His pleas have become a familiar litany in frequent appearances on Capitol Hill, but they have fallen on deaf ears. The only branch of government that has the constitutional authority to reform fiscal policy to get the economy moving is irretrievably locked in a state of political paralysis until at least after the November elections.
Making matters worse, President Obama hasn’t a clue about how to lead our country out of its deepening slump, let alone move Congress to action. His own impotent, warmed-over proposals have been discarded even by his own party. Obsessed with his own imperiled re-election, Mr. Obama has little if anything to say about the state of the economy except to acknowledge that “it’s tough out there” and too many people “are still out of work.”
He’s made no serious proposals to get the economy growing again, and he’s offered no agenda to do so if he is re-elected. Democratic leaders remain mute about higher jobless levels and near-recessionary economic growth that is now below 2 percent of gross domestic product (GDP). If that’s not bad enough, Mr. Obama has thrown up further political obstacles to stronger growth — namely, his threat to veto any tax cut extension bill that does not raise taxes on wealthier Americans, small businesses and investors.
It isn’t just his rival, Mitt Romney, and Republicans in Congress who think this doesn’t make economic sense. Former President Bill Clinton, clearly the most popular Democrat in his party, has warned Mr. Obama and Democrats in Congress that this is the worst thing they could do to the economy at this time.
“What I think we need to do is to find some way to avoid the fiscal cliff, to avoid doing anything that would contract the economy now,” Mr. Clinton told Wall Street analyst Maria Bartiromo on CNBC last month. Instead, Mr. Clinton said, Congress should “deal with what’s necessary in the long-term debt-reduction plan as soon as they can, which presumably will be after the election.” When asked if this means extending all of the Bush tax cuts for the time being, Mr. Clinton said, “They will probably have to put everything off until early next year. That’s probably the best thing to do right now.”
Similarly urging Congress to “do no harm,” Mr. Bernanke — like Mr. Clinton — told lawmakers Tuesday it’s imperative they take action to prevent sweeping end-of-the-year tax increases or severe spending cuts that would push the economy into another recession. “The most effective way that the Congress could help to support the economy right now would be to work to address the nation’s fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery,” Mr. Bernanke told the Senate banking committee in his most forceful plea to date.
The nonpartisan Congressional Budget Office estimates that the “fiscal cliff” that looms menacingly at year’s end will likely trigger a recession early next year. But Mr. Bernanke warned, “These estimates do not incorporate the additional negative effects likely to result from public uncertainty about how these matters will be resolved.”
The Fed and private-sector economists have lowered their economic growth forecasts for the rest of this year to around 2 percent — a pathetically weak level that ensures the unemployment rate will remain stuck in the 8 percent range or, more likely, rise in the months to come.
It should be clear that the direction of the economy will determine Mr. Obama’s political fate, and judging by the latest bleak statistics, it may have done so already. The manufacturing sector is contracting. Retail sales fell in June for the third consecutive month. Weekly jobless claims rose by 34,000 last week. Home sales and other leading economic indicators remain weak. Unemployment has been stuck at more than 8 percent for 41 consecutive months.
Meantime, a new report from the aerospace industry warns that unless Congress acts, automatic, end-of-year spending cuts will eliminate more than 2 million jobs. “The unemployment rate will climb above 9 percent, pushing the economy toward recession and reducing projected growth in 2013 by two-thirds,” said Stephen S. Fuller, a public policy professor at George Mason University, who authored the report.
But economists say the Obama economy already is in the danger zone, even before it goes over the “fiscal cliff” in December. The country is “approaching recession when measured by employment, retail sales, investment and corporate profits,” says Bill Gross, founder of the bond investment firm Pimco.
All this suggests the end is near for Mr. Obama’s troubled presidency unless there is some miraculous economic turnaround between now and Nov. 6. And no one sees that happening.
While the national news media is focused on Mr. Romney’s record at the Bain Capital investment firm he founded and his tax returns, voters are focused like a laser on the crumbling Obama economy.
A CBS-New York Times poll out this week says Mr. Romney leads Mr. Obama by 49 percent to 41 percent on who is best able to improve the economy and creating job. Ominously for the Obama campaign, Americans who say the economy is improving fell from 33 percent in April to 24 percent this month.