EDITORIAL: Summer sizzles, economy fizzles

OPINION:

In the closing days of spring, administration cheerleader-in-chief and Vice President Joseph R. Biden Jr. proudly predicted that as the months ahead heated up, so too would the economy. It was to be “recovery summer,” according to Mr. Biden, who toured the country touting the alleged benefits of President Obama’s “shovel-ready” economic policies.

“The fact is the Recovery Act is working,” Mr. Biden declared in mid-June. But as summer fades and the economy sputters, the vice president now gamely contends that even though the economy did not respond as robustly as the administration would have preferred, “no doubt we’re moving in the right direction.”

But what direction is that? Indicators that should be down are up, and those that should be up are down. The administration claims to have “saved” 3 million jobs, but this argument is losing traction as new claims for unemployment benefits continue to rise. Almost one in five American adults is either unemployed, underemployed or has lost hope. Gross domestic product (GDP) growth has declined since the end of 2009, and Friday’s downward revision of second-quarter growth shows an economy on life support. New-home sales have fallen to the lowest pace on record, and despite historically low mortgage rates, prospective homebuyers lack enough confidence in the future to make long-term commitments. Meanwhile, more people are losing their home,s and Mr. Obama’s plan to mitigate foreclosure has bogged down in red tape and administrative waste.

Since the “recovery summer” campaign kickoff, the stock market has declined, Treasury bond yields have tanked, the trade deficit has increased, manufacturing is down, non-farm productivity is down, durable goods orders are performing below expectations, the dollar is weaker, and retail sales have flatlined.

The administration has been forced to make the argument that things may be bad but they would have been much worse had the stimulus not passed, citing a study released last week by the Congressional Budget Office that concludes that the stimulus temporarily raised GDP and employment. But according to a concurrent report by CBO’s Macroeconomic Analysis Division, the data “are not as helpful in determining [the stimulus plan’s] economic effects as might be supposed because isolating the effects would require knowing what path the economy would have taken in the absence of the law.” Because what might have been cannot be known, the data “add only limited information” about the impact of the stimulus. In other words, maybe it helped, maybe it didn’t.

The most observable impact of the orgy of federal spending in the past 18 months is the rapid increase in government debt. The budget deficit for the month of July 2010 was greater than the deficit for the entire year of 2007 - that is, under George W. Bush, the person Democrats reflexively blame for all the country’s troubles. The government will spend more in stimulus money than it did on seven years of war in Iraq and run debt at levels not seen since World War II.

This was no summer of love for the president. National economic woes, ill-timed and extravagant vacations, nearly continuous golf outings and persistent bad press from the Gulf oil leak took their toll. Mr. Obama’s Gallup weekly approval rating when the White House rolled out “recovery summer” was 47 percent, with 45 percent disapproving. The latest figures in the same poll are 43 percent approval and 50 percent disapproval. Meanwhile, more Democrat-held seats in Congress are in play for the November midterm elections, and unfortunately for the president, the strongest signs of recovery are in the Republican Party.