In his state of the union address, President Obama had to show that he empathized with the economic difficulties facing ordinary Americans. He sought to deflect responsibility for the current mess by blaming it on the previous administration while acknowledging, “The worst of the storm has passed, but the devastation remains. One in 10 Americans still cannot find work. Many businesses have shuttered. Home values have declined. Small towns and rural communities have been hit especially hard. And for those who’d already known poverty, life has become that much harder.”
A recovery has begun but it remains sluggish.
- In the last quarter, the US economy grew at its fastest annualized rate in 6 years, 5.7% .
- The National Association of Realtors said compared to the month before existing home sales dropped 16.7% in December, the worse decline in 40 years.
- Home prices increased in November for the sixth consecutive month, although the pace of increase is slowing and prices remain down from a year ago. The S&P/Case-Shiller home-price index rose 0.2% compared to October on a seasonally adjusted basis. The month before, it had climbed 0.3%. Compared to the year before in the 20 cities tracked, prices were down 5.3%.
- New unemployment claims dropped by 8,000 the week of Jan. 23rd compared to the week before. Still, 470,000 were newly idled.
- Orders for durable goods inched up 0.3% in December a relief after a horrendous year where orders plunged a record 20%.
Although the President announced a second jobs bill to try to get the economy moving before the mid term election, he also sought to allay fears of record deficits by announcing a budget freeze on discretionary items to begin next year. Mr. Obama is attempting a challenging balancing act, trying to pump up the economy while remaining fiscally prudent. “We can’t afford another so-called economic ‘expansion’ like the one from the last decade –- what some call the ‘lost decade’ -– where jobs grew more slowly than during any prior expansion; where the income of the average American household declined while the cost of health care and tuition reached record highs; where prosperity was built on a housing bubble and financial speculation.”
The economy was the focus of the speech, but Mr. Obama didn’t dwell a lot on the housing crisis, the cause of the economic meltdown. He did take credit for the government’s foreclosure prevention plan that is still falling short of expectations. “We’re working to lift the value of a family’s single largest investment –- their home. The steps we took last year to shore up the housing market have allowed millions of Americans to take out new loans and save an average of $1,500 on mortgage payments. This year, we will step up refinancing so that homeowners can move into more affordable mortgages.”
President Obama swept into office on a wave of hope. He acknowledged that more Americans were now doubting that he could deliver the change he promised. Although he stressed bipartisanship in his speech, a look at the reaction shots around the chamber shows Republicans sitting on their hands, biding their time as they anticipated this president’s mid term election vulnerability if the economy doesn’t get better fast enough. Mr. Obama is facing a test of leadership skills as never before. If he can’t cajole the senate to pass more of his ambitious legislative agenda, he runs the risk of being seen as a lame duck president after a single year in office.