History teaches us that of all the factors that will impact the 2014 elections, none will be more important than the economy. By any measure, the Obama economy is anemic. In fact, Investor’s Business Daily states that “had Obama’s recovery been only as good as the average of the past 10 recoveries, the economy would be $1.3 trillion larger.” Or put another way, “that’s $4,038 for every person in the U.S., or $10,451 per household.”
Since the recession officially ended in June 2009, President Obama’s “recovery” has translated into a loss of about 10 million American jobs – not to mention the fact that the discouraging job market has eroded the willingness of the unemployed to even search for a job, resulting in millions more who have simply dropped out of the labor force. As I have written before, part of what little economic growth we have is sustained by the trickle-down from the wealth effect created by the stock market boom. The Obama economy disproportionately helps the 1 percent, but the only thing worse than trickle-down growth is no trickle-down at all.
The Federal Reserve announced yesterday that it will start the so-called “tapering” process in the new year, reducing government bond purchases beginning in January 2014 and thereby reducing the liquidity that has fueled the stock market. And I’m skeptical of the notion that the White House and the Fed do not collaborate on the decisions made regarding bond-buying and tapering.
Many Democrats have decided to conveniently believe that the recent uptick in the gross domestic product suggests that the synthetic economic lift that has been fueled by the conveyor belt of cash from Washington to Wall Street via the Federal Reserve can now be substituted with real economic growth. Like I said, it’s convenient to believe that real economic growth is here to stay, and that what little growth we have won’t stall when the Fed ends its liquidity supply to the stock market. It appears President Obama is willing to wager his party’s chances in the November elections on this assumption.
I’m reminded a little bit of that great scene in ‘Indiana Jones and the Raiders of the Lost Ark,’ where Jones is going to snatch a golden idol from its pedestal and simultaneously replace it with a bag of sand, in hopes that a booby trap would not be sprung and the walls wouldn’t cave in around him.
Nothing about corporate earnings or broad-based business confidence suggests that we are experiencing real economic growth. All the president is doing is further endangering his fellow Democrats, who already have the dead weight of Obamacare hanging around their necks as they prepare for the 2014 elections. This president may be one of the luckiest politicians of all time, but believing he can replace the government-supplied growth in the stock market with real economic growth when he and his Democratic allies continue to champion no-growth policies is unrealistic.
I have always said that President Obama and the Democrats don’t have many problems that a few quarters of 4 percent-GDP growth wouldn’t solve. But since we have only seen one quarter of over 4 percent GDP growth during President’s Obama’s tenure in office (in Q4 of 2011), it is highly unlikely that we’ll see two or three quarters of 4 percent growth before the midterm elections. The real question is how weak economic growth will be over the next year, not how strong.
President Obama is taking a real political gamble. But he’s not playing with his own fortunes. If the president’s economic “bag of sand” replacement doesn’t work as planned, he will survive, but Democrats on the ballot in 2014 will be trapped as the Obama economy caves in.
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