The Administration says structural unemployment not a problem. I say they are out of touch.

Analysts and commentators have been predicting the demise of the congressional Democrats in the 2010 mid-term elections. Maybe demise is too strong a word for they will still have significant numbers in the House and the Senate no matter the outcome of the elections.

The conventional wisdom says that the Democrats will have health care reform, the stimulus package, the debt, and the deficit to blame for their fall. A significant number of Americans view the health care reform legislation as either too costly or an unnecessary government takeover of the health care system.

So far, a significant number of Americans view the stimulus package as not only too expensive with its $800 billion price tag, but as ineffectual. The unemployment rate is currently at 9.7%, and there is a possibility that as more people enter the labor force later this spring and in the summer that the rate may exceed 10%.

The amount of public debt is staggering. As of 11 May 2010, the total U.S. public debt is approximately $12.9 trillion. As of the first quarter of 2010, our current dollar gross domestic output or total income and consumption as a nation was $14.6 trillion. Right now for every dollar of national income generated, we owe $.89 in debt.

The public is also concerned about the deficit. From a kitchen table perspective, Americans are uncomfortable with the United States living beyond its means. From an economic perspective, large deficits increase the probability of private borrowers being crowded out of the financial markets. In other words, government borrowing creates a vacuum, a great sucking sound, leaving less available credit for private individual and commercial borrowers and the possibility of these borrowers paying higher interest rates.

The Obama administration is forecasting the fiscal year 2010 deficit to be $1.56 trillion or approximately 11% of the nation’s GDP.

Does this mean that it’s fair to make the Democrats the fall guys for the nation’s economic and fiscal woes? There is a good argument for answering yes. The Congress is responsible for the nation’s purse strings. A Democratic Congress, responsible under the Constitution for regulating commerce, presided over declines in GDP from 2007 through the second quarter of 2009.

And while gross private domestic spending was falling during the same period, a Democratic Congress was loosening up the purse strings, pouring out increased government spending. According to the Commerce Department, as gross private domestic spending decreased 25% between 2007 and 2009, government spending increased ten percent over the same period.

The Democrats may have a little saving grace from the healthy three percent growth in GDP between the first quarter of 2009 and the first quarter 2010. Also, the nation has seen 520,000 jobs added in March and April 2010.

The question is, will this be enough to stop the hemorrhaging at the polls this November.

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
This entry was posted in Budget, Democrats, Economy, Obama, Political Economy and tagged , , , , . Bookmark the permalink.

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