Obama's Race Against the Economy
Let me be clear: Fourth-quarter GDP growth will be negative, perhaps deeply so. What Nancy Pelosi, Barack Obama, and Harry Reid -- the architects of what I have been calling the POR (Pelosi-Obama-Reid) economy -- did during the final five months of the presidential campaign to convince businesses, entrepreneurs, and investors that they were intent on starving them of the energy resources needed for growth and radically increasing their taxes, combined with their party's decades-in-the-making housing and mortgage industry debacles coming to a head, virtually guarantee that.
The hopeful signs are these:
- As of December 19, oil is down over 70% from its summer peak. Many drivers are spending over $150 per month less on gas than they were just five months ago.
- The Fed has taken interest rate reduction as far as it can go, which has taken mortgage rates to historic lows. Refinancing activity has picked up, disproving the notions that credit isn't available to worthy borrowers and that most of us are a bad hair day away from homelessness. This is an ideal opportunity for those who have good credit but poorly structured adjustable-rate or interest-only mortgages to get out of them, and for those carrying 6% or higher fixed-rate mortgages to lower their monthly payments or draw out equity. (Yes, Virginia, people in most states still have plenty of home equity.)
- A falling Consumer Price Index of -1.7% led to real earnings growth of 2.3% in November. A repeat performance but with smaller numbers looks likely in December.
- Christmas shopping season retail sales, while still far less than impressive, might not be as bad as originally predicted.
Pethokoukis pegs the annual impact of the first two items just noted at over $500 billion.
Good news "too soon" would be bad news for the massive $850 billion stimulus package Obama and the Democratic Congress wish to pass. If a recovery has visibly commenced, who, besides their pork-addicted constituencies and the endless line of bailout beggars who should know better, will need stimulation?
Obama, Biden, and the Democratic Party are engaging in their sharply negative jawboning on the economy for the same reason a mob hit man sends a person he knows to attend his target's funeral: he wants to make sure he's dead. Obama et al. want to make sure the economy seems dead, and that consumers don't do something unhelpful like start spending again, until shortly after their party's precious stimulus package becomes law -- after which they, with the help of their lapdogs in old media, will joyously announce a resurrection.