Americans are worried as they prepare to fire up their barbecues, head for the beaches and ball parks, and otherwise celebrate our hard-won independence from British despotism.
That’s the good news, because it reflects a realisation that a policy shift can no longer be postponed.
By 44% to 34% Americans tell Bloomberg
pollsters they are worse off than they were last year (the balance say their situation is unchanged).
Over half — 55% — expect their children’s standard of living to be lower than their own, while only 23% are expecting their children to live better than they have. Two out of every three Americans believe the nation is on the wrong track.
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Top of the list is worries about jobs. You have probably read that Americans are upset with high petrol prices. Well, only 4% of those polled rate petrol prices their biggest problem; 42% say unemployment and jobs is the most important issue facing the country, four times as many as worry primarily about healthcare.
The better news is that Americans have come to realise that the fault, dear reader, lies not in our stars, but in ourselves if 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% of the workforce, to dominate the electoral process.
Aroused Americans are realising that their political and policy leaders are not only on the wrong track, but don’t know how to change to the right one The Tea Party followers, derided by America’s liberal establishment and by the commentariat here in Britain and in Europe as an uneducated (wrong), trailer-dwelling (wrong), Bible reading (right) mob, have taken to the streets to show that they are indeed no longer content to be underlings, that Cassius had it right when he said, “Men are at some time masters of their fates”.
To the Tea Party and its friends, now is that time.
So in the 2010 congressional elections they and millions of other voters helped the Republicans seize control of the House of Representatives and win enough seats in the Senate to end Democrats’ ability to push through legislation on a straight party-line vote.
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Aroused Americans are realising 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 Barack Obama poured $787 billion into a stimulus package designed to fund shovel-ready projects and cut the unemployment rate to 8%. He subse- quently admitted those projects really weren’t shovel-ready. The unemployment rate, at 9.1%, is significantly above the 7.8% level he inherited, but the federal deficit has tripled from less than $500 billion to $1.5 trillion, or about 10% of GDP, in line with Greece.
Federal Reserve Board chairman Ben Bernanke printed $600 billion with which to buy Obama’s IOUs during an eight-month programme, which ended last Thursday, in an attempt to:
But it is unfair to blame the huge level of debt and misshapen policies solely on politicians. American voters overwhelmingly favour reducing the deficit, but also say they don’t want to give up any of their healthcare, pension and other benefits, or have their taxes raised. Consistency is indeed the hobgoblin of these voters’ minds.
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.
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Even Obama now insists that he is a born-again deficit cutter, willing to forgo some programmes he favours. Unfortunately, none of these is 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. Pulitzer prize-winning columnist Charles Krauthammer has calculated 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 jet 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 that is similar to the heart of George Osborne’s programme — will be agreed as 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 car industry, which is reporting that June sales were up 12% over last year, and 4% over May’s dreary performance.
Overall, the Conference Board indexes 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 must be hoping that the expansion will pick up enough speed to get the unemployment rate closer to where it was when he took office. We will know more when next week’s jobs report is released.
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Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute