per month.