If history were any guide, President Obama should be cruising to reelection with high approval ratings just now. Economic recoveries are generally proportional to the severity of the recessions that preceded them. A president who is lucky enough to face reelection when a recovery is well under way should be a blessed incumbent.
The following charts suggest that something rather different is happening.
That's not Carter-horrible, but it is well below Reagan and Clinton levels. Here is another chart that is more unfortunate, perhaps, for 1600 Pennsylvania Avenue.
This isn't only merely bad; it's really most sincerely bad. The most recent jobs report is especially disheartening. It casts doubts about the recovery that seemed to be under way. This may be a blip and it may be revised upward when better data becomes available. The problem remains that we are seeing the weakest jobs recovery after the greatest jobs loss in a half century. At this rate, we don't get back to where we fell from for years. Why is line for the recent recession so different from those of previous recessions?
There is a reason why economic recoveries are usually robust. Recessions are caused by inefficiencies that build up in the private economy over time and they are the cure for that problem. That is why they are sometimes called "corrections". Unfortunately, recessions cannot correct for bad government.
Governments have enormous powers to keep paying out when their revenues dry up, something that private businesses cannot do. But with great power, I have heard it said, comes great responsibility. Another way to put that is that with irresponsible behavior by governments come great disasters.
The current dilemma is not the President's fault. It is the result of long term trends in government behavior. At virtually every level of government in virtually all developed countries, the same chickens are coming home to roost. Consider the state of Illinois, as told by the Chicago Tribune:
The state of Illinois admits to $83 billion in pension underfunding, a staggering weight on today's and tomorrow's taxpayers. Add to that the as yet uncalculated billions in unfunded pension obligations for city, county and other local governments… Beyond that $83 billion in unfunded pensions, state government alone faces an unfunded liability of more than $54 billion in retiree health liabilities over the next 30 years.
And then there is California. From the City Journal:
From health care to state and local public-employee retirement benefits, Californians face as much as $500 billion in unfunded liabilities for pensions alone. The state's unfunded health-care liabilities top $62 billion. Brown's new budget actually proposes a 7 percent increase in spending, though it offers to cut some services.
And then there is Spain. From the editors of the Washington Post:
EUROPE IS supposed to be well on its way to resolving the debt crisis that threatens the coherence of the European Union and the stability of its common currency, the euro. But apparently the bond markets didn't get the memo. Creditors balked at the latest offering of Spanish 10-year bonds, forcing Madrid to pay an interest rate of almost 5.8 percent, the highest rate since December and dangerously close to the 7 percent level believed inconsistent with national solvency.
That is why the current recovery in the US is so anemic and why the European governments are floundering in their attempts to economic stability. The basic problem is not in the private sector, which ordinary economic cycles can correct, but in the public sector. It is at root a failure of budgeting.
A responsible budget is a plan for the future. No one can see the future, but one can project realistic and honest estimates of the costs of government programs and balance those projections against equally realistic and honest expectations of revenues. Across the board and at every level and for decades, governments have failed to budget responsibly.
The President has acknowledged the need for entitlement reform and fiscal responsibility, but he has made no attempt to produce a budget that seriously addresses the problems we face. The budgets he has produced over the last two years, projecting long term deficits into the stratosphere, have failed to gain a single vote in House of Representatives.
The Republican majority in the House has produced a budget two years in a row. I am not here defending those budgets. I do note that what is supposed to happen is that the Senate would produce a budget of its own and conference committee would hammer out a compromise to be passed by both houses and sent to the President for his signature. That is how legislation works and in the case of budgets it is required by law.
The Democratic majority in the Senate refuses to produce any budget at all. It has been over a thousand days since they have done so. As long as the Senate continues to refuse to do its duty, the Federal Government will remain fiscally constipated. It can't pass a budget.
The severity of our economic crisis is due to a loss of confidence by business managers and investors. That will not be remedied until our own government and those of other economically important nations begin to put their fiscal houses in order. I don't know who will win the elections this fall. Whoever does will face some extraordinary challenges.