From the Associated Press:

Federal Reserve Chairman Ben Bernanke says the economic recovery “is close to faltering” and the central bank is prepared to take further steps to support it.

The economy is growing more slowly than the Federal Reserve had expected, Bernanke said Tuesday before the congressional Joint Economic Committee. He said the biggest factor depressing consumer confidence is poor job growth.

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From the Associated Press:

The Federal Reserve is running out of options to try to boost a slumping economy and lower unemployment. So policymakers are expected to reach 50 years back into their playbook for their next move.

Most economists expect the Fed to announce a plan Wednesday to shift money in its $1.7 trillion portfolio out of short-term securities and into longer-term holdings.

The plan could lower Treasury yields further. Ultimately, it could reduce rates on mortgages and other consumer and business loans, too.

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We ignore most polls because most are not meaningfully instructive and, often, the phrasing of the questions hideously corrupts the results.  There are, however, some polls we do watch carefully because we believe they are instructive.  The Rasmussen “wrong direction, right direction” tracking poll is one we do watch carefully. It is conducted week after week and the single question that is asked (do you believe the country is headed in the right direction or the wrong direction?) is exquisitely unambiguous and the message it conveys to the ruling class can only be ignored at great peril.

Campaign strategists for President Obama as well as the leaders of both political parties, should be burning a lot of midnight oil pondering the reality that three quarters of the nation believes we are headed in the wrong direction.  That’s not just an opinion that’s being expressed.  It, rather, reflects a growing sinking feeling, a queasiness in the nation’s collective gut, not that things just aren’t going well, but that things are getting worse. It says that the vast majority of Americans believe the course that has been, and is being, set is the wrong course.

What should be particularly distressing to the White House is not only that the nation’s confidence is so low, but that it has also been deteriorating rather steadily.  To be sure, the people were unhappy with the direction of the country when President Bush left office.  When Bush departed Washington, two-thirds of the people felt we were headed in the wrong direction.  Now, following thirty-three months of President Obama’s initiatives to fundamentally transform America, three-quarters of the nation feels we are headed in the wrong direction.  The question doesn’t ask whether the people are happy with where we are, but, more importantly, whether they are happy with where we are headed.

Most polls provide a glimpse at where the electorate’s opinions are at a given moment, and, consequently, are subject to rapid change.  For example, prior to September 15^th 1950, most Americans probably would not have liked the way the war in Korea was going.  But between September 15 and September 19^th the enormously successful Inchon landing took place, and American opinion would have, no doubt, turned around on a dime.  President George H.W. Walker enjoyed very high approval ratings in January of 1991 following the successful Gulf War, but in spite of his personal popularity, his electability diminished as the economy declined in the months thereafter, clearing the way for President Clinton’s election in 1992.  Likewise, President Obama enjoyed a temporary, but well deserved bump in his approval rating when our navy seals took out Osama Bin Laden.

Presidential approval ratings (as compared to the “where we’re headed ratings“) are, we believe, less telling.

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From James Pethokoukis in Reuters:

And it may be about to get a whole lot worse for the Obama 2012 campaign. The White House’s worst-case scenario for the economy on Election Day next year has become Wall Street’s baseline scenario. After looking at a string of weak economic reports and Europe’s growing fear of debt meltdown and contagion, JPMorgan – led by Obama pal Jamie Dimon – has just come out with a politically poisonous forecast.

The megabank now thinks the economy won’t grow much faster over the next 12 months than it did during the first half of this year — and that’s assuming Europe doesn’t go all pear shaped. It sees GDP growth at just 1.5 percent this year, 1.3 percent next year with unemployment at … 9.5 percent heading into the final days of the election season. “The risks of recession are clearly elevated,” the bank said. Here’s its reasoning:

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Mr. Geithner, please check your crystal ball because it appears to have a major malfunction!  Either something’s wrong with the ball or you’ve got a classic case of “operator error” going on.  You might look into borrowing your good buddy Barack Obama’s.  His crystal ball seems to be shooting fairly straight these days.  “Electricity rates will necessarily skyrocket,” anyone remember this gem?  He could start a 1-800-psychic line with that one!  Hey it might not be pretty, but at least it was truthful.

In an interview with Fox News on April 19, 2011, a little over three months ago, when U.S. Treasury Secretary Timothy Geithner was asked if the U.S. was at risk of losing its AAA rating, he replied:

“No risk of that, no risk…you see the leadership of the United States of America, the President…the Republican leadership…the Democrats…recognizing now that this is the right thing to do for the economy.”

