Sunday, August 2, 2009

Obama hits speed bumps...

Modern presidents seem to have 'handlers'. When things go bad a president is not so quick to step up and correct himself as a hander is apt to rephrase what 'the president' meant to say.

In the past two weeks Obama has two such moments.

A week ago it was a conflict over a race issue that led the President to stub his toe. The President, without knowing the facts sided with a friend and a fellow black man over a dispute that oddly involved a black Harvard professor being arrested by the police in his own home. Maybe you and I can back a friend on the basis of his character without knowing the facts but the President should not, especially not in such a charged moment as this. The really interesting aspect of the professor/police imbroglio is not even that the President got involved; that is just what brought this episode to our attention. What is most interesting is this: that each of the participants in this confrontation was supposed to be an expert in race relations issues (black professor/white cop). Some experts eh?

But to most of us the issue is that we do not really know the facts, and we cannot judge what happened, just that the conflict and outcome are quite odd. And to US it really matters that the President leapt before he looked. His handlers have since tried to snatch him out of thin air and sit him down for a friendly beer with the two parties and let the moment pass.

So it has.

But then there was another odd moment for the president this past week, and it has grieved me more, since it is about economics and I do understand the issues. It is not yet an issue in the press and probably will not become one. It is the Saturday remark by the President, coming after GDP fell by only a 1% annual rate in Q2, saying that there will be many more months of recession. Huh??

"It will take many more months to fully dig ourselves out of a recession - a recession that we've now learned was even deeper than anyone thought," the president said in his weekly radio and Internet address.

"And when we receive our monthly job report next week, it is likely to show that we are continuing to lose far too many jobs in this country. As far as I'm concerned, we will not have a recovery as long as we keep losing jobs."

This makes no sense to me. It's true that the recession was deeper than anyone thought but that's no longer news, it's old hat. What's news is that the Q2 drop in GDP is (just about) shallower than 'anyone thought.' The President is supposed to be a cheerleader for the economy. Yet he continues to pour cold water on good news and emphasize bad news. The economy fell at a 1% annual rate and that is just a stone's throw from positive growth and that will likely mark the end of the recession (it's not automatic, however). Economists are now lining up the side of saying that the recession is almost over; meanwhile, the President is living in the past. (Don't stop thinking about yesterday?)

Over the weekend his Treasury Secretary began the contrary spin that the recession may be almost over, pushing the positive message but fudging on the timing.

Yet another Obama advisor, Larry Summers tossed this curve ball into the mix:
"Historically, increased hiring typically lags increases in output, so it's going to take time before you see it ... in the employment statistics," White House economic adviser Lawrence Summers told NBC's "Meet the Press."
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For anyone interested in the FACTS, here they are:
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Recession of
count of months to first gain in jobs then to lasting gain
2001...... ..... 7......................... 20
1990............ 4..........................13
1981.............3...........................4
1980..............2...........................2
1973..............3...........................5
1969..............2...........................2
1960..............2...........................2
=======================
2001&1990
average: .......5.5........ .........16.5
Others
Average........2.0............ .........3.0
=======================

So what is the agenda and what is Mr Summer's point? Do job losses continue when the recession ends? Yes, always in fact. For how long? Well, except for the last two recessions for 2 or 3 months. Geez, is that a reason to shift national policy?

Don't get me wrong. I am not against extending unemployment benefits. Just because jobs start increasing soon after the recession ends and just because the recession seems about ready to end there are still reasons for more government involvement. There are significant blocs of people whose unemployment benefits will expire soon due to the length of the recession. Jobs will still be hard to get even as employment begins to increase on a monthly basis. So do it for that reason, not for some bogus reason. Extend benefits even though the recession is ending. Do it to alleviate hardship, if that's what you want to do.

Both Geithner and Summers cite the lagging nature of the unemployment rate. They see it peaking in 2010. And that rate does lag by more than job growth --but not by much. If it does peak in 2010, and not in 2009, it will come early in 2010, not late.

All this distortion about jobs and how long it takes for them to grow and the economy and how bad it is, is destructive to the economy. I will not again issue the analysis I have already presented in this blog. But a set of historic recession FACTS tells us that when recessions are deep, the subsequent expansions tend to be strong. So we could be putting people back to work more quickly than it's now anticipated and at a faster rate when we do.

I want the President to regain his focus. He is our national leader; he must rise above representing an interest group. When JFK was president he was president first, Catholic second. Obama must be president first and black second. He must not be so quick to jump to support friends. He also needs to get his economic facts straight as well as his role or mission. I fear that it is for partisan reasons that the President does not want to take ownership of the economy. He wants to continue to live in the past and to blame the Republicans for a recession that really has some pretty deep bi-partisan roots. I don't think Lawrence Summers is a help in that regard. The President needs to be OUR cheerleader not another disheartened voice. We have enough of those. It does not sound to me like Mr Summer's council is going in the right direction. Mr Geithner seems to have this one right by at least looking at the positive. But then there is all that talk about deficits and the possibility of tax hikes. It would be nice to milk the good news for a while when we have it.

Hey did you know that GDP in Q2 fell at just a -1% pace after dropping at a -6.4% pace in Q1. Good news, eh?

Even more to the point, we need the President to pick the policy he wants to implement and to tell us why for the right reason, not for the wrong reason. I think we have had enough of that 'bait and switch', don't you?