Obama's Private-Sector Comment Lights a Fuse

[WestVirginiaRebel]

Real Clear Politics:

President Obama and Republican House leaders traded fire Friday over whether the economy's private sector is "doing fine," as the president asserted, and whether new federal infusions of support to bolster public-sector employment make sense.

During a brief and hastily scheduled news conference at the White House, the president condemned Congress for refusing to pass “most” of his American Jobs Act introduced last fall -- legislation he said could offset 450,000 layoffs of firefighters, teachers and police, and also put unemployed construction workers into jobs.

Enacting his “to-do-list” economic ideas this year could buy insurance against the threat of Europe’s fiscal troubles, which are impacting trade with the United States and could yet blow up into something worse, he added.

His comments drew immediate criticism from GOP leaders, but it was the remark about the private sector that elicited the strongest response, prompting the president to walk back his statement after the press conference. “Listen, it is absolutely clear the economy is not doing fine,” he said. “That’s the reason I had a press conference. That’s why I spent yesterday, the day before yesterday, this past week, this past month and this past year talking about how we can make the economy stronger.” He accused Republicans of mischaracterizing his remarks about improvements in the private sector.

In arguing that state and local government hiring and construction remain two of the weakest sectors of the economy during a slow recovery, Obama said at the press conference that “overall, the private sector has been doing a good job creating jobs; we’ve seen record profits in the corporate sector.”

Circling back to that thought a few moments later, he added, “The truth of the matter is, we’ve created 4.3 million jobs over the last 27 months; over 800,000 just this year alone. The private sector’s doing fine. Where we’re seeing weaknesses in our economy have to do with state and local governments.”

Technically speaking, the president’s wonky thesis might be correct about pesky trouble spots in the employment picture. The unemployment rate in the construction sector was 14.2 percent in May, an improvement from 16.3 percent a year ago, but with the housing sector still sluggish, the rate remains in double digits. States and cities have indeed shed employees as they’ve slashed budgets to adapt to years of declining revenues, but the unemployment rate in May for government workers overall was 4.2 percent -- about half of what it was nationally, according to the Labor Department.

The president is correct that many large, private corporations are flush with cash and thriving without new hires because of rising worker productivity. But the growth in corporate profits in the first quarter of 2012 ($11.4 billion) decreased in comparison with the rise in the fourth quarter of 2011 ($16.8 billion), according to the government. While profits have been healthy, less is less and perhaps not entirely “fine.”

Politically, Obama has somehow dropped his tuning fork. Perceptions of the economy feed on open wallets and rising consumption, on confidence, on whether personal incomes are growing or contracting, and on whether the cost of living holds steady. And job creation depends on small start-ups, most of which are not profitable in the beginning -- especially in a tough economy.

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Obama tried to spike the economic football, but fumbled instead.