Investment Contrarians

Can President Obama Really Help the Economy?

By for Investment Contrarians |

Can President Obama Really Help the EconomyWhen it comes to the latest presidential election, the central focus for many U.S. citizens has been the lack of gross domestic product (GDP) growth for America. Since the Great Recession began several years ago, GDP growth has remained far below potential, leaving millions of people unemployed and looking for work. During this time, the global economy has also slowed. While President Barack Obama has made large claims about what he can do to help increase GDP growth, let’s take a look at the most likely scenario.

During a presidential campaign, all politicians will make grandiose claims about how they can solve all of the country’s problems and kick-start GDP growth. Of course, we all know that the president does not create jobs in the private sector, but creates a structure that can either help or hinder job creation. With the global economy continuing to slow, many Americans are hoping that President Obama’s second term is far more business-friendly than his first.

Because the president faces a House of Representatives that is controlled by the Republican Party, the fear of political gridlock is now becoming a reality once again. With the fiscal cliff issue looming on the horizon, this divided political structure will surely slow the decision-making process. All hurdles to GDP growth should be avoided by both political parties. As much as it is rare to see, both sides should come together to help create the foundation for America’s GDP growth to increase to acceptable levels. With a sluggish global economy, America cannot look to other nations to help pull it out of this trough.

This is the reason that markets are selling off on the news of Obama being re-elected; uncertainty is not welcomed by businesses of any size. With the political situation now being in a gridlock, there is no certainty that any solid re-structuring of the economy can take place. For GDP growth to start growing again, all business owners need to feel certain of future regulations and policies. Not being able to turn to the struggling global economy, this higher level of uncertainty at home is a strong hindrance to faster GDP growth.

Unfortunately, with essentially the same political split as we’ve seen over the past four years, hope and enthusiasm for the future is certainly being diminished. We’ve seen lackluster GDP growth for the last four years, and we’ve seen uncertainty rise. We’ve seen serious issues not resolved, but delayed and postponed. Unfortunately, the massive fiscal cliff issue won’t likely be resolved until the last minute, if at all.

With much of the global economy slowing down, many had hoped that a unified political structure could help speed up reforms and kick-start GDP growth once again by beginning to offer incentives. Unfortunately, with this political split between the president and the House of Representatives, it appears that the gridlock and the lack of ability to compromise will be the norm again. Naturally, this certainly would lead one to believe that GDP growth will remain below potential for some time to come.

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  • Peter

    I don't believe he can improve the economic based on his last four year record. GOOD LUCK who ever believe him.

  • Samuel

    Yes he will not be able to for the first two years if the republicans keeps the same obstruction policy. Hopefully after the first two years it will start to turn when people will throw our the republicans from the house.

  • Christopher Evert

    The problem is that our economy has a control, which is broken.
    This is taught in elementary school, but seems the public at large has forgotten:
    The Fed adjusts the Prime Rate up and down to balance between inflation and recession. This IS how our economy works.
    When the Prime Rate is lowered, the cost of doing business is lowered across the board, and companies and individuals alike invest in growth and expansion (both personal and corporate). Like it or not, our economy is fundamentally tied to the banking system… which has become entirely privatized… and finally Alan Greenspan entirely deregulated – which he now concedes was a mistake:
    http://www.nytimes.com/2008/10/24/business/economy/24panel.html

    Unfortunately, due to the scandals/crashes/collapses between '07 and '09 that most people ARE familiar with, the banking system took a huge hit, and [perhaps understandably] banks exited certain lending segments entirely, and those who remained tightened lending practices dramatically.

    The net effect is that it doesn't much matter how low you lower interest rates, if banks aren't lending, money isn't moving, and the economy won't be stimulated.

    This is what needs to be fixed – just like a car with no gas/brake.

    And with the republican line having become a simplified cry to appeal to the simpletons (a sad state of affairs) by shouting simply "big government!" over and over, the republican party has been reduced to supporting the image of tearing down all regulatory agencies – introducing reforms on wall street to restore our economic control would be akin to serving steak at a vegetarian convention at this point.

    The evolution of the republican party in this way over the past 12 years have made me regret registering republican. I think we dodged a bullet by dodging Romney – in his own words, his recovery would take 8-12 years – and that's if you trust that his disjoint and [in most respects] unstated plan actually would have somehow resulted in a working system – a working system that operated as a financial vehicle that somehow didn't require a gas/brake.

    If that gas/brake can be fixed (I don't care who the mechanic is), banking system restored to behave as it always has (the TRUE conservative concept – which involves regulations and potentially other "big government" intervention – it's not inappropriate in my opinion to respect the relationship between our government and our economy), then we can get back to the days when it was petty dem vs. rep differences between candidates, as opposed to one party entirely ignoring our lack of control over the economy. Sadly, it's the party I registered with, back when they were a functional, rather than dysfunctional party.

  • doug

    what incentives does the House GOP to work with democrats to make the economy better or help with the job market?

  • Alan Kershaw

    Ever heard of patriotism? Well, they haven't. I wonder what Lincoln would think of the Republicans' war against the American people?

  • scatcatpdx

    I think gridlock is the best thing. Obama and the Democrats already have made their intentions known: Businesses will face higher taxes, more regulations and unfunded mandates. Obama plan will depress not stimulate the economy and most businesses except for those who are politically connected.