Tuesday, January 31, 2012

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January 31, 2012

Obama's Economic Illusion

President Obama has a new spring in his step, you may have noticed.

The State of the Union was well delivered and given with passion and confidence, the sign of a prize fighter warming up for a match and liking his chances. The president seemed kind of relaxed and optimistic, an attitude he's been bringing to his public appearances.

A key reason for this is the economy, which by the White House's account is bouncing back. But in reality, there's not much bounce. And if it reverses like it's done before, the economy may just bounce over a cliff.

Gross Domestic Product, the Commerce Department announced Friday, grew by 2.8 percent in the fourth quarter of 2011. Unemployment has come down to 8.5 percent. It took a long time to "dig us out of the ditch," the White House proclaims, but now President Obama's policies are finally starting to work.

Obama, as evidenced by his attitude, seems to genuinely believe this, but there's a big problem with his narrative. The problem is of course avoided by Obama, and unfortunately ignored by much of the press.

GDP growth for the fourth quarter the year before, in 2010, was 3.1 percent, higher than last quarter's. And it was 5 percent in the fourth quarter of 2009, when we appeared to be having a traditionally strong recovery, until the sluggish Obama recovery became apparent.

Meanwhile, growth for the year in 2011 averaged just 1.7 percent, compared to a 2010 average of 3 percent.

Unemployment, at 8.5 percent, remains way above historic averages. The White House says, "This is good, but we've got more work to do." Actually, it's not good, and at this pace there's years of work to do before we get back to a normal unemployment rate.

So the Obama argument that Bush was just so terrible that it took Obama a while to dig us out just doesn't wash. More logical is that, put succinctly, Obama screwed up the recovery.

Republicans don't seem to be making this argument. They seem willing to be drawn into a class warfare debate with Obama instead. Big mistake.

Keith Koffler
Editor, White House Dossier

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