Tag Archives: Obama

The problem for Obama is that America isn’t working

The Telegraph, Jun 6, 2016

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Falling levels of unemployment. A return to growth. House prices recovering. And, perhaps most significantly of all, a central bank that has felt so convinced the economy is on the mend that it has actually raised interest rates once in the past year and may do so again before Christmas comes around.

The American President Barack Obama had some fair points to make as he defended his economic record over the last eight years.

As he prepares to start writing his memoirs, Obama has started what is usually the final lap of any term in the White House – securing his legacy, and doing what he can to make sure his own party, no matter how much he may dislike the nominee,  keeps the keys to the Oval Office.

And yet while Obama undoubtedly has steadied what was a very rocky ship, in reality his economic record has been a dismal one.

Labour participation rates have been terrible, wages have been weak, corporate taxes have become ridiculously high compared with the rest of the world  and, worst of all, the United States has lost much of the entrepreneurial drive that made it so rich in the first place. He has done nothing to turn any of that around – and in many ways has made it worse.

With the fluency and intelligence that marks all his speeches, Obama made a powerful defence of his economic record when he spoke in Elkhart, Indiana, last week. “America’s economy is not just better than it was eight years ago – it is the strongest, most durable economy in the world,” he said. He went on to argue that “we’ve seen the first sustained manufacturing growth since the 1990s” amid a broad based recovery from the financial crisis he inherited from the Republicans.

“The trouble is, when you dig into the detail, there are some long-term trends that suggest an alarming decline in the competitiveness of the US – and Obama has done nothing to reverse them” (Matthew Lynn)


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ell, up to a point. True, no one would deny that the American economy is in better shape now than it was when Obama took office. It is growing at a respectable rate, wages are increasing, it has avoided deflation, and the stock market, while hardly exciting, has kept one of the longest bull markets in history going. The trouble is, when you dig into the detail, there are some long-term trends that suggest an alarming decline in the competitiveness of the US – and Obama has done nothing to reverse them.

Such as? First, the US has witnessed a terrifying drop in labour participation rates. In simple terms, it is not that unemployment is that high – it is that people don’t bother looking for work. America used to lead the world in the numbers of people with jobs, but the overall participation rate has fallen from 67pc in 2000 to 62pc now. It is still two percentage points below where it was before the last recession. By contrast, in this country, the rate has climbed past 70pc to hit all time highs. True, a lot of those jobs are not terribly well paid, but an economy can’t grow without lots of people working – and that is not true of the US any more.

Next, for all his boasts,  wages have been stagnant under Obama. The shale boom has created a few centres of prosperity – indeed all of the ten towns with fastest growing earning are energy producers, led by places such as Midland, Texas, and Bismarck, North Dakota  (the two places where earnings growth has been strongest in the last decade). With the oil price under pressure, that probably won’t keep going – and once you strip those few booming cities out, wages have hardly grown at all under this Presidency.

Thirdly, corporate tax rates have been allowed to drift upwards. As other countries have cut their rates of corporation tax, Obama has kept the American rate stubbornly high, preferring to punish companies that want to escape, rather than the rather more obvious solution of simply cutting it. In the US, the corporate tax rate is 35pc, and state taxes levied on top of that mean it is often closer to 40pc.

By contrast, our rate is coming down to 17pc, half what American companies pay. Heck, even the French rate is lower than the American one. Globally, only the United Arab Emirates, at 55pc, and Chad, at 40pc, now levy more. The result? American companies have started to move abroad, and even though Obama has threatened to slap extra taxes on them for doing so, more and more are likely conclude that they have little choice but to locate somewhere more competitive.

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Fourthly, he has presided over a mountain of new regulations. According to a Heritage Foundation study, new rules imposed on business last year cost $22bn, and the total since Obama became President has gone past  $100bn. A total of 20,000 regulations have been imposed since 2008. In the last year alone, there have been costly new rules micro-managing overtime, clean air, and financial advice. Even by European standards, where markets are far from liberal,  much of the American economy is now ridiculously bound up in meddlesome red tape. One example: in Tennessee, you now need a state licence, involving 300 hours of training, just to shampoo hair in a barber shop. How is that meant to help people start businesses or get jobs?

