28 Apr
2011
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Modern Malaise (and Why Obama is Beatable)

The government reported Q1 GDP growth figures today at 1.8% annualized.

From MarketWatch:

The U.S. economy slowed markedly in the first quarter and inflation accelerated, clear evidence of the double whammy on the economy from higher gasoline prices.

In its first estimate Thursday, the Commerce Department said gross domestic product rose at a 1.8% annual rate between January and March, slower than the 3.1% pace in the prior three months.

Believe it or not, this was better than the predicted 1.7%.  Economists once again “blamed” weather (is weather a new phenomenon?), but have now added high gasoline prices to their list of economic gripes.  Growth estimates for 2011 remain between 3.1% and 3.3%, which now, in the context of this report, seem overly optimistic.

Let’s put into perspective how measly 1.8% growth is compared to the economic recovery experienced under Reagan.  Average annual GDP growth during the Reagan expansion years was 4.3% (see here).  In 1983, Reagan’s third year as President, GDP growth was 4.3%.  In 1984, GDP growth was a tremendous 7.3%.

Meanwhile, as the economy cools off (did it ever heat up?), jobless claims spiked

From MarketWatch:

WASHINGTON (MarketWatch) — New applications for U.S. unemployment benefits jumped last week to the highest level in three months, potentially a sign that recent improvement in hiring trends may have stalled.

The number of people who filed initial requests for jobless benefits climbed 25,000 to a seasonally adjusted 429,000 in the week ended April 23, the Labor Department reported Thursday. The last time claims were that high was in late January.

Economists surveyed by MarketWatch had expected claims to decline to 395,000. Claims in the prior week were revised up slightly to 404,000.

Finally, home values are in a “double dip.”

Home prices and sales fell again in March, according to both the Massachusetts Association of Realtors and The Warren Group, publisher of Banker & Tradesman.

The Bay State’s median home sale price dipped to $267,250 in March, down 2.8 percent from March, 2010, according to the Warren Group. Home sales were down 14 percent year-over-year.

Let’s not forget that the price of fuel and food have risen rapidly in the last few months.  Consumers are paying an average of $3.87 per gallon, up from $2.85 a year ago and $3.58 a month ago (here).

In short, Obama’s policies have failed.  Americans are suffering and are reaching the end of their financial rope.  Another 1.5 years of Obama will only solidify the obvious.

Republicans, if they nominate the right candidate, one who talks plainly and honestly and explains why Obama’s policies have failed, have an eminently beatable opponent.  From this perspective, winning the election could be the easy part; reversing course once in power will be more challenging.

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