NEOAVATARA

I just wanted to to make clear some realities that both sides are obscuring:

1.  The economy is getting better.

Some conservatives say ‘wait, but we are losing jobs!’.  Yes, we are losing jobs.  Things are still very bad.  That said, we are either turning the corner, or getting ready to turn the corner.  This is not unexpected.  Late last year, I predicted that the turnaround would occur by September…that has generally been the consensus at the time.  This was no surprise.  Many feel that this turn around would have occurred with or without the Obama stimulus; that is debatable.

2. The Deficit is ugly.

$1.3 trillion already.  $181,000,000,000 in JULY ALONE!!! That is more than the national debt for most of the history of this country.  And things are going to get worse.  Enough said.

And because of that, most Americans think Obama is going to break his promise and raise taxes.  The expectation of higher taxes doesn’t help the economy either.

3.  We are still hemorrhaging jobs.

Now stick with me here, because it is a little complicated.  People often ask how we can lose a couple hundred thousand jobs, and have an improvement in jobs numbers.

Last week, we had a jobs report showing that the unemployment rate dropped from 9.5% to 9.4%.  But understand how they come to this number.  They calculate the total number of people that currently are unemployment insurance, and divide that by the total amount of people that are considered ‘employable’.  So, the number of unemployed individuals actually increased.  O.K.  But how did the employment percentage decrease?  Because the total number people considered employable actually shifted upwards, meaning the overall rate of unemployment decreased.  Why did that number increase?  Well, there are a lot of reasons, most relating to seasonal changes.

In any case the number itself is probably accurate, but is also meaningless.

The White House themselves have said that unemployment will likely still push 10%.  Now, this seems to be an oxymoron.  But here is the problem.  In the above number, one thing not considered are people who have been unemployed so long that they have started fall off the unemployment insurance numbers, and have given up looking for a job.  This number has increased, meaning that overall unemployment, despite the jobs statistic, is still getting worse.  Is it getting worse at a slower rate?  Sure, but it is still worse.

And this week, jobless claims jumped again, with a drop in overall people receiving unemployment…backing up my point that many of these people simply are starting to lose unemployment benefits.

4. Retail sales declined in July.

How could this be?  I thought ‘Cash for Clunkers’ was such a huge success and stimulated the economy.

Well, first of all, as ‘successful’ as Cash for Clunkers has been, it has repercussions.  First, basically you have shifted people spending money on new cars from some point in the future to today.  The overall sales of cars over the next year or two are unlikely to change despite the program.  Additionally, more money spent on cars means less money to spend on other things…which may be a small part of why retailers have done so poorly.

5.  Foreclosures are still rising, with no immediate end in sight.

There were more than 360,000 properties with foreclosure filings — including default notices, scheduled auctions and bank repossessions — an increase of 7% from June and 32% from July 2008, according to RealtyTrac, an online marketer of foreclosed homes. In fact, one in every 355 U.S. homes had at least one filing during July.

Ultimately, we are still in a bad recession.  I think we have to give credit where credit is due.  Some of the actions by Bush and Obama with TARP did avoid a major disaster last fall.  And the economic system is healing.  That is simply a fact.

But that is a different issue all together whether we are on a path to have a thriving economy.  Almost every economist now believes that we will NOT have anything close to robust growth by 2011, and even by then they are divided on what kind of recovery we will have. This is ultimately where the Obama Stimulus Plan appears to be failing.  There is simply nothing in that plan that was stimulative.  Did it spend a bunch of money, and help keep people afloat.  Maybe.  I am even willing to cede the point.  But longterm, it will hamstring us into spending less, and doesn’t help create any longterm business growth that is ultimately crucial for an economy to thrive.

So the classic ‘jobless’ recovery may be on the way.

So, when we count what succeeded and what didn’t in the last year, yes, Obama and Bush probably helped save us from a depression.  But neither have helped us to have a booming economy like we have had for the past quarter century.  Ultimately, that is what President Obama will be judged on.