Finally, and perhaps more worryingly of all, the US now has a lamentable rate of start-ups. The number of new companies being formed  every year barely exceeds the number that close down, and in several of the last eight years it has actually seen a net rate of closures. According to a report this month by the Economic Innovation Group, this recovery has seen a net 165,000 new enterprises, compared with more than 400,000 in the 1990s and 2000s. By contrast, this country, even though it is only a fifth of the size of the US, has a million more companies than it did before the crash, and the total has hit an all-time high  (on average, we now create more than 250,000 new enterprises a year). Our image of the US is shaped by its history, and by the huge success of Silicon Valley. But that is a unique economic eco-system, and if you strip that out, the US is not a nation of entrepreneurs any more.

In reality, the American economy has lost much of its appetite for innovation and its dynamism. A few giants such as Google and Amazon, and a booming energy industry, have helped to mask that, but the underlying trends show a relentless decline in competitiveness. It is too early to describe the US as the new France – but the comparison is not as ridiculous as it once would have been.

It has taken about four decades longer than it took Europe, but in many ways America has started to turn into a continental social democracy, with all the sluggishness and slow growth that implies. With his emphasis on subsidies, heath care and regulation, Obama has accelerated that process – and Hilary Clinton would do so even more. America may be losing global economic leadership because countries such as China are growing. But it is also losing it because it has abandoned many of the qualities that made it so prosperous in the first place – and Obama showed no sign of wanting to recover them.

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Ex-Obama adviser Austan Goolsbee says Fed may cut rates in 2016

CNBC, Jan 28, 2016

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The Federal Reserve may say it’s bent on more interest rate hikes this year, but it’s much more likely it will need to cut instead, warned Austan Goolsbee, a former adviser to President Barack Obama.

“They want to raise rates; they want to get back to normal. They have said they thought they would raise four times plus this year and I don’t think there’s any scenario in my mind that they’ll be able to do anything remotely like that,” Austan Goolsbee, who was chairman of Obama’s Council of Economic Advisers from 2010-11, told CNBC’s Squawk Box.

Goolsbee, who is now a professor at the University of Chicago’s Booth School of Business, said, “It’s far more likely that they’ll have to reverse themselves as a number of other countries have, like Sweden and others, where they raise the rates thinking it’ll be fine and then have to drop it.”

The Fed itself fueled market expectations that its previously stated goal of about four interest rate hikes this year wasn’t likely to come to fruition, with its post-meeting statement released overnight.

As widely expected, the central bank left rates unchanged but said it was “closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.”

Markets read the Fed’s cautious tone on the economy and financial conditions as a sign it is not likely to hike rates in March. The market priced a 24 percent chance of a March rate hike after the 2 p.m. ET Fed statement, down from a 31 percent chance ahead of the release.

“Growth has been only modest in the U.S. and with the things going on around the rest of the world, I fear that 2016 might be worse than just modest growth,” Goolsbee said. “We’ve had good improvements in the job market, but the GDP (gross domestic product) is still pretty weak.”

Estimates of U.S. economic growth in the fourth quarter are around 0.8 percent, according to the CNBC Rapid Update, down two-tenths of a point from the previous forecast. The official reading on fourth quarter GDP is due on Jan. 29.

But even if the Fed reverses course on December’s 25 basis point interest rate increase – its first hike in nearly a decade – that took it to a range of 0.25 and 0.5 percent, it’s not clear it would help the economy much, Goolsbee noted.

“That would only help a little. You’d get a small bump,” he said. “But realistically, it was only a raise of 25 basis points and if you thought little movements in the rates would make a difference, then the fact that the Fed cut 400-plus basis points through the crisis ought to have had a better impact than it’s had.”

Goolsbee pointed to a something the Fed itself acknowledged in its latest statement: the global environment isn’t strong.

“We’re dealing with the fact that the Fed has some impotence at really trying to get things moving,” he said.

“Most of what’s happening is you’ve got problems in Europe, you’ve got obvious problems in China, slowdowns in the emerging markets. That’s feeding back on to the U.S. and slowing down things here and that’s not the Fed’s fault but it opens them up to be the target for people to say it’s the Fed’s fault because they raised rates right when this other stuff is starting to bite back.”

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Obama economy: 8.7 million jobs

CNN Money, Nov 6, 2015

Obama economy: 8.7 million jobs

The U.S. economy is humming again.

October was a month of strong jobs gains. Since President Obama took office, the economy has added 8.7 million jobs.

On many fronts, there’s a lot to cheer. More people are getting back to work. Gas prices are extremely low. The stock market is back near its all-time highs. Home prices have rebounded in most parts of the country.

