by John M. Curtis
(310) 204-8700

Copyright Nov. 7, 2009
All Rights Reserved.

             Scavenging for votes on Capitol Hill for his health care reform bill, President Barack Obama faces a bigger mountain to climb with the nation’s unemployment rate hitting a 26-year high at 10.2%.  Surprising economists, the Labor Department announced that employers cut another 190,000 jobs in October, a blow to the White House hoping for better news on jobs.  Battling the GOP on health care has proved a major distraction for a White House scrambling to preserve confidence in managing the economy.  Tuesday’s election didn’t help matters, losing the governors’ races in Virginia and New Jersey.  While it’s true that Barack inherited a rotten economy from former President George W. Bush, it’s now his to fix, with voters growing increasingly impatient.  With a decision on adding more troops to Afghanistan looming, Obama doesn’t have too much room for error.

            Economists expected October’s 9.8% unemployment rate to jump slightly to 9.9%, surprised by the sudden leap to 10.2%.  “I can promise you that I won’t let up until the Americas who want to find work can find work and all Americans can earn enough to raise their families and keep their businesses open,” said Barack speaking at the White House.  More bad economic news weighs heavier on the president’s domestic and foreign policy agenda, where the public grows more skeptical with costly foreign wars and growing unemployment.  Obama says his biggest priority is growing jobs yet he’s spent his political capital on health care reform.  No one knows its  real effect on the economy, especially on publicly traded insurance companies.  If health care reform hurts the bottom line of insurers, as many Republicans insist, then it’s likely to worsen the unemployment picture.

            Wall Street has shown an alarming disconnect between growing unemployment and the nation’s Gross Domestic Product.  Rocketing up over 60% from its March lows of 6,500, the Dow Jones Industrials finished Friday, Nov. 6 at 10,023, a stunning reversal.  Some economists question whether the Dow can continue its upward trend if GDP heads south.  Federal Reserved Chairman Ben S. Bernanke held the Federal Funds rate steady at 0-.25%, signaling that the economy remains sick.  “Unfortunately, the problem is becoming deeper and more protracted,” said Mohamed El-Erian, chief bond trader at Pacific Investment Management Co. [PIMCO], referring to the continued rise in unemployment   El-Erian, a savvy economic forecaster, sees continued economic weakness preventing small, medium and large businesses from adding jobs in the foreseeable future.

            El-Erian sees a jobless recovery causing more problems for long-term economic growth, preventing companies from adding new jobs.  Without adding new jobs, there’s bound to be downward pressure on the stock market that is currently valued for sustained economic growth.  “It’s not the increase in the headline number,” said El-Erian.  It’s also about the longer–term nature of unemployment, the increase in underemployment and the prospect for only a very gradual recovery,” showing skepticism about today’s bull market.  Republican National Committee Chairman Michael Steele blasted President Obama for promising jobs but delivering more unemployment.  He claimed Tuesday’s GOP gains in Virginia and New Jersey were a national referendum against the president.  Steele mentioned nothing about the GOP losing two House seats in Upstate New York and Northern California

            Pushing hard for national health care, Obama hasn’t explained the net effect on unemployment if insurance companies are force to lay off workers.  He hasn’t explained  what happens to the stock market if insurers show a drop in earnings.  Few people hold sympathy for health insurers, too often concerned more about protecting profit margins than the health of subscribers.  Questions also linger about a sizable troop increase in Afghanistan, both in terms of casualty rates and costs to the U.S. treasury.  Already running the biggest deficits in U.S. history, more expense for health care and military spending could have catastrophic consequences to the economy.  “I don’t know how the heck the Fed could justify tightening policy with unemployment rate over 10 percent unless we have an imminent inflation danger,” said Keith Hembre, chief economist at First American Funds in Minneapolis.

            Barack says he’s concerned about unemployment but can’t explain how his push for national health care and escalation in Afghanistan will affect the economy.  More domestic and military spending could explode an already harmful budget deficit, robbing the economy of long-term economic growth.  Unless economists are missing something, the president needs to explain how his health care and military priorities will affect the economy before causing more damage.  If combating unemployment and fixing the economy are Barack’s top priorities, he needs to explain how he intends to get there.  More domestic and military spending only add to an already intolerable budget deficit, harming chances for economic recovery.  Beranke’s approach to interest rates spells more trouble for the economy.  Barack needs to level with the public about how he plans to fix the economy.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.