The Obama Economy: Negative Growth

The economy stalled completely in the 4th quarter of 2012. The Federal government’s initial report shows a 0.1% annual drop in real GDP. This isn’t just a massive drop from the third quarter’s 3.1% annual GDP growth, we’re entering negative territory. In entering negative territory we’re seriously running the risk of another recession. Considering that Britain is dangerously close to a triple dip recession (thanks in part to tax increases) and Europe is on the edge of implosion, another American recession would hardly come as a surprise. One can only imagine how Obama will blame Republicans for all of this.

Those who have been following the economy knew that the fourth quarter probably wasn’t going to be terrific. There was tax uncertainty, Obamacare uncertainty and sequestration uncertainty. The only one of those issues that has gone away is the tax issue as Congress and the President increased taxes on 80% of American workers. Obamacare remains up in the air as to its tax increases and reach into business and taxpayer pocketbooks. Sequestration was put off several months along with the debt ceiling. Those two major issues create uncertainty in the economy and make the investment environment unstable.

If we go back and look at the economic data over the past several months we can see any number of problems with the economy. The unemployment rate has remained generally steady but if you look at the details there are less people working today than at this time last year. The reason the unemployment rate hasn’t gone up is because the Obama administration simply removes the long term unemployed from the employment market. First time unemployment applications routinely come in above 350,000 a week. There has been a massive increase in the number of Americans on Social Security Disability as the government seems to be moving the long term unemployed onto SSI. Durable goods orders which have been unsteady and have generally declined. It’s a perfect storm for a negative growth quarter.

What is interesting in all of this is that the stock market appears to be booming. The Dow is approaching 14,000, a number never reached before. Oil is approaching $100/barrel again and gold is approaching $1,700/ounce. Oil tends to follow the stock market and gold tends to go up when the economy looks unstable. Over the past decade the stock market has had the appearance of operating outside the general economy. When the recession hit the stock market dropped dramatically. But it worked its way back up to 13,000 at the Dow despite the fact that the economy was at best growing slowly and at worst stagnating. Then the Dow went down dramatically last year only to pick up again as the economy slows down. Your 401k may be doing well today but the same can’t be said of the economy.

We have a President who has no idea how fix economic problems. He believes in top down progressive fascism or the more banal term state capitalism. It hasn’t worked, the government has no idea how to manage an economy. Obama has no idea how to create regulations that result in actual growth, he has no idea how tax increases negatively affect the economy. The economy begins and ends in Washington in Obama’s world and if it doesn’t work out he’ll just blame the enemy. Apparently the American people like that approach. I hope the country enjoys the Obama recession.

UPDATE: As predicted Obama blamed Republicans for fourth quarter negative growth. The President doesn’t believe he’s responsible for anything.