Reason For Obama’s Falling Approval Rating

There is a mix of reasons why the United States has been unable to repair its economy. First, labor costs are too expensive. When a GE refrigerator breaks down, the labor cost to fix it can be $100. Even when a plumber comes to check on a leaky faucet, the labor cost typically exceeds $100. This is one reason why large manufacturing firms increasingly employ cheaper labor abroad.

American manufacturing accounts for only 12 percent of all industries combined. The tax system is not advantageous either. While corporate taxes are being lowered around the world, the United States maintains a 39 percent corporate tax.

It is likely that starting next year the marginal tax rate for households with annual incomes over $250,000 will rise to 39.6 percent from 35 percent. The Obama administration has stated that it will not renew the soon-to-expire tax reduction measures introduced by George W. Bush in 2001 and 2003. If so, the tax burden for small- and medium-sized businesses, including the self-employed, will grow. The tax burden will prove an even greater obstacle to job growth. Edmund Phelps, a Columbia University professor and 2006 recipient of the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, has stated “that taxing the rich more in a struggling economy can result in a loss of economic drive.” Furthermore, “it must be understood that innovation, the source of competitiveness in capitalism, is funded by the rich.”

It is uncertain whether businesses will employ more workers in the future. After the financial crisis, Americans who previously enjoyed spending are scrambling to reduce debt. U.S. households’ debt-to-disposable income ratio fell from an all-time high in 2007 of 137.6 percent to 131.4 percent in 2008 and finally 128.2 percent last year. This decrease in aggregate demand could slow the economic recovery.

The risks of regulation have increased. While businesses face additional burdens coming from health care reform, the prospect of cap-and-trade legislation brings new worries about more tax burdens. On top of all this, the Obama administration is pushing a new tax on foreign investment. At a recent meeting with Peter Orszag, Director of the Office of Management and Budget, Ivan Seidenberg, CEO of Verizon and former head of the Business Roundtable, expressed his worries that the new policies do not accurately reflect the costs of regulation. Businesspeople increasingly do not believe President Obama’s words from February’s edition of BusinessWeek, in which he expressed that he is “pro-business.”

However, Obama has told businesses that they must use the $1.8 trillion toward job creation.

Government and the private sector share the goal of building business confidence, but the result may be a further postponement of the job market recovery.

The atrophied job market is raising America’s frustration. The Pew Research Center conducted a survey in December of 2008, which showed that since the beginning of the recession 30 months ago, half of Americans were anxious about unemployment or wage cuts. The survey also showed that 25 percent of those in the 18-29 age bracket were not independent and instead had moved back in with their parents. The number of people worried about their children’s quality of life is rising.

The reason for President Obama’s falling approval rating, regardless of the successive reforms he has passed, is the American people’s growing hopelessness.