While it would still be premature to issue a definitive judgment, early indicators seem to illustrate that President Obama’s ambitious economic initiatives are already failing. Five months into his presidency, none of President Obama’s initiatives or measures taken to stimulate the economy, failing to reach the benchmarks that the President himself set for his programs. Nearly a month ago, with unemployment spiraling higher, I asked if Obama’s stimulus bill could already be considered a failure. This week the economy’s health appeared even more bleak. The Voice of America reports:
The White House says America's employment picture is worse than the Obama administration had anticipated just a few months ago. The somber admission follows the latest jobless report showing the highest unemployment rate the United States has seen in more than 25 years.
U.S. unemployment jumped a half percent in May, to 9.4 percent prompting this comment by Austan Goolsbee, a member of President Barack Obama's Council of Economic Advisors:
"The economy clearly has gotten substantially worse from the initial predictions that were being made, not just by the White House, but by all of the private sector," said Austan Goolsbee.
Indeed, it appears the stimulus bill is already failing in its primary mission of saving and creating jobs. As this graph illustrates, one can easily tell that the stimulus bill has failed using President Obama’s own employment projections. The graph shows President Obama’s own predictions on what he thought unemployment would do if the stimulus bill was or was not passed, represented by the dark and light blue lines. The red indicators show what unemployment has actually done since the stimulus bill passed:
Basically, unemployment under Obama’s stimulus plan has already spiked higher than Obama’s own unemployment predictions for what would have happened if there had never been a stimulus bill. Now, it’s hard to predict these things, and I’m not faulting Obama and his economic team too much for just being wrong in their predictions. However, when you bet $787 billion on your predictions, money you don’t even have, you better make sure your predictions are right.
To make matters worse, this is not the only high spending government program that has failed in its goals since President Obama took office. Three months ago the Federal Reserve launched a $1.2 trillion plan that was supposed to revive the housing sector by bringing down mortgage rates. Unfortunately, this and other high-spending programs are having the exact opposite effect as intended. The AP reports:
But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.
"If the meltdown continues in the bond market, then mortgage yields will soon be at levels that choke off refinancing activity," said economist Ed Yardeni, who runs his own investment firm. "Even worse, they could abort any necessary recovery in home sales and prices."
In other words, the government is borrowing so much money to pay for these programs that investors fear rampant inflation is just a matter of time. This fear is so severe it has effectively stifled any recovery in the housing market. Again, this program was funded with borrowed money. Indeed, deficit spending has spiked tremendously since President Obama took office:
To put things in perspective, this would be like a family running up a huge debt through credit cards and unwise purchases. Instead of creating a budget and finding a temporary second job to help pay down the bills, however, the father decides to borrow a large sum of money (money he can’t hope to pay back) and try his luck down at the local casino. This month’s economic news is like the roulette wheel coming up black after the father put everything on red.
Even if these economic programs had worked as intended, the U.S. economy would have probably suffered from the incredible amounts of debt we have taken on from the money we borrowed to fund these programs. That these programs might spectacularly fail only raises dire concerns for the future of the American economy.