According to the Washington Post, there is rising fear that our economy is headed for a “double-dip” recession due to a slowdown in China, concern over the strength of the European banking system, and diminishing consumer confidence here in the U.S. The drop in consumer confidence is quite remarkable. The Conference Board’s index showed a decline from 62.7 percent in May to 52.9 percent in June. Experts had expected no change.
Confidence could fall even more when the June jobs report is issued on Friday. Forecasters expect the jobless rate to remain at 9.7 percent.
To understand how devastating a double dip recession would be, we need only consider the consequences of the original dip, which destroyed 20 percent of Americans’ wealth. A Pew Research Center survey shows that four in ten Americans have had to tap savings and retirement accounts to make ends meet. Almost a quarter of Americans had to borrow money from soneone. One in ten, including 24 percent of those between the ages of 18 to 29 years old, moved back in with their parents.
As for parents, 35 percent of those 62 and older who are still working say they have postponed retirement. Six in 10 working adults between ages 50 and 61 say they may be forced to do the same.
But at least in the event of a second dip, we won’t have to listen to Europeans and their admirers among the American left tell us how reckless the U.S. is compared to its betters abroad. And perhaps Thomas Friedman will keep his admiration for the Red Chinese to himself for a while.
As for the domestic poltical consequences of a double-dip recession, they hardly require elaboration. I haven’t wanted to look ahead to the 2012 election; the one this fall consumes all the energy I’m able to devote to horse race politics. But another economic hit might well leave the Obama presidency on life support.
This would be true of any modern presidency, I think. But it seems to me that Obama has left himself particularly vulnerable. The Pew study mentioned above shows that more than half of American adults responded to the recession by whittling down their mortgages, credit card balances, car loans and other borrowing. Nearly half say they plan to save more and third say they plan to spend less.
But the Obama administration, in its quest to not let the crisis go to waste, responded in precisely the opposite way. Rather than sacrificing by keeping spending under control, Obama has splurged, first through the wasteful stimulus bill and then though an unpopular health care bill that few believe is fiscally sound.
Obama, in sum, is completely out-of-step with America on the matter most important to Americans. Many will likely forgive and forget if the economic outlook brightens substantially. But right now that looks like a big” if.”
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