We worry as we prepare to fire up our barbeques, head for the beaches and ballparks, and otherwise celebrate our hard won independence from British despotism. That’s the good news, because it reflects a realization that a policy shift can no longer be postponed. By 44 to 34 percent, we have told Bloomberg pollsters we are worse off than we were last year (the balance say their situation is unchanged). Over half of those polled – 55 percent – expect their children’s standard of living to be lower than their own, while only 23 percent are expecting their children to live better than they have. Two out of every three Americans polled believe the nation is on the wrong track.
Top of the list: worries about jobs. You probably read about how upset we are with gasoline prices, which encourages the Obama team to believe that as prices come down, the president’s approval rating will go up. Well, only 4 percent of those polled rate gasoline prices their biggest problem; 42 percent say unemployment and jobs are the most important issue facing the country, four times as many as worry primarily about health care.
The better news is that Americans have come to realize that the fault, dear reader, lies not in our stars, but in ourselves, knowing that we are underlings, to borrow from Cassius. So millions of usually passive citizens have become activist voters, no longer willing to tolerate the errors of policymakers or allow trade unions, which account for less than 7 percent of the work force, to dominate the electoral process.
The Tea Partiers, derided by the U.S. liberal establishment and by the commentariat in Britain and in Europe as an uneducated, trailer-dwelling, bible reading mob, have taken to the streets to show that they are indeed no longer content to be underlings, that friend Cassius had it right when he said, “Men are at some time masters of their fates.” To the Tea Partiers and friends, now is that time.
Aroused citizens are realizing that their political and policy leaders are not only on the wrong track, but don’t know how to change to the right one. President Obama poured $787 billion into a stimulus package designed to fund shovel ready projects and cut the unemployment rate to 8 percent. He subsequently admitted those projects really weren’t shovel ready. The unemployment rate, at 9.1 percent, is significantly above the 7.8 percent level he inherited, but the federal deficit has tripled from less than $500 billion to $1.5 trillion, or about 10 percent of GDP, in line with Greece.
Federal Reserve Board chairman Ben Bernanke printed $600 billion with which to buy Obama’s IOUs in an eight-month program that ended last Thursday in an attempt to
♦ keep mortgage rates low (he succeeded), so that the housing market would recover (it didn’t);
♦ lower corporate borrowing costs (he succeeded) so that business spending would rise sharply (it didn’t);
♦ head off a Japanese-style deflation (he succeeded), but at the cost of an inflation in commodities prices;
♦ drive share prices higher (he succeeded) in order to shore up consumer confidence and spending (it didn’t).
But it is unfair to blame the massive level of debt and misshapen policies solely on politicians. American voters overwhelmingly favor reducing the deficit, but also say they don’t want to give up any of their health care, pension and other benefits, or have their taxes raised.
If the fact that Americans are worried is good news, and the fact that there are stirrings among the electorate to get America onto the right track is the better news, then the best news is that a consensus is forming as to how to do that. Even President Obama now insists that he is a born again deficit cutter, willing to forego some programs he favors—unfortunately, none that are the real cause of the ongoing deficits. The president instead blames the deficit on Republicans’ refusal to raise taxes on “millionaires and billionaires, and on corporate jets and oil companies. Charles Krauthammer computes that, “If you started collecting that [corporate jet] tax at the time of John the Baptist and you collected it every year — first in shekels and now in dollars — you wouldn’t be halfway to covering one year of the amount of debt that Obama has run up. If you collect the corporate jets and the oil tax together … for 100 years, it covers the amount of debt Obama added… in February!”
The received wisdom in Washington is that a mixture of tax increases and spending cuts – something in the range of $3 of cuts for every $1 in tax increases – will be part of a deal to increase the debt ceiling sufficiently to enable the government to get through the summer congressional recess, when haggling over a longer-term solution will resume.
Meanwhile, the recovery crawls along, although with no help from the banks, which have increased the portion of mortgage applications that are rejected, and continue to make it difficult for small businesses to obtain credit. A bit of good news comes from the auto industry, which is reporting that June sales were up 12 percent over last year, and 4 percent over last month’s dreary performance. Overall, the conference board’s indices that are supposed to foretell economic activity “still point to expanding economic activity in the coming months,” reports the board’s economist, Ataman Ozyildirim.
The president is hoping that the expansion will pick up enough speed to get the unemployment rate closer to where it was when he took office. If it doesn’t, he is hoping that the $1 billion campaign he is planning, and an unelectable Republican standard bearer, will prevent some successor from coming in and tearing up his wife’s vegetable garden. We’ll know more when next week’s jobs report is released.