That’s the question President Obama is going to have to start answering if he tries to talk about the economy, because things are so bad that even the mainstream news outlets and Democratic party operatives can no longer ignore them.
According to the Department of Labor, there are still 4.6 million fewer private sector jobs today than January 2008. In the public sector, nationwide, there are 407,000 fewer jobs today than January 2008. But within the Federal Government, there has actually been a net gain of 225,000 jobs since January 2008. Despite its claims to the contrary, the Obama Administration can’t honestly claim that it has created a single new job in the private sector. But it has created nearly a quarter of a million new jobs in the Federal Government — although it’s unlikely that this statistic will impress too many voters.
In other news, the latest report from the Federal Reserve notes that the net worth of middle class families plunged nearly 40% between 2007 and 2010. Much of this net loss was due to the decline in real property values that followed the bursting of the mortgage bubble. Another significant factor was the major decline in the stock market in 2008 and 2009, which drastically lowered the value of savings and investment accounts. The middle and lower middle working classes have been hit hardest by the recession, and its real effects have resonated far beyond depressed home values.
First, the initial spike in unemployment that followed the stock market crash and the mortgage meltdown forced a significant number of people to cash in securities because they needed emergency money. Even though the stock market has mostly recovered, many of those investments were cashed in at the bottom of the market, and that money is either no longer invested or available for investment. That means that a significant number of middle class Americans have not been able to take advantage of the stock market’s recovery. Long term unemployment is another serious problem. Millions have been unemployed for two years or longer — the steepest period of long term unemployment since the Great Depression — and have burned through their savings and investments. Even if they have found temporary or part time employment they are not earning enough to start saving again. Finally, real wages have decreased since the start of the current recession and have not yet recovered to pre-recession levels.
All of these factors contribute to something called the “wealth effect,” which ties people’s spending habits to their perceived wealth. In other words, even when employment and wages eventually recover, the spending of middle class Americans may still remain lackluster due to their huge losses of investment and equity wealth. We may already be seeing this reflected in the fact that retail sales posted a 0.2% drop for the months of April and May. This has been primarily attributed to falling gasoline prices, but the gasoline price decrease is due largely to weak demand and the European financial crisis which is driving down crude oil prices. Neither of those phenomena is a “positive” economic sign. Although overall sales are still a little better than April/May of last year, a tapering-off of consumer spending seems to indicate that people still do not anticipate any kind of real economic recovery during the summer.
Maybe that’s why Paul Krugman was finally forced to admit at the Netroots Nation convention that our current economy is “incredibly awful.” Or why James Carville is now openly talking about “the deterioration of the middle class.”
Yet President Obama seems blissfully unaware of the situation, even telling reporters last Friday that “the private sector is doing fine.” Really? Rush Limbaugh has come up with probably the most plausible explanation for the President’s unbelievable gaffe: to Obama, the “private sector” means Warren Buffett, Harvey Weinstein, Oprah, Jamie Dimon, George Kaiser, etc. In other words, the very folks that Obama is currently shaking down for campaign donations. And these super-rich Democrats have all done very well during the past few years; in fact, the top 1% is really the only segment of Americans who has seen their net worth increase during the recession.
But those of us who don’t hob-nob with the ultra rich at their posh Beverly Hills estates or quaint summer vacation homes in the Hamptons see our current economic situation quite differently. Twenty years ago, the mainstream media cheerfully drummed up public sentiment against George H. W. Bush and “the worst economy in the last fifty years,” and directly blamed his policies for the comparatively minor downturn that occurred during the spring and summer of 1992. Today they have been working furiously to avoid blaming Barack Obama for anything. But if public attitude about the economy continues to sour, it’s doubtful that they will be able to feign “neutrality” for much longer.
Let’s hope that happens very, very soon.