Reports indicating a stumbling economy have prompted a whirlwind of talk from Republicans, economists and President Obama on just how to right the economy once and for all. According to Labor Department figures, May payrolls grew at the slowest pace in eight months. Further government data indicates that the economic recovery is slowing. In responding to the latest state of the economy, President Obama voiced concern over the slowdown but dismissed talk about a second recession. “I am concerned about the fact that the recovery that we’re on is not producing jobs as quickly as I want it to happen,” the president said. “We don’t yet know whether this is a one-month episode or a longer trend.”
With Republican presidential candidate Mitt Romney – who leads the latest USA Today/Gallup Poll for the GOP nomination – on his heels, President Obama has cause for concern. The economy could be the main factor that causes him to lose his bid for a second term. With the exception of Ronald Reagan, no U.S. president since World War II has been reelected when the jobless rate was above 6 percent. The latest poll reveals Obama’s worst marks as yet on the economy, with 59 percent of those surveyed disapproving his handling of the economy. The Washington Post-ABC News poll also found that 89 percent of those surveyed felt the economy is in bad shape, 57 percent believe economic recovery has yet to begin and two-thirds say the country is on the wrong track. Certainly not the numbers President Obama wants to see, particularly when Republican presidential candidates are putting the economy front and center on their campaign platform. “We can fix our economy,” said Republican presidential candidate Tim Pawlenty, who recently introduced his “A Better Deal” economic recovery plan. “Our people are ready to get back to work. We just need to give them tools to get there. And get the government out of the way.”
With the U.S. Congress in a stalemate over cutting government spending and raising the federal debt ceiling, President Obama is relying on the business community for support. Recently, he assembled his Council on Jobs and Competitiveness at the headquarters of Cree, Inc., a manufacturer of energy efficient lighting based in Durham, North Carolina. Obama hopes to convince company leaders that his policies are sound, despite the slowing economy, and to seek ideas on how to get the economy back on track. “We want to be for any policies that are going to help incentivize and stand up the private sector to drive the recovery,” explains Austan Goolsbee, chairman of the White House Council of Economic Advisers. Previously, Obama called on businesses to take the lead in stimulating sound economic recovery by investing in hiring and capital. He plans to promote the same message to voters with stops in North Carolina and Florida, two states with high unemployment rates that also happen to be critical to his reelection bid. “The administration has put themselves in a box,” notes Gus Faucher, director of macroeconomics at Moody’s Analytics in West Chester, Pennsylvania. “The most important thing for deficit reduction is to get the economy growing again.”
Federal Reserve Chairman Ben Bernanke blamed high gas prices and the March earthquake and tsunami in Japan for the economic slowdown and expects economic growth and job creation to rebound over the next few months. “Overall, the economic recovery appears to be continuing at a moderate pace, Bernanke said, adding, “albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers.”
The Obama administration is looking for solutions that would appeal to businesses and Republicans, who want reduced taxes, not more government spending. Among the things being considered are a temporary cut in the employer contribution to payroll taxes, a one-year reduction of payroll taxes paid by workers and allowing businesses to immediately write-off 100 percent of certain capital investments.