Even wages and consumer spending are finally starting to show signs of a pickup.

Unemployment is now down to 5% — a healthy level that the U.S. hasn’t seen since before the financial crisis of 2008.

A stronger economy is a problem for Republicans

“With low unemployment and rising wages, the Republicans’ job gets a lot harder,” says Doug Holtz-Eakin, president of the American Action Forum and a former economic adviser to John McCain’s presidential campaign.

Of course, there are still challenges. Economic growth is good, but not great. The U.S. has been expanding at about 2% a year. That’s a lot slower than the usual growth of 3% that America has averaged over the past several decades.

“We’ve been recovering at 2.2%. The question is will we see something that is faster?” says economist Holtz-Eakin.

He adds that Friday’s strong jobs report “is promising but is by no means definitive” that growth will pick up.

But overall, it’s getting harder to poke holes in the Obama economy.

“Republicans — or Bernie Sanders, for that matter — can no longer credibly claim that the economy is terrible,” says Greg Valliere, chief global strategist at Horizon Investments.

Employment in America hit a low in December 2009 — toward the end of Obama’s first year in office. Since then the economy has actually gained nearly 13 million jobs.

One of the sticking points in the Obama economy was too many people who wanted full-time jobs had to settle for part-time work. There were concerns that the Affordable Care Act would cause employers to keep workers part-time so they wouldn’t have to pay health care benefits.

So far, the evidence isn’t showing that. In the past year, 1.2 million Americans have been able to transition from part-time to full-time work, an encouraging sign.

The other frequent criticism is that so few Americans are working at all. The so-called labor force participation rate is at the lowest level since 1977. Some of that is because Baby Boomers started to retire and younger Americans are studying for more degrees. But that is a cultural shift.

How Obama compares to other presidents on jobs

It’s fair to ask: How does Obama compare to his predecessors on jobs?

By this point in their presidential tenures, this many jobs had been added under …

Ronald Reagan: 12.1 million

Bill Clinton: 20.4 million

George W. Bush: 5.4 million

Those figures don’t account for the fact that the U.S. population has been growing. So the gains under Clinton and Reagan would actually look even stronger.

Jobs added under recent US presidents

After the Great Recession, the economy is healing, but the question remains whether it will continue to pick up in the coming months.

The Federal Reserve is also widely expected to begin increasing interest rates, something that could cause some short-term turbulence as the economy adjusts.

“Perhaps [the economy] hasn’t fully recovered, but the labor market is looking awfully healthy,” says strategist Valliere.

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Obama wins U.S. debt-limit, budget truce through end of presidency

Reuters, Oct 30, 2015

U.S. President Barack Obama early Friday won congressional passage of legislation that lifted the threat of a default on government debt through the end of his presidency and a budget blueprint easing strict spending caps through September 2017.

The Senate voted 64-35 to approve the measure, which was negotiated over the past few weeks by the White House and congressional leaders, including former House Speaker John Boehner, who retired from Congress.

Obama will sign the bill into law as soon as he receives it, the White House said in a statement.

Without action by Congress, the Treasury Department would have exhausted the last of its borrowing capacity on Nov. 3, according to Treasury Secretary Jack Lew, and risked default on U.S. obligations within days that would roil global financial markets.

The two-year budget provision provides new top-line spending levels for Congress for the fiscal year that began Oct. 1 and the one starting Oct. 1, 2016.

It loosens budget caps, allowing an additional $80 billion in spending on military and domestic programs over the two years.

But lawmakers still need to allocate that money among thousands of budget-line items. They face a Dec. 11 deadline, when existing spending authority by government agencies expires, and a spirited fight is expected.

Obama called on Congress to build on the budget “by getting to work on spending bills that invest in America’s priorities without getting sidetracked by ideological provisions that have no place in America’s budget process.”

Conservative Republicans are likely to try to attach controversial policy add-ons, such as prohibiting funding for women’s healthcare provider Planned Parenthood to punish the group for an abortion-related controversy involving fetal tissue.

Some may also try to undo Dodd-Frank Wall Street reforms enacted after the 2008-09 financial crisis or prohibit new regulations on carbon emissions.

During Senate debate on Thursday, conservatives railed against the budget and debt limit bill.

Republican Senator Rand Paul, who is running for the Republican nomination for president, complained in a floor speech: “The right’s going to get more military money. The left’s going to get more welfare money. The secret handshake goes on and the American public gets stuck with the bill.”

