The Fed’s grim forecasts of what the Obama economy will look like throughout next year were bleaker than its modest earlier estimates. High unemployment will persist throughout 2012, along with sharply slower economic growth rates.
The Federal Reserve took no action at that time to deal with the chronically weak economy, sending yet another unmistakable message to the White House and a divided Congress that any real, long-term improvement will require a change in fiscal policy.
Clearly, with the presidential election campaign officially beginning in two months, the White House was hoping the Fed would come up with some new, substantive initiatives to improve economic conditions. That won’t happen anytime soon.
With unemployment at around 9 percent (more than 16 percent when part-time and temporary workers are included), the Fed forecasts that the jobless rate will remain around 8.6 percent by the end of next year. Worse, unemployment will still hover somewhere between nearly 7 percent and 8 percent by late 2014 unless there is a dramatic change in economic policies.
The Fed had expected the labor picture to improve by now, forecasting in June that unemployment would be down around 8 percent by the end of 2012.
This summer, the Fed bullishly predicted the economy would grow by between 3.3 percent and nearly 4 percent in 2012. It sharply and sheepishly lowered that forecast Wednesday to between 2.5 percent and 2.9 percent, a growth rate that cannot make much, if any, of a dent in the statistics of 25 million Americans who cannot find full-time jobs.
To see how far away the failed Obama economy is from any kind of full recovery, listen to University of Maryland business economist Peter Morici: “The economy must add 13.4 million jobs over the next three years - 373,000 each month - to bring unemployment down to 6 percent. Considering continuing layoffs at state and local governments and federal spending, private-sector jobs must increase at least 400,000 a month to accomplish that goal.”
The Fed’s bearish report came as a cold shower for the White House and the Obama campaign. The president’s latest $447 billion tax-and-spend jobs scheme is opposed by Republicans, and with a number of Democrats facing tough re-elections next year, it stands no chance of passing Congress.
Pieces of the plan may be enacted, such as extending the payroll tax cut and unemployment insurance benefits, but the major provisions are dead.
With his job approval numbers running in the low 40s as he gears up for a tough election battle, the odds against him winning a second term are daunting at best. No president since the New Deal has won re-election with the unemployment rate over 8 percent.
Not only has his 2009, $825 billion economic stimulus plan failed to drive down the unemployment rate or put the economy on a permanent growth path, his critics say the rest of his tax and regulatory agenda has erected severe roadblocks to future expansion and job creation.
The list of anti-growth, anti-job policies under Mr. Obama is long, costly and unpopular: The sweeping employer taxes and health insurance mandates embedded in Obamacare have already made much of the business community drop its health care plans, increase worker health care payments and reduce payrolls to reduce its exposure to future costs.
In the first three years of his presidency, critics said Mr. Obama’s leftist policies to sharply curtail domestic fossil-fuel exploration and development and his halt to swift action on trade expansion for U.S. exports imposed new obstacles to economic growth and jobs. The president and his party took no action on three trade agreements negotiated by President George W.Bush until just recently, and any serious moves to begin energy expansion to lower prices remain in limbo.
Mr. Obama has proposed a laundry list of limited remedies to pull the country’s housing industry out of a depression but without any success.