Economy, Jobs and Housing Market Assessment

August 30, 2010

By Padmini Arhant

The economy, job and housing market are the most important issues for the American electorate.

An overwhelming population is experiencing tough economic situations one way or another and there is legitimate concern over the rising deficit as well.

President Barack Obama and Congressional Democrats achievements, work-in-progress including the remedial measures are elaborated for better understanding and fair assessment.

Upon assuming office President Barack Obama and the Congressional Democrats passed the economic stimulus bill worth $787 billion to salvage the economy from ‘Great Depression,’ at that time.

This step was vital for the U.S. and the global economy on the precipitous decline following,

The previous administration’s deficit spending on two simultaneous wars in Iraq and Afghanistan,

Facilitating financial market recklessness,

Free market deregulations in finance, health and energy industries,

Widening deficits through financial and auto industry bailouts with no accountability

Allowing Corporations to evade taxes on domestic and overseas earnings with adverse effects on national revenue.

Extending tax cuts for the wealthy – are the few recipes that triggered the economic disaster.

The policies were implemented at U.S. taxpayers and the average Americans colossal expense.

By neglecting the national requirements – prominently the job and housing market deceleration, the infrastructure repair and restoration, education, health, social security, veterans’ health care, small businesses and the American families in general.

President Barack Obama then introduced “The American Recovery and Reinvestment Act” for $787 billion in February 2009.

It comprised –
• $288 billion in tax cuts.
• $224 billion in extended unemployment benefits, education and health care.
• $275 billion for job creation using federal contracts, grants and loans.

The main objective was to invigorate economic and job growth at an estimated 900,000 – 2.3 million jobs.

Further, the stimulus fund was spread over ten years with the first three fiscal years receiving the major allocation.

The Congressional Budget Office (CBO) projected the stimulus funds would boost GDP growth by 1.4% – 3.8% at the end of 2009.

GDP growth for Q4, 2009 – 5.6% when including the businesses low inventory replenishment.

Otherwise the growth reported to be 1.8%.

According to (BEA) Bureau of Economic Analysis, Trading economics – Bloomberg – Thank you.

“The current GDP growth is 2.40%, with Growth rate – 1.60%, Inflation rate – 1.20%, Jobless rate – 9.50%, Interest rate – 0.25%.”

A significant increase when compared with the negative GDP growth -6.80% in December 2008.

The economy has moved from the negative to a positive trend with a present annual growth rate at 1.60%.

Beginning 2010, the economic figures in the first and second quarters are very encouraging and attention worthy.

GDP before adjusting for inflation in Q1 (Jan – Mar) 2010 rose to 4.8% and Q2 (Apr – Jun) 2010 – 3.6%.

GDI – Gross domestic income – the individuals, private and public sector combined income reportedly increased by 2.3% annual rate for Q2, 2010 after gaining 4.1% in the first quarter – Q1, 2010.

Corporate profits after an impressive 10.5%increase in Q1, 2010, rose by 4.6% for Q2, 2010 – still maintaining the gain from Q2, 2009.

Similarly the higher earnings by 39 percent in Q2, 2010 is relatively progressive than the 2009 second quarter.

Consumer spending for Q1, 2010 – 1.9% and Q2, 2010 – 2% exceeding the previously expected 1.6% pace for the second quarter.

Wages and salaries for Q1, 2010 increased by $6.5billion from the fourth quarter i.e. Q4, 2009.

Company inventory in Q2, 2010 was 0.65% against 2.64% for Q1, 2010. However, the business capital expenditure on structures, equipment had surpassed the prior projection of 22 percent to 24.9 percent.

Trade gap seemingly grew to $445 billion for Q2, 2010 in excess of the previous estimate at $425.9 billion confirming the import level at 32.4%.

It’s clear from the data that the economy in 2010 is comparatively a vast improvement to 2008.

The modest annual rate 1.60% is attributed to numerous factors:

Despite 39 percent increase in 2010 second quarter corporate earnings, the companies have contracted inventory spending, payrolls and lowered employee wages contributing to sluggish job growth and household income reduction eventually having an impact on the economic stimuli – the consumer spending.

Consumer spending also affected by the lack luster housing and stock market performance with majority households dependent on investment income.

Notwithstanding the ripple effect on the small businesses relying on retail purchases.

In addition the rising imports at 32.4 % suggest the lagging manufacturing industry require substantial private investments to provide the anticipated jobs.

Perhaps, capital gains tax relief might incentivize corporations to promote jobs in the manufacturing and service sector. The consideration could ease the burden on Congress in extending unemployment benefits to the jobless.