For some time now, the United States debt has been creeping up to the 100 percent of Gross Domestic Product (GDP) mark.  That’s a disaster just waiting in the wind. It’s reminiscent of 2001 when the Bush Administration warned of potential problems and warned that financial giants, Fannie Mae and Freddie Mac, could “cause strong repercussions in financial markets.”  In 2003, the White House upgraded the concerns to a “systemic risk” that could spread beyond the housing sector.  But U.S. Representative Barney Frank (D) told the House Financial Services Committee that the housing market was fine, stating, “Fannie Mae and Freddie Mack are not in a crisis.”

In 2008, the housing market crashed, sending the economy in a downward spiral, from which we have not recovered.  You would think that our “leaders” would have learned their lessons from the past, especially from such a debacle just a few short years ago.  But with the passing of the recent budget hijacking, debt ceiling busting deal that our lawmakers recently compromised on, ignoring the warnings of the TEA Party, it is apparent that the lessons of history were short-lived.  Shortly after the deal was done, the unthinkable happened.  The US debt hit the 100 percent mark of GDP, the market tanked, and the US credit rating was downgraded from its AAA rating, with the real possibility of being downgraded again.

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Candidate Obama said he would “transform the Untied States of America” and unfortunately this is the one promise he kept.  Two and one half years into his presidency, the National Debt has climbed to 100% of our Gross Domestic Product (GDP) for the first time since World War II; GDP growth for the first six months of this year has been a meager 0.8%; we continue to run a $1.5 trillion annual deficit, essentially growing the Debt by 10% versus the 0.8% GDP growth; 25 million Americans are unemployed, under-employed or have dropped out of the work force; 45 million Americans are on food stamps; and now Standard & Poor’s (S&P) has downgraded our country’s credit rating from AAA to AA+ for the first time in our history.  America has truly been transformed!

I could add to this list a number of foreign policy decisions that have elevated our enemies and trashed our long-time allies, but the economic failures of this president are more striking and more easily understood.  His $900 billion economic stimulus bill did little more than pay the salaries of state workers for one year and increased the Debt.  His re-distributive one-time programs of cash for clunkers and mortgage-restructuring failed and added to the Debt.  The overbearing healthcare legislation, that the Congressional Budget Office now says will increase the cost of healthcare, did nothing but create uncertainty for business.  Massive new and restrictive regulations from the Environmental Protection Agency (EPA) and Congress, when under full Democratic control, has forced private capital to the sidelines and almost completely stalled economic growth.  These are only some examples of Mr. Obama’s transformation of our country.

S&P warned us several months ago that our credit rating was in danger of a downgrade and pointed to the lack of leadership in Washington, D.C. as the main problem.  Mr. Obama still does not get it.  His reaction to the weak GDP growth and recent slide in the equities markets was to blame the earthquake in Japan, the economic problems in Europe and the uprisings that formed the Arab Spring.  His supporters are already saying publicly that Obama inherited a situation that was “worse than we thought.” Translation – blame former President Bush.  Mr. Obama will not take responsibility for a failing economy that he has managed since January of 2009 and it is this clear lack of leadership that is at the root of S&P’s downgrade.

The truth is that Mr. Obama’s socialist experiment of hyper-spending has done nothing more than add $4.5 trillion, or 45%, to the Debt since taking office.  He has over regulated the economy into a private sector coma.  It is time for real leadership and a return to free market capitalism. S&P made that clear with its downgrade.

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On Wednesday, President Obama attended a gala celebration in Chicago to celebrate his fiftieth birthday one day early. Attendees paid $35,800 a ticket to bask in the light of their Messiah, and to mingle with musical stars Herbie Hancock and OK Go.

Meanwhile, outside the Obama bubble, the stock market heralded President Obama’s 50th birthday with a 512 point decline — more than 10 points for each year he’s been alive. It was the Dow’s worst day since the 2008 financial crisis.

Many Americans find the President amiable and charismatic. That said, results are all that count, and by this measure, the President has fallen well short of the mark.

For those still blaming President Bush for an economy that has been all but stagnant for nearly three years of Obama’s management, the numbers speak for themselves:

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From AFP:

US debt shot up $238 billion to reach 100 percent of gross domestic project after the government’s debt ceiling was lifted, Treasury figures showed Wednesday.

Treasury borrowing jumped Tuesday, the data showed, immediately after President Barack Obama signed into law an increase in the debt ceiling as the country’s spending commitments reached a breaking point and it threatened to default on its debt.

The new borrowing took total public debt to $14.58 trillion, over end-2010 GDP of $14.53 trillion, and putting it in a league with highly indebted countries like Italy and Belgium.

