President Obama's No-Confidence Game
The Obama administration's economic rhetoric thus far has been alarmingly irresponsible.
Let's start with the president's reaction to the government's advance estimate of fourth-quarter economic growth.
Before its release, experts predicted that the economy's gross domestic product (GDP) had contracted by an annualized 5%-6% during that period. The actual annualized -3.8% from the Bureau of Economic Analysis (BEA) was not nearly that bad.
Why not? Though the result could change in BEA's February and March revisions, it appears that businesses built up inventories during the quarter in anticipation of revived demand early this year. If it weren't for that, the annualized contraction would have been 5.1%.
The media spin that the inventory build-up masks larger overall weakness misses this important point: Businesses don't build up inventories for the heck of it. They do it because they either have customer orders in hand or because their forecasting models tell them they can reasonably expect future orders.
It wouldn't be surprising if this were indeed the case, because there are underlying indications of a nascent recovery. Gas prices have stayed well over 50% lower than they were last summer, keeping an estimated $1 billion a day in consumers' pockets. Record-low mortgage rates have fueled a wave of refinancing around the country, with lower monthly mortgage payments freeing up additional billions of spendable dollars a month.
But it's almost as if President Obama has seen these early signs of improvement and said, "We can't have that."
One thing those inventory forecasting models can't figure in is the ability of a country's chief executive and his party to throw cold water on consumer and business confidence.
The leaders of what I have been referring to as "the POR economy" -- Nancy Pelosi, Barack Obama, and Harry Reid -- began doing this in earnest, both in actions and words, in June of last year. Since the November elections, their downbeat decibel level has done nothing but increase.