As it’s rather sleepy on this blog and in Oxford at the moment – apart from the thousands of tourists and language students – I thought I’d add my two pence on the economic worries in the United States. On the debt ceiling fiasco (what country sets a debt ceiling that must be approved by the legislature?), I already wrote a post on Obama’s dithering on forging a compromise until his grand plan last week. Too much too late. In his FT column, Clive Crook things this was a political manoeuvre. But I’m not sure. This is the standard Obama delay pattern where he only intervenes when it becomes an intractable legislative quagmire. It’s poor leadership and was avoidable. For another example of this behaviour, I refer you to the healthcare fight two years ago. Mitch McConnell (R-KY), the Senate Minority Leader, has thankfully offered a politically clever (if very cynical) compromise measure that will avoid a default by allowing Obama to raise the debt ceiling three times by $2.5 trillion each, as long as he also offers a matching set of spending cuts of his choosing. We can breathe easier knowing the not all Republicans are insane enough to actually want a US default.
But I don’t think McConnell’s clever trick will matter that much politically. If you want to predict the Republican’s chances in 2012, keep an eye out on the only thing that matters in voters’ minds – unemployment. Last Friday brought really bad news from the Labour Department, very unexpected, showing that the US economy only added 18,000 jobs last month and unemployment ticked up to 9.2 percent (from 9.1). And 6.3m Americans have been out of work for over 27 weeks. This is the main issue, and the Republicans can attach any sort of blame to it, including Obama’s push for higher taxes (or closing loopholes) during debt ceiling negotiations. Moreover, the report shows that unemployment is worse among groups that usually lean Democratic, blacks and Hispanics.
Among the major worker groups, the unemployment rates for adult men (9.1 percent), adult women (8.0 percent), teenagers (24.5 percent), whites (8.1 percent), blacks (16.2 percent), and Hispanics (11.6 percent) showed little or no change in June. The jobless rate for Asians was 6.8 percent, not seasonally adjusted.
Discouraged workers account for another 982,000, a staggering measure that includes a disproportionate number of youth, visible minorities, and men. When factored in, the number of discouraged workers catapults the unemployment rate to an alarming 16.2 per cent, according to the U.S. Labour Department survey. Further, the 14 million unemployed Americans now swells to more than 25 million, a substantial portion in a work force of 154 million.
Obama should start praying that this turns around quickly.