On November 6, Obama won a second chance to turn the economy around, by defeating clueless conservative Mitt Romney. So, what is Obama's plan? His plan is more of the same. More of Ben Bernanke's "quantitative easing", more tax increases, and even more regulations. Oh, and don't forget the $50 billion in additional "stimulus" spending Obama wants.
Part of Obama's new normal involves ignoring the staggering difference between the president's promises and the actual results delivered.
Obama's $842 billion in stimulus spending was supposed to get the unemployment rate down to 5.2% by now. The actual unemployment rate in November (calculated at the labor force participation rate assumed for the stimulus plan) was 10.8%. This is not only more than twice as high as the level promised, it is higher than the 10.4% rate (calculated on the same basis) that existed when Obama signed the stimulus bill into law.
So, is there any hope for the working class, and for jobless Americans that want to join the working class? As things stand right now, no, there isn't. Here's why.
Right now, America is about 14.7 million jobs short of full employment. To create one average job, someone has to invest about $200,000 in nonresidential assets. Therefore, to create the additional jobs we need, someone would have to invest an additional $3.0 trillion or so in the U.S. economy.
If an additional $3.0 trillion had been invested by the private sector during Obama's recovery, 3Q2012 GDP would have been $1.5 trillion, or 9.5%, higher than it actually was. Real GDP growth during those 13 calendar quarters would have averaged 5.11%, rather than the 2.21% actually achieved. By way of comparison, real GDP growth averaged 5.67% during the first 13 quarters of the Reagan recovery.
Coming out of a severe recession, a sustained period of fast economic growth has been normal for America,. However, under Obama, slow growth and high joblessness has become the new normal.
OK, so, who happens to have $3.0 trillion lying around, plus the knowledge and skills required to invest it wisely to create sustainable jobs? The poor? The middle class? The government?
No, the investment required to transform America's stagnant jobs picture can only come from the people that actually have the money, as well as the demonstrated ability to manage capital investment. In other words, it would have to come from the hated and reviled "one percent".
Obviously, "the rich" are already investing all that they are willing to invest under the current structure of incentives. Obama's plan is to do everything he can to make investment even less attractive for "the one percent" than it is now. This is why economic stagnation has become the new normal.
A good measure of the driving force for "the rich" to invest in job-creating nonresidential assets is the Real Dow, which is the Dow Jones Industrial Average divided by the price of gold.
A rising Dow reflects a flow of capital into productive assets. A rising gold price indicates that capital is moving into inflation hedges. The Real Dow, which is the ratio of the two, reveals the balance between the competing investment options available to "the rich".
The jobs picture will not improve until and unless the Real Dow begins a sustained rise. Unfortunately, the Real Dow ended November at 7.61. This is down by 16.6% since Obama's so-called "economic recovery" began, lower by 23.6% than when Bush 43 left office, and down by a staggering 80.6% since we last enjoyed full employment (in April 2000, under Bill Clinton).
So, if you are waiting for an improvement in the employment picture, watch the Real Dow, but don't hold your breath.
There will have to be big changes in policy before the jobs situation will improve significantly. Essentially, Obamunism would have to be supplanted by Reaganomics. America would have to move to a strong, stable dollar, lower taxes (especially on savings and investment), and cost-effective regulations.
As things stand, the American people can look forward to more years of economic stagnation, as well more years of pretending that there is a light at the end of the tunnel. Don't worry if your kids graduate from college, only to move back home and play video games in the basement. It's just the new normal.
Obamunism: I like that.
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