No Repeat of Reagan's Miracle for Barack Obama

The presidential elections in the United States are more than a year away, but investors are already sure that there will be no great turnaround in the American economy under the reign of the 44th president. What’s worse, the problems keep multiplying, and there seems to be a shortage of sensible solutions on how to solve the biggest financial crisis since World War II.

Obama’s new jobs plan, with a price tag of almost $450 billion, does not qualify as a sensible solution either.

From the time when Obama took over as president in 2009, the United States experienced a net loss of almost 2.4 million jobs. Unemployment has reached levels not seen since the early ‘80s, when Ronald Reagan had to grapple with 12 percent unemployment. Reagan, however, was able to stimulate the market, leaving his successor, George H.W. Bush, with unemployment below 6 percent. Obama will not be able to replicate this feat and definitely not at the end of his first term.

Eager to avoid a further slip in the opinion polls, the president is trying to demonstrate some signs of life in the job market. However, there are few throughout the world who believe in Obama’s victory against the crisis. Investors also fall into this category, having taken Obama’s plan as confirmation of the increased probability of economic stagnation and of the lack of any ideas on how to reverse course. In the face of high unemployment and record debt, many hoped that Barack Obama would realize the futility of increased government spending. They seem to have been mistaken.

The whole world is currently looking for a way out of the economic quagmire in which we find ourselves. More debt is not the answer. The only solution is structural reform of government spending and less socialism in the economy.