Senator Ted Cruz, a rival Republican presidential hopeful, returned to Washington from the campaign trail to accuse Republican majorities in Congress of “handing the president a blank credit card for the remainder of his tenure.”

Senate Majority Leader Mitch McConnell, a Republican who helped negotiate the bill, praised the measure for rejecting tax increases and noted that the added spending would be offset by savings elsewhere in the government.

He also said it would “enact the most significant reform to Social Security since 1983.” The estimated $168 billion in long-term savings from the program would be achieved by clamping down on medical fraud and excess claims associated with disability benefits.

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What Obama’s trade deal (likely) means for American jobs

CNN Money, Jun 12, 2015

What would President Obama’s trade deal do to my job?

That’s really what all the fuss is about on various trade agreements that President Obama is pushing.

The biggest deal of them all is known as the Trans-Pacific Partnership (TPP for short). It would reduce trade barriers between 12 countries– U.S., Japan, Vietnam, Mexico to name a few — that account for 40% of the world’s economy.

 

1. What’s the debate? The White House and Republican leaders say that’s great news for American workers. It would make it easier for millions of people in other nations to buy U.S. goods, which should create jobs.

“We’re going to see unprecedented growth in the middle class in the Asia Pacific from 570 million [in the] middle class to 3.2 billion in just the next 15 years,” Commerce Secretary Penny Pritzker told CNNMoney.

But Democrats and unions say history hasn’t shown that free trade is all that beneficial to workers at home. A deal like TPP would just make it easier for businesses to move jobs elsewhere, they argue.

“This trade agreement would continue the race to the bottom for American workers,” said Senator Bernie Sanders, a Democratic presidential candidate.

2. Who’s right? It’s difficult to answer that because TPP is being negotiated mostly in secret. You can’t just go read through the document like you can for most pieces of legislation.

On Friday, the House was supposed to vote on whether to give the president “fast track” authority, but in a big defeat for Obama, House Democrats defeated a key part of the bill. The issue is likely to come back for a vote next week.

If passed, the Obama administration would be able to negotiate and sign various trade deals — like TPP — with little legislative involvement. It would almost certainly mean that TPP would get done, at least in some form.

Here’s a look at what all this means for your job — and your neighbor’s.

3. What about my job? Workers in the auto, agricultural and energy industries likely have the most to gain. America’s top exports right now are cars, gas and planes and other spacecraft. Reducing trade barriers should make those industries thrive even more.

On the agricultural side, products like pork are in high demand elsewhere in the world. The U.S. could potentially set up and fill that void. But critics of the deal argue that workers for larger companies that have a global reach already will be in a better position to benefit than workers at smaller businesses.

The biggest question mark is what will happen to other manufacturing and service jobs. Nike, for example, has said it would create 10,000 new engineering and manufacturing jobs in the U.S. if TPP happens.

But economist Peter Morici of the University of Maryland calls it “simply a bad deal for ordinary Americans” because of “downward pressures on wages and worsened income inequality,” in a Washington Times op-ed. He says America’s free trade agreement with South Korea killed about 25,000 jobs, driving wages down and worsening income inequality.

4. Who profits from the deal? One of the most outspoken supporters of TPP is the U.S. Chamber of Commerce, the main lobbying group for big business. As the White House points out, exports have been a key driver of economic growth during the recovery, accounting for about a third of the rebound.

But critics like Democratic Senator Elizabeth Warren question whether anyone beyond big business executives and shareholders will benefit.

“U.S. multinationals, like GE and IBM, would still profit from the TPP by moving production to Asia to advantage labor and other resources made cheaper by manipulated currencies, but ordinary working Americans would face more unfairly advantaged foreign competitors, unemployment and even lower wages,” argues Morici.

5. Better conditions for whom? One of the missing details that the public doesn’t know right now is how many protections are in the TPP deal. The White House says the trade agreement will enforce better labor and environmental practices — at home and abroad.

If done right, it could give the U.S. more teeth to fight back when other countries try to undercut America. For example, the agreement is supposed to provide protection for the intellectual property of U.S. exports, from movies to software to prescription drugs. The White House was also trying to create an assistance program for workers who lose their jobs because of free trade agreements.

But the wording — and enforcement — is key.

“If you’re used to reading these trade agreements, the devil is absolutely in the details,” Thea Lee, the deputy chief of staff for the AFL-CIO, which is spearheading the left’s opposition to the deal, told CNN.

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