Thursday, September 24, 2009
It's the Economy, Stupid
Long the campaign battle cry of many a political contest, no words could be truer in today's economic climate. Recent polls indicate that the economy is the number one concern of Americans today--perceived more important than health care reform, national security and/or other pressing domestic or international issues of the day. So why doesn't the Obama administration declare a war on unemployment just as previous administrations have against drugs, cancer, AIDS, poverty, inflation or other major areas of public concern? Statistics reported by the government do not tell the whole story, especially of the thousands who have at least temporarily given up their new job searches in total frustration. While President Obama, Fed Chairman Bernanke, various economists and others in high ranking governmental positions want to believe that the Great Recession has hit bottom, jobs are still disappearing and not enough new, meaningful ones are being created, banks are still failing with the FDIC deposit insurance reserve once over $50 billion now less than $10 billion, and the auto and housing industries still very fragile despite being artificially pumped up by the "Cash for Clunkers" program and an $8000 first-time homebuyers tax subsidy that is scheduled to expire in November. And, most importantly, consumers, who have historically led the country out of past recessions (where experts proclaim that 70 percent of the U.S. economy is fueled by consumer spending), still aren't spending because too many that are fortunate enough to still have jobs are afraid of losing them, face furloughs or have had their hours drastically cut. The vast majority of jobs already lost are lost forever and so goes the spending of the millions of people who once held these jobs or who are now underemployed with temporary, much lower paying jobs forced to purchase just the necessities to survive. Major retailers have already announced plans to scale back seasonal holiday hirings even below the depressed levels of one year ago when the bottom really fell out for consumer spending. So many other employers are still playing a "wait and see" strategy or have announced salary freezes and/or already "no raise" policies for 2010. Where will the spending come from? And the misery index is still high. Despite low interest rates, even prime borrowers/businesses cannot get loans due to extremely restrictive underwriting standards or reduced or eliminated credit lines. Government-backed loans comprise a huge majority of all residential home loans being granted in today's environment; loans that must adhere to Fannie Mae and Freddie Mac agency standards while these governmental entities themselves continue to bleed billions in losses even after being nationalized in late 2008. In light of all of the other government bailouts (banks, auto industry, etc.), how much longer can the federal government continue to backstop the purchasing of mortgage securities that fuels this housing finance? Housing sales numbers are also artificially inflated by the forced bank sales of thousands of underwater mortgages (where the owners have walked away due to loan balances exceeding the home's market value) or the continuing flood of home foreclosures now affecting even the most prime loans due to borrower unemployment or catastrophic health care indebtedness. I'd like to be the eternal optimist just like the next person but there are just too many holes in the optimist's argument today. Not to downplay the importance of health care reform, the tremendous need for infrastructure improvements, or supporting our troops in harm's way, I, for one, believe that the economy should be this country's number one priority at this time--responsible and responsive lending to qualified borrowers by the nation's banks, hiring the unemployed with targeted tax breaks for corporations or small businesses, etc.--whatever the country needs to get back on track to real prosperity supported by realistic measures of economic health and not sugar-coated for political expediency. The stakes are too high and the problem too great not to give it the attention it truly needs. Yes, it is the ECONOMY, people! Is anyone listening?