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On today’s edition of Coffee and Markets, Brad Jackson is joined by Francis Cianfrocca to discuss the McConnell – Obama debt deal, how we got screwed, and the weak GDP report.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Erick Erickson: Not Playing the Fool
Obama, Congressional Leaders Reach Debt Deal
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The Q2 US GDP report – just terrible
Economists React: ‘Recovery? What Recovery?’

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My favorite contributor over at Black Entertainment Television wrote a piece on President Obama’s eroding support among African Americans –specifically on his dismal handling of the economy. According to a Washington Post/ABC News poll, Obama’s African American support has dropped from 77%, to just over half supporting his stewardship of the economy. What a difference just two and a half years can make! When the president was elected, the exuberance among African Americans was infectious, joyous, and a bit overly optimistic as this clip from the day after the election shows:

Liberals and African Americans still clinging to “hope and change” cite in the president’s defense that he inherited a terrible economy from President Bush and that Obama can’t be expected to turn the economy around in only two and half years. It’s almost a plausible argument – until you start comparing this presidency and economy with the economy our 40^th President inherited from Jimmy Carter in 1981.

When Ronald Reagan was inaugurated in 1981, interest rates were at 21%, inflation was at a wrenching 13.5%, and unemployment was at 7%. In contrast, when President Obama was inaugurated in 2009, interest rates were at a historically low 3.25%, inflation stood at 4.2%, and unemployment was at 7.8%. The misery index (the addition of inflation and unemployment numbers) when Reagan entered office was 20.5%, for Mr. Obama, 12.8%. Currently under President Obama, inflation is 2.7% and unemployment is at 9.2% and climbing with many economists believing it’s really 16% giving Obama a real misery index of 18.7%. Even the liberal Washington Post suggests that President Obama has had enough time to jump start the economy:

The economy rebounded significantly during Reagan’s third and fourth years in office. The unemployment rate declined, although not spectacularly. It was still at 8.3 percent in December 1983 and at 7.5 percent in August 1984 as the general election campaign was entering its final months.

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From Reuters:

The data was released Friday along with the government’s first estimate of second quarter GDP, which advanced at a meager and weaker-than-expected 1.3 percent rate

Not only did the economy skirt perilously close to a contraction in the first quarter, growth in the fourth quarter of last year was at a tepid 2.3 percent annual rate, not the solid 3.1 percent pace that had been believed.

The downward revision to the first quarter was even sharper.

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Sometimes we wonder if what has become obvious to a majority of Americans really has eluded our ruling class in Washington.  “We don’t have a precise read on why this slower pace of growth is persisting,” said Federal Reserve Chief Ben Bernanke at the Fed’s June 22 press conference.  President Obama also recently shared with us his insight regarding the sorry state of the economy with this gem:

“There are some structural issues with our economy, where a lot of businesses have learned to become much more efficient, with a lot fewer workers. You see it when you go to the bank and use an ATM — you don’t go to a bank teller. Or you go to the airport, and you’re using a kiosk, instead of checking in at the gate.

Small wonder then that the latest Bloomberg poll reveals that only about one third of Americans believe the economy is in better hands now than it was under the Bush Administration.  That is a remarkably poor assessment of the job the people feel the President and his economic team (whoever and wherever they are) is doing managing our economy.

These data are consistent with the most recent assessment of consumer confidence, which has sagged to new lows with only 17% of American households expecting conditions to improve over the next six months.  Should anyone be surprised? The Administration seems to be betting on Keynesian strategy from a 1930’s playbook.  It didn’t work then and it isn’t going to work now, and the people know it.

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From the Associated Press:

The Federal Reserve acknowledged Wednesday that the economy is growing more slowly than it expected. But it said it will complete its $600 billion Treasury bond buying program by June 30 as planned and announced no further efforts to boost the economy.

Ending a two-day meeting, the Fed repeated a pledge to keep interest rates at record lows near zero for “an extended period,” a promise it’s made for more than two years.

Fed officials said in a statement that they think the main causes of the economy’s slowdown, such as high gas prices and supply disruptions from Japan’s disasters, are temporary. Once those problems subside, Fed officials said the economy should rebound.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca and Senator Jim DeMint to discuss the attack on Boeing by unions and the NLRB, their threat to Right to Work states and the debt ceiling debate.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Should Bond Buyers Bet on Stalling US Economy?
Another Labor Board Power Play
Boeing faces NLRB persecution
The NLRB’s Opening Of Pandora’s Box Beyond Boeing

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On today’s edition of Coffee and Markets, Brad Jackson is joined by Francis Cianfrocca to discuss the royal wedding, the disappointing GDP numbers, higher unemployment and Ben Bernanke.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

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From Associated Press:

The economy slowed sharply in the first three months of the year as high gas prices cut into consumer spending, bad weather delayed construction projects and the federal government slashed defense spending by the most in six years.

The Commerce Department said Thursday that the economy grew at a 1.8 percent annual rate in the January-March quarter. That was weaker than the 3.1 percent growth rate for the October-December quarter. And it was the worst showing since last spring when the European debt crisis slowed growth to a 1.7 percent pace.

Federal Reserve Chairman Ben Bernanke and other economists say the slowdown last quarter is a temporary setback. They generally agree that gas prices will stabilize and the economy will grow at a 3 percent pace in each of the next three quarters.

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Fed head Ben Bernanke, at his first-ever news conference on Wednesday, slammed the door shut on any new QE3 pump-priming. The $600 billion QE2 program to purchase bonds will end on target at the end of June, and that will be that. Mr. Bernanke also suggested that the Fed’s “extended period” for the near-zero federal funds target rate could end in a couple of meetings. Perhaps these announcements suggest a bit-less-easy monetary policy. Perhaps.

But Mr. Bernanke had no defense of the sinking dollar, or the inflation it brings, or the drop in middle-class living standards it causes. So it’s little surprise that gold prices surged $24 to $1,526 during the Fed chairman’s press conference. Silver jumped sharply as well. The markets clearly don’t see any King Dollar shift by the Fed.

Mr. Bernanke just doesn’t get that inflation-sensitive market-price indicators — like rising gold, oil, and commodity indexes, and the falling dollar exchange rate — are trying to signal higher future inflation. Instead of listening to markets, he is determined to fight them. This is a losing battle. Instead of a market-price rule (anchored by gold) we have some sort of Bernanke fine-tuning rule. It’s not working.

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From MarketWatch:

According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.

Put that in your calendar.

It provides a painful context for the budget wrangling taking place in Washington, D.C., right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.

According to the IMF forecast, whomever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.

Most people aren’t prepared for this.

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Loaded with misleading statements, demagoguery, political rhetoric and outright lies, Mr. Obama’s speech announcing his debt reduction plan was no more than the formal start to his re-election campaign with the establishment of a clear ideological line in the sand.  The American people now will begin a long debate on which side of that line they will stand.

On one side is the America that those who came before us worked hard for; sacrificed for; and many died for.  This is the America where individualism and self-reliance is real, not just the throw-away line that Mr. Obama opened his speech with.  This is the America where all are guaranteed equal opportunity, not equal outcome; the America where the efforts of citizens determine the winners and losers; the America where the current generation pays for itself and passes on the freedom to increase prosperity to the next generation.

On the other side stands a perverse vision of our country where the government makes choices for the citizens; determines who the winners are; and pays for all of the current generation’s desires with liens on the labor of future generations.

In his own words, Mr. Obama declared, “This is not about debt reduction; this is about what kind of country we want to be.” However if we don’t begin to focus on the run-a-way spending of the federal government, our national debt will exceed our Gross Domestic Product (GDP) before the end of this year and will double over the next ten years.  Our economy will collapse under the weight of that debt and the only kind of country we will be, is a failed one.

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Caveat emptor: The first-quarter economy is slowing and inflation is rising. A month ago, economists were optimistic about the potential for 4 percent growth. Now they are marking down their estimates toward 2.5 percent. Behind this, consumer expectations are falling while inflation fears are going up.

A recent CNBC All American Economic Survey revealed that 37 percent of respondents expect the economy to get worse in the next year. That’s up about 15 percentage points from the December poll. The key reasons? Worries over rising food and fuel costs. Respondents anticipate prices to climb 6.6 percent over the next year. That’s double the 3 percent inflation registered in the December survey.

Supporting the CNBC poll, the early March consumer sentiment index from the University of Michigan dropped sharply, with the reading for consumer expectations falling 14 points. Additionally, one-year inflation expectations have risen to 4.6 percent in March from 3.4 percent in February.

Of course, everyone has been badly shaken by the terrible disaster in Japan. For the U.S. economy, supply-chain disruptions will damage growth. Also, the civil war in Libya and the broad unrest across North Africa and the Middle East has fueled a mild oil-price shock, also subtracting from U.S. growth.

So if the economy ending in the March quarter slows to less than 3 percent, it would mark the fourth-straight sub-3-percent GDP reading. Despite the strength in the manufacturing sector and rising corporate profits, that reading would underscore the softness of this recovery cycle.

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