Investment Contrarians

Obama Economic Plan 2013, President Obama in 2013

Obama Economic Plan 2013, President Obama in 2013

Speaking at a campaign event in downtown Madison, WI, the day before being re-elected president of the U.S., Barack Obama said, “The war in Iraq is over. Osama bin Laden is dead. Our heroes are coming home. We’ve made real progress. But, our work’s not done. Our fight goes on.”

He’s right. Domestically, we have a lot to accomplish. Unemployment remains high, the housing market has not rebounded, millions and millions of Americans have turned to food stamps and one-third of Americans are living at or below the poverty line.

When President Obama first took office in January 2012, the unemployment rate was 7.8%. The following month, it cracked eight percent and stayed there until September 2012, when it touched 7.8%. While the official unemployment may have dipped below eight percent, more telling perhaps is the underemployment rate, which has held steady near 14.7%.

A recent poll suggests U.S. home prices will rise just one percent in 2013—less than inflation. Consumer prices are expected to rise two percent in 2013.5

Since President Obama took office in January 2009, the U.S. government has implemented more fiscal stimulus and monetary intervention than ever before, yet real GDP has slowed from 2.4% in 2010 to two percent in 2011 and to only 1.6% in the first half of 2012.6

Without a substantial improvement in the labor market, the housing market will continue to struggle. So too will consumer spending and the entire U.S. economy. At roughly 70% of America’s GDP, consumer spending is a major economic stimulus.

During his re-election campaign, President Obama said that over the next four years, he plans to move the economy forward by keeping the current policy framework in place. Sadly, deficit spending and a growing dependence on the Federal Reserve to buy the government’s excess debt have yet to produce real results.

Staying the course in 2013 could send the U.S. back into recession.