Edward Luce writes for the Financial Times, and he doesn’t like what sees when he looks at the US economy. The current recovery, writes Luce, is anemic and likely to stay that way; worse, for many households, the pain is increasing.
The median household income is considerably lower than it was in June 2009, when the recovery began. It is likely to be lower still in November when Barack Obama faces re-election.
It won’t be easy to convince a majority of American voters that they are better off or that the current policies are working if household incomes sink for another six months.
But Luce has a more troubling point to make as well: small business is ailing under this president.
According to the Bureau of Labour [sic] Statistics, US small business creation is in long-term secular decline. In 2010 it hit a historic low: just 8 per cent of all US businesses were less than a year old, against 13 per cent in the 1980s. Again, none of this should come as a surprise. Talk to any venture capitalist in Silicon Valley, and any small business outside Washington, and they say the same thing: risk capital is far harder to come by. With the exception of the social media, which has very low overheads, most start-ups find it hard to get credit from banks or investors.
Luce isn’t blaming Obama for this long term trend, but it is deeply worrisome — and offers an opportunity for Republican critics of the Administration to hammer the message that government regulations and bailouts that favor big business and Wall Street are killing the American dream.
Luce himself thinks that deficit spending on infrastructure would help jump start the economy and makes the point that borrowing right now (with real interest rates at or near zero) makes this a good time to get the work done. In the 2012 political atmosphere, however, it looks as if deficits will be poison and that President Obama will not want to ask for a lot more federal spending.
All told, the state of the economy looks problematic from the incumbent’s point of view. The President’s best hope to make his re-election a sure thing was for this year’s winter pick up to gain momentum rather than stall out as spring came into view. Luce thinks that hasn’t happened, and that we are back in the doldrums.
The White House desperately wants him to be wrong.