Per Recovery Accountability and Transparency Board that oversees spending under American Recovery and Reinvestment Act of 2009 available at:

http://www.recovery.gov/Pages/home.aspx – Thank you.

Recovery funded jobs reported by recipients – 749,597 as of June 30, 2010.

“Job calculations are based on the number of hours worked in a quarter and funded under the Recovery Act.”

Evidently, the $787 billion has not been entirely invested in the economy to realize the immediate goals – jobs, housing and stock market appreciation to generate consumer spending and ultimately the desirable GDP growth.

Stimulus fund investment verification:

Tax Benefits:
Allocation – $288 billion
Investment – $223B /77%
Remaining Fund – $ 65B / 23%

Education, Jobless Benefits etc.:
Allocation – $224 billion
Investment – $143B / 64%
Remaining Fund – $ 81B / 36%

Contracts, Grants & Loans:
Allocation – $275 billion
Investment – $139B /51%
Remaining Fund – $136B /51%

President Barack Obama, Vice President Joe Biden and the Congressional Democrats have passed the crucial legislations to stimulate the different economic sectors.

Housing Market – Foreclosure moratorium to contain the bleeding and refinancing at affordable payments has saved homeowners from losing their homes. The documentation and eligibility cited as the reasons for the programs’ average success.

Addressing these issues would enormously benefit many homeowners and revive the housing market.

Also, the $8,000 credit to first home buyers enabled the market to rein in on falling home prices nationwide.

Therefore based on the results, extending the moratorium and first homebuyer credits, refinancing options by reviewing the eligibility criteria to include more struggling homeowners could be helpful to the housing sector.

Tax benefits: President Barack Obama and Congressional Democrats have been extremely diligent in this respect.

Tax breaks to 99% represented by average Americans, small businesses, corporations creating or saving employment, payroll taxes, tax exemption to seniors with moderate income $50,000 or less, consumer rebates and credits on home and automobile transactions – proof is in the data for 77% of the allocated stimulus fund has been invested.

The recent $26 billion bill for unemployment benefits extension and the federal aid to cash-strapped states to prevent job losses as well as essential programs termination directly influence consumer spending.

Investments in infrastructure projects such as highways and roads, the electric power grid, dams, bridges, levees, water mains and sewer systems, airport, public transportation system expansion by building new high-speed passenger rail systems were in the job creation proposal.

Although, the target is – 900,000 – 2.3 million jobs, it’s distributed across the economic spectrum ranging from green jobs, infrastructure, manufacturing and service sector to small businesses.

A bulk of it to be absorbed by the private sector contrary to the false propaganda on the alleged government take-over of the free market.

President Barack Obama’s timely intervention in the auto industry attracted criticism from the opposition.

Nonetheless, today the state of Michigan that was worst hit in the economic recession is experiencing job growth in the auto industry due to the Obama administration rescue plan.

Stimulus package has been directed towards saving multitude jobs for the beleaguered local school districts that threatened teachers’ salaries with layoffs and cutbacks,

Federal grants to make education affordable for students – Pell Grants for college education and ‘race to the top’ federal funds for schools across the nation.

Adequate medical coverage for military members and their families and $1 billion for the Veteran’s Administration – which suffered severe cutbacks under President Bush and Vice President Dick Cheney that led to the Walter Reed Army Hospital closure at the peak of Iraq and Afghanistan wars.

In an effort to care for the children and seniors – Food programs for low-income Americans, including $150 million to help refill food banks, $100 million in meals programs for seniors, and $100 million for free school lunch programs – all ignored by the former administration.

Deficit management is possible with the troop withdrawals from Iraq and Afghanistan, constrain defense expenditure, health care costs savings and economic surge producing revenues, besides optimizing GDP growth through exports.

Above all, President Barack Obama and the Democrats legislative successes are phenomenal.

Historic reforms in finance and health care in tandem with bipartisan committee on deficit control deserve recognition.

The economy, jobs and the housing market are the President and the Congressional Democrats’ priority and they continue to explore all options in expediting the economic recovery.

If not for their hard work and determination to improve American lives, the pessimistic view on the economy would have prevailed.

Congratulations! To President Barack Obama, Vice President Joe Biden, the Congressional Democrats and the selective Republican members for the milestones reached thus far and the impending legislations to move our great nation forward.

All the more reason to elect the Democrats for a super majority in the House and the Senate, so that President Barack Obama can complete the tasks in every respect, particularly accelerating the job growth, stabilizing the economy and energizing the housing market.

A great future is certain with President Barack Obama, Vice President Joe Biden and the Democrats majority in Congress.

Please visit the DNC, DSCC, DCCC and DGA websites for your generous contributions to elect the new and incumbent democrats in November 2010.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Economy 

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