Obama's Economic Team has failed, America's Economy Has A Structural Problem

Economics / US Debt
Sep 09, 2010 - 11:33 AM
By: Gordon_T_Long

Obama's Economic Team has failed him!

It’s a STRUCTURAL problem not a CYCLICAL problem!

It’s a DEMAND problem not a SUPPLY problem!



I gave President Barrack Obama six months to roll-out his doomed Keynesian policies, twelve months to discover they were flawed and eighteen months to realize that the solution to America’s problems must lie within a different economic framework. I had hoped by the end of twenty-four months to see new policies closer to an Austrian economic philosophy emerge. I was wrong.

Though, even the Wall Street Journal recently featured an article on the re-emergence of the Austrian School of Economic philosophy, it would appear that President Obama’s administration still neither gets it, nor I am afraid ever will. Key defections by his leading economic advisors, talk of the need for QE II and a Stimulus II, and a political collapse in public confidence suggests a growing awareness that Keynesian policies are not working, as many predicted they wouldn’t. Obama's exciting rhetoric of Hope and Change has left myself and the majority of recent polled Americans disillusioned and disappointed. What I see the administration failing to grasp is twofold:

I-America has a Structural problem, not a cyclical business cycle problem. Though the cyclical business cycle was greatly worsened by the financial crisis, I would argue that the structural problem facing the US is actually a contributor to what caused the financial crisis.

II- America has a Credit demand problem, not a Credit supply problem. It isn’t that the banks won’t lend, but rather that few can any longer afford or qualify (on any reasonably and historically sound basis) to borrow.

A STRUCTURAL PROBLEM

1) Trade Balance: Insufficient Export/Import Ratio



We are all painfully aware that the US has not produced sufficient exportable product to support its standard of living for many years. Manufacturing in the US has been in steady decline since the 1960’s and the excess spending during the Vietnam War. It has been 50 years since the US had a balanced budget (forget Clinton's social security slight of hand). Over the last 10-15 years the US has seriously compounded this problem by accelerating the de-industrializaton of America without a strategy to replace salable export product. Corporate industrial strategies of outsourcing, downsizing, and off-shoring were never countered other than by an excess consumption splurge which fostered massive real estate and retail expansion distortions.

Simply said: A US Service Economy that is based on 70% GDP consumer consumption does not pay the bills!

For a brief period of time following the dotcom implosion, the US operated as a mercantile “Financial Economyâ€