After four tough years for the economy, Barack Obama is about to be inaugurated for his second term as President, and the stock market Dow Jones Industrial Average and S & P 500 have hit their highest point since December 2007, when the Great Recession was beginning.
Housing starts are up, and unemployment is staying below 8 percent, and many economists predict a good recovery becoming clear during 2013, as long as budget deals and debt ceilings controversies are resolved. But the debt ceiling issue is a troublesome one.
Obama has asked for a lifting of the debt ceiling only three times, while George W. Bush asked for it seven times, Bill Clinton a total of four times, George H. W. Bush four times, and Ronald Reagan a grand total of SEVENTEEN times!
In percentages, Obama has had the debt limit go up only 26 percent; Bush II 90 percent, Clinton 44 percent, Bush I 48 percent, and Reagan nearly 300 percent!
But now, it is suddenly a massive issue, when Republicans assert that, somehow, Obama has been more reckless than anyone else, when in fact, he has been far more responsible than any recent President, and particularly Reagan, who ranks at the bottom on this list of the past four Presidents and Barack Obama!
So Obama has a lot to be thankful for, relating to the stock market revival, but there are still many issues and problems that he will face in the next four years!
Fewer and fewer Americans have their wealth invested in the stock market today. Many of those who experienced considerable losses to their retirement accounts in the 2008-2010 period left the market and never came back. Much of the daily volume on the NYSE as of January 2013 is the product of High-Frequency Trading (HFT), which has pushed out traditional retail investors. I suggest you read the NY Times article “High-Speed Traders Profit at Expense of Ordinary Investors” , although there are literally hundreds of other news items out there that corroborate this.
Much, if not all, of the stock market’s rise can be attributed to: (1) inflation – as the value of the dollar declines, the dollar value of equity holdings increases; (2) Quantitative Easing – the Federal Reserve’s Quantitative Easing mechanism puts more dollars into circulation by first distributing them to bulge-bracket investment banks like Goldman Sachs and JP Morgan Chase, which are using the money to pump up equities; (3) global fears about the Japanese and European bond markets; (4) interest rates that are effectively 0%, which allow investment banks to generate profits through arbitrage – they borrow money for free, use it to purchase equities, this fuels equity price increases and the whole thing becomes a feedback loop. You ignore the fact that precipitous increases in asset prices often herald a economic “bubble” rather than sustainable growth.
That inflation rate (which is not reflected by the Consumer Price Index, as food, housing and fuel have been removed from that index) and the absurdly low interest rates are clobbering low-income people on fixed incomes. This stock rally is nothing to cheer about if you care about the livelihoods of working class people or retirees or if you are concerned about income inequality.
To say that “many economists” predict a strong 2013 is sophistry. All you’re saying is that, somewhere, two or more economists predict strength. Can you name some specific economists, so your readers can evaluate their credibility? I place a lot of trust in Nouriel Roubini. He is a professor at NYU’s Stern School of Business. He sat on the Council of Economic Advisors during the Clinton administration and was at one point an assistant to current Treasury Secretary Tim Geithner. He received a lot of notability for predicting the Great Recession and for calling out much of the malfeasance on Wall Street that led to it. His prediction for 2013 is that the economy will be (direct quote) “awful”, the UK and some Eurozone countries will tip back into recession, and growth will be woefully anemic in the U.S. and Japan.
As for unemployment … I have taken up a lot of space already, so I will simply suggest you look up John Williams’ Shadow Stats. If we were to utilize Depression-era statistical methodologies, in order to make a direct comparison to today, unemployment in January 2013 would be above 20%.
You don’t strike me as a “progressive”, at least not a principled one. You seem to be primarily preoccupied with edifying the political legitimacy of President Obama, even if doing so conflicts with a reality-based, nuanced assessment of where our economy really stands.
The number of times that you raise it isn’t something I would focus on. Someone could massively increase the ceiling, which might not be prudent, and they’ve only increased it once. Also, someone could have increased the ceiling, and then another future president could have run up deficits to get the debt up to the limit. The fact is that deficits as a % of GDP have been much higher over the last few years than during the late ’90s or during the 2000’s prior to the credit and housing bubbles bursting.