The Obama Economy

Ray Keating

President Barack Obama was elected and came into office amidst a terrible economy. There's no doubt about that.

However, with the President now being in the White House for over two-and-a-half years, the current economy most definitely is the Obama economy. And as the latest GDP numbers out on July 29 show, it's a continuing ugly economy.

Real GDP in the second quarter grew at a dismal 1.3%. For good measure, growth was revised dramatically downward for the previous two quarters - taking fourth quarter 2010 real GDP growth from 3.1% to 2.3%, and the first quarter 2011 from 1.9% to 0.4%.

Inside the second quarter GDP numbers, personal consumption expenditures were basically flat; private gross domestic investment rose but a faster pace clearly is needed; and while exports were positive, the rate of increase slowed for the third straight quarter.

As for the so-called recovery in general, real GDP growth over the past eight quarters has averaged 2.5%, and over the past two quarters an average of only 0.85%. Meanwhile, during recovery/growth periods, real GDP has averaged 4.5% real growth since 1950.

Bottom line: This Obama recovery ranks as one of the worst on record.

Of course, given the public policy climate over the past three-and-a-half-plus years, a poor recovery should surprise no one.

We need substantive, permanent tax relief. Instead, the Obama administration has raised taxes, including in ObamaCare, and is pushing for higher taxes down the road. For good measure, massive government stimulus spending, which has done nothing to spark the economy, has raised the specter of still higher taxes not too far down the road. Indeed, until very recently, President Obama and Senate Democrats were pushing hard for tax hikes to be central in any debt ceiling deal.

Burdensome, misguided and outdated regulations, which take their heaviest tolls on job-creating small businesses, need to be rolled back. Yet, more regulation, including, for example, in health care, in the workplace, and in the financial industry, has been the leading policy weapon of the Obama White House.

Lowering trade barriers must be a priority in order to expand opportunity for U.S. entrepreneurs, businesses and workers. Yet, the President has shown no substantive interest in moving ahead on free trade.

And investors, entrepreneurs and consumers need the confidence that monetary policy is focused on price stability and maintaining the value of the dollar. Clearly, that has not been the case with the Bernanke Fed, which has loosened monetary policy at an unparalleled rate, creating enormous risks regarding inflation.

Higher taxes, more regulation, loose monetary policy, and no interest in advancing free trade is a recipe for damaging the economy, not aiding it. This agenda has created vast concerns among the entrepreneurial sector of our economy, thereby restraining the private sector risk taking needed to spur growth and job creation. Policymaking in the U.S. will have to move in a dramatically different direction if we are to see a solid return to robust economic and employment growth.

Raymond J. Keating, chief economist for Small Business & Entrepreneurship Council.
Copyright 2011, Small Business & Entrepreneurship Council. All Rights Reserved.

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