Sunday, July 3, 2011

President Obama's June Economic Gloom

July has arrived. Enough of President Obama’s June economic gloom.

The June gloom could lead to the Summer of Recovery.

Last summer was the Summer of Recovery

Next summer may also be the Summer of Recovery

Instead, we witnessed the June economic gloom.

June started with a rise in the unemployment rate to 9.1%, and an anemic rise in jobs to 54,000 jobs in May.

Weekly new unemployment claims exceed 400,000, while hundreds of thousands have stopped looking.

The GDP growth is slow.

That is not a recovery

President Obama’s economic June Gloom was self-made.

President Obama’s early economics tour d’farce betrays his ignorance of economics
President Obama spoke at the Jeep plant in Toledo on Friday, June 3. He boasted about saving Chrysler, which has repaid the government investment. He ate two hot dogs at Rudy’s and bragged about the secondary impact on Chet’s, which closed two days later on Sunday, June 5. His advance staff screwed up.

He also said the economy was hitting some bumps in the roads, bumps so tough that even a Jeep Wrangler couldn’t get over them. The “humor” was met with boos by the Wrangler builders.

On June 13 in North Carolina he proposed a public-private partnership to train 10,000 engineers for high-tech jobs. Is the President unfamiliar with the great engineering schools in America, two of which are in Illinois (Illinois and Northwestern), that are producing tens of thousands of computer, electrical, mechanical, industrial, and biomedical engineers annually? Is he unfamiliar with Research-Triangle Park in North Carolina?

He extolled Cree’s in North Carolina for its green products. Over 50% of its employees are in China. It held a grand opening on December 8, 2010 of its Huizhou plant in China. President Swobada, Chairman and CEO of Cree, explains the company’s motto as follows “Cree Chip, China heart.”

President Obama ignored China and bragged about the company’s hiring of 375 new factory jobs with another 300 expected to follow. The President also forgot to mention that the Cree employment came after the federal government provided $39 million to the company, which comes out to $104,000 for the 375 workers.
When asked at another appearance at his Jobs Council about ‘shovel ready jobs in the Stimulus Bill,” he replied in a joking manner “Shovel-ready was not as shovel-ready as we expected.”

President Obama believes that the economic future of America lies in green jobs. That he will invest in, ignoring the needs of the American people today, and oblivious to the reality that American green manufacturers cannot compete with Japanese manufacturers, and that Spain's extensive investment in green has failed.

His crack about “shovel ready” was apparently meant as a self-deprecating humorous mea culpa, but it came across as flippant. He said that maybe those shovel ready projects weren’t so shovel ready after all.

The President in an interview with the Today Show said companies were not hiring because of automation, and not his policies: “There are some structural issues with our economy where a lot of businesses have learned to become more efficient with a lot fewer workers. You see it when you go to a bank and use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.”

Imagine that, airlines and banks should not become more efficient. Neither should FedEx or UPS. They should model themselves after the post office.
Imagine that, he wants to take us back to the Stone Age for our economic growth.

The President’s remarks display a basic ignorance of economics and echo the Luddites of the past.

Wait, forget about the ATM’s and Luddites. On Thursday, June 23 he announced at Carnegie Mellon University the Advanced Manufacturing Partnership with 6 universities (Berkeley, Carnegie Mellon, Georgia Tech, Michigan, MIT, and Stanford) initially receiving $500 million to increase the number of advanced manufacturing jobs in the country. The idea is to develop techniques for creating new products more efficiently and creatively.

Sounds like automation and technology to me!

July may be a fresh economic start for the President.

President Obama’s economics team has bailed out on him. His words about the team 2 ½ years ago: “Vice President-elect Biden and I have assembled an economic team with the vision and expertise to stabilize our economy, create jobs, and get America back on track.” His brilliant Economic Dream Team may have been wrong, but they’re smart. They recognized that his recovery plan bailed. They are abandoning ship.

Larry Summers, his Director of the National Economic Council, is headed back to Harvard. Christina Roemer, Chair of the Council of Economic Advisors returned to Berkeley. Austan Goolsbee, the short term replacement at the National Economic Council and long term economic confidant of the President, will be back at Chicago. Peter Orszag left the Office of Management and Budget for Citigroup. Only Timothy Geithner, Secretary of the Treasury, is remaining, but he lacks a safe haven outside government.

The President views the Golden state as a piggy bank for reelection, but it’s his economic albatross. California generates 13.1% of the nation’s economy, but it shed 29,200 jobs in May. It’s an economic basket case with an unemployment rate of 11.7%, higher than Michigan’s. 2.1 million Californians are unemployed, with over 1 million out of work for 27 weeks or more.

President Obama delegated the budget negotiations to Vice President Joe Biden, the same VP who fell asleep during the President’s April 13 speech on the deficit.

It was well documented at the time that while he was going around espousing the “Shovel ready” expediency of the Bill, he did not know what it actually contained.

He delegated the Stimulus Bill to Congress, especially the House of Representatives, where a King of Pork, David Obey, drafted it. The primary purpose of the stimulus Bill was not to create jobs, but to buoy up state and local government expenditures, especially for the public employee unions. Only 6% was earmarked for jobs creation, shovel ready projects. The rest was transfer payments, which add nothing to the economy.

In short, the Stimulus Act was, at best, poor Keynesian economics. Or it displays the failure of Keynesian economics. Combined with the experience in Europe, the seductive Keynesian economics should be taught along with Communism and socialism as a failed economics theory – a costly failure.

Maybe the June Gloom is gone. Maybe oil prices will continue to fall. Maybe jobs will come back, fueling economic growth again.


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