President Barack Obama and Treasury Secretary Timothy Geithner, both who previously were hailed as providing great leadership, appear to faltering according to the most recent Wall Street Journal survey of economists. This stands in sharp contrast to public popularity polls, which still show the President with support around the 55-60% range. However, even the public is getting worried: a Rasmussen poll shows that 53% of the public now worry that the U.S. is headed for a Depression, and that has steadily increased since the fall.
There was a wide range of opinions from the economists, who a few short months ago were relatively optimistic about the Obama Administration’s performance before the inauguration. But a majority of the 49 economists polled is dissatisfied with the administration’s economic policies. On average, they gave the president a mark of 59 out of 100, and although there was a broad range of marks, 42% of respondents graded Mr. Obama below 60.
Many economists were dissatisfied with the stimulus plan, complaining that the spending was not very stimulative. However, economists’ main complaint centers on the administration’s plan for the banking sector. “The most important issue in the short run is the financial rescue,” said Stephen Stanley of RBS Greenwich Capital. “They overpromised and underdelivered. Secretary Geithner scheduled a big speech and came out with just a vague blueprint. The uncertainty is hanging over everyone’s head.”
Overall, the economists predicted that the downturn will end in October. Previously, they had predicted the bottom would arrive in August. GDP is predicted to continue to contract in the first half of this year, with slow growth returning in the third quarter. They also expect unemployment to steadily increase, hitting an estimated peak of 9.3% by December of this year. Economists also put nearly a one-in-six chance that the U.S. will fall into a depression, defined as a decline in per-person GDP or consumption by 10% or more.
The world is not that impressed either. The Obama Administration has been trying to get a global stimulus plan working. The disagreements, especially between the European Union and the United States, appears to be widening. Obama and his allies want a large stimulus plan, along the lines of 5% of GDP for all western nations. So far, the Europeans have not even passed stimuli equivalent to 1% of GDP. Obama was hoping to have an agreement ready to sign at the G20 summit next month, but that appears less and less likely to happen. Some of this is cultural, as countries like Germany are very resistant to deficit spending. However, some is lack of faith in the Americans to do what is needed on their side of the pond. And many Europeans, in traditional European fashion, blame the Americans for all their ills.
This dissatisfaction, especially of Geithner, is shocking. Geithner was the unanimous pick for the Treasury post, and almost no one I have heard of spoke against him when he was named. But he has failed in building confidence of his abilities to solve the banking and credit crisis, which has put strong downward pressure on the markets. His foreclosure plan has been criticized from numerous angles. Additionally, the President’s lack of focus on the economy concerns many, when it is almost everyone’s top issue for discussion. You know it is bad for Timothy Geithner when he has become the laughingstock of Saturday Night Live; now, that is the big time.