“Leaning forward in his chair, Obama described the profound structural shifts in the economy over the past two decades that voters often don’t appreciate or acknowledge. “If you are a blue-collar worker, you saw manufacturing head out to China,” he said. “You’re in a town, the plant closes. But…in part because of the housing bubble….a whole bunch of blue-collar manufacturing workers could suddenly shift into construction.” The underlying economic decay was covered up by cheap credit, as homeowners made up for the shortfall in wage growth with low-interest second mortgages and unprecedented loads of credit card debt…

…And that “meant people felt pretty good in terms of their purchasing power even though the underlying situations hadn’t improved appreciably,” Obama said. Then the bubble bursts, “and suddenly they get washed away.” Those construction jobs have returned slowly, and many of those manufacturing jobs never came back at all. “They’d be much worse off had we not taken the steps we took,” Obama said. “But they have a sense that it’s a little more of a struggle for them than it might have been for their parents or for their grandparents.” Obama considered the problem from a political perspective. “In some ways,” he said, “engaging in those hard changes that we need to make to create a more nimble, dynamic economy doesn’t yield immediate benefits and can seem like a distraction or an effort to undermine a bygone era that doesn’t exist. And that then feeds, both on the left and the right, a temptation to say, ‘If we could just go back to an era in which our borders were closed,’ or ‘If we could just go back to a time when everybody had a defined-benefit plan,’ or ‘We could just go back to a time when there wasn’t any immigrant that was taking my job, thinks would be O.K.’” He didn’t mention Donald Trump or Bernie Sanders by name, but the implications were obvious…….”Dodd-Frank made capital scarcer and more expensive at a time when the weak economy desperately needed a boost to growth.”, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office who now runs American Action Forum, a right-leaning research group. Holtz-Eakin estimated in 2015 that the regulations (coming out of the financial crisis) would shave $895 billion off gross domestic product over the next decade….When the president’s motorcade left Saft to head back to Air Force One, I noticed something unusual: The plants parking lot was extremely small. It dawned on me that Obama’s tour of the (battery) factory, filled with photo ops and handshakes included very little interaction with workers. Instead, he was shown machine after machine, mostly operated by computers. At one point, he was introduced to WALL-E, a robot named after the Pixar film, that takes battery components from a tray. No employees necessary. This giant mecca of innovation(235,000 sq. ft.), a physical marvel that if built several decades ago would easily have employed a few thousand people, employs only 300. It was a scene that underscored a challenge facing the U.S. economy and one that may be the driving factor behind greater inequality: We’re not only losing jobs to overseas competition, we’re losing them to technology. Obama noted the robots, too. “We just saw here those robots were pretty impressive, but also pointed to the direction the economy is going,” he said….Many citizens, he said back on Air Force One, ”have to worry about retraining at some point in their careers, because they can’t anticipate being on one place for 30 years. The occupational mix in the economy places greater demands on people because it’s changing more rapidly. And all of this makes people feel they don’t know what’s around the corner.” For whatever sense of “uncertainty” business leaders lament, this may be a much more profound sense of uncertainty. “It’s one of the reasons that I pursued the Trans-Pacific Partnership,” he said, bringing up the free-trade pact that has divided both parties, “not because I’m not aware of all of the failures of some past trade agreement and the disruptions to our economy that occurred as a consequence of globalization, but rather my assessment that most trends are irreversible given the nature of global supply chains, and so we better be out there shaping the rules in ways that allow for higher labor standards overseas, or try to export our environmental standards overseas so that we have more of a level playing field.” Whether a president can truly improve, or damage, an economy remains an open question. The great economic power might in fact remain in the hands of the Federal Reserve. Economist credit the Fed’s policy of keeping interest rates at historic lows with helping pump up the economy and bring unemployment down. At the same time, the Fed has been blamed for widening inequality, swelling the price of real estate and corporate profits, even as savers and retirees dependent on fixed-income assets have suffered.”, Excerpt from Andrew Ross Sorkin’s, The Obama Recovery, The New York Times Magazine, May 1, 2016

“The truth about our economy and the crisis is being revealed, even by our President! He doesn’t mention the false liberal narrative that greedy and reckless bankers and lack of regulation caused the crisis, does he?”, Mike Perry, former Chairman and CEO, IndyMac Bank

Posted on May 10, 2016, in Postings. Bookmark the permalink. Leave a comment.

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