Anecdotally, my perception is that about 80% of the country wants the Obama Presidency to be a success. On the other side of things, you have about 18% of the far right who want him and the country under him to fail, and you can read all about the things those folks have to say at the website Free Republic, www.freerepublic.com. You also have about 2% of the country who are the extreme elements of the progressive left who have spent the last eight years trying to convince people that the Republican and Democratic Parties are the same and thus those people also have an investment in the failure of an Obama Presidency. You can read about what those people have to say among the comments of more pragmatic progressives at many progressive news agencies like www.OpEdNews.com .
What is almost universal is the lack of understanding of how bad this economic downturn is likely to get and what impact that will have on Obama's first term and whether that first term is seen as a success or failure.
Taking first the current unemployment rate of 6.5% (1), we are at the highest unemployment rate in fourteen years. Goldman Sachs and many other respected analysts have predicted an unemployment rate of 8.5% sometime next year. The last two months, the rate of job losses has been accelerating at an alarming rate. We have lost half a million jobs in the last two months alone and over 1.2 million jobs have been lost so far this year. I wrote in April that I believe we would see unemployment at near 15% by the end of next year and I think the combination of accelerating job losses and GDP shrinkage points to a higher unemployment rate than what firms like Goldman Sachs are predicting.
To my point, the accelerated job losses and GDP shrinkage are coming as we are two weeks away from the start of the holiday shopping season that accounts for an overwhelming amount of the US Retail markets' receipts. The horrific holiday shopping season that I think we are going to have is going to open the job loss spigots even wider. The writing is already on the wall, retail sales had a 1.2% decline in September and this Friday, November 14th, the retail sales figures for October will be released and most analysts expect a further 1.4% decline in sales. Besides retail sales, there are a myriad of bad economic reports. The Yahoo Finance Top News stories for yesterday had as much bad news as one normally sees in a month. Those titles include:
Fed's bailout for AIG swells to more than $150B
Circuit City files for bankruptcy protection
Deutsche Post to cut 9,500 jobs in US
Fannie posts $29B 3Q loss, $100B (bailout) may not be enough
GM shares hit 60-year low on worries of collapse
Starbucks 4Q profit drops 97 pct on closure costs
Tribune Co. swings to $121.6 million loss in 3Q
This doesn't seem like your run of the mill recession to me, it looks like the beginnings of a complete collapse. Two months from now when Obama takes office, how much worse off will we be? Obama and his team should have two plans, one for what they would do if the economy takes the course that many analysts predict where you have a moderate to severe recession, and another contingency plan for what they would do if the economy becomes much worse than that. It may need to include emergency plans to put a lot of people around the country back to work in infrastructure and/or public works.
Even if we have a recession with 'only' 8.5% unemployment, that would represent the worst unemployment rate in 25 years, since 1983 (2). There are many Americans in the workforce today who were not old enough to appreciate how bad things were in the recession/stagflation of the late 70's and early 80's. When unemployment gets that bad, it becomes the defining issue of the current Presidential term. No one cares if other pet projects are not undertaken and the expectation is for the administration to 'fix it' at all costs.
President-elect Obama has already taken important steps toward addressing our economic crisis. He has assembled an economic team the likes of which has probably never been seen before in America or anywhere else. His team members include Paul Volcker, who was the architect of the recovery for the late 70's early 80's recession/stagflation, the wealthiest and most successful venture capitalist in history and chairman of Berkshire Hathaway, Warren Buffet, Google chairman Eric Schmidt, a professor at the University of Chicago Graduate School of Business Austan Goolsbee, former head of the Hamilton Project, Jason Furman, former commissioner of the Securities and Exchange Commission Roel Campos, former commerce secretary William Daley, Roger Ferguson, former vice chairman of the Federal Reserve board of governors, Anne Mulcahy the chairman and CEO of Xerox Corp as well as many others including Robert Reich and Robert Rubin (3,4).
The above group of assembled economic giants could be called a "Dream Team'. It will fall to them, under President Obama's leadership, to craft a way out of the economic death spiral in which we find ourselves. One of their challenges will be to grow the economy and of course put people back to work in an environment where there are energy and food shortages. We're seeing decreases in the price of oil and gas because the market is betting that the recession will cause a drop in demand. If, however, a recovery begins to take shape in the next 12-18 months and demand begins to increase again, if we have not addressed issues with the supplies of food and energy, you will see a rapid increase in inflation that may kill any recovery before it has the chance to really get going.
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