2012 Presidential Election Approaching: How Will The Unemployment Rate Affect The Results?

With the presidential election two months away, U.S. employers were able to add only 96,000 jobs in August, whereas the labor force participation rate dropped to its lowest level in 31 years. Since Obama’€s inauguration, the unemployment rate has stayed above 8 percent, which was the longest period of such high unemployment since the Great Depression of the 1930s. We asked our Zintro experts whether they hold the administration accountable and how big of an impact this will have on the election.

Henry Kilpatrick, managing director and economic policy consultant, proposes a spending stimulus to restore the economy. “The only potentially effective tool the president has to work with is increased spending. Tax cuts will not convince businesses to increase production if they do not foresee a market for their products. Also, the lack of aggregate demand is a problem elsewhere, especially in Europe. This limits the ability of domestic firms to export products, hiring more workers to do so,” he explains. “The only bright spot seems to be export of energy products, and a potential return of chemical manufacturing due to the price and availability of natural gas and natural gas liquids.” On the other hand, Kilpatrick still believes that the President has limited power to the extent to which he could cut the deficit. “Congress has not been willing to go along with increased stimulus spending proposed by President Obama, especially with regards to his jobs bill. However, there seems to be increasing concern with the “fiscal cliff” we supposedly will fall off at the end of the year, when drastic spending cuts will occur, and income taxes will rise to pre-Bush levels. With this gridlock it is hard to blame the President, but the unanswered question is whether the President’s policies would work even if Congress bought into them,” he adds. Moreover, he finds it difficult to measure how much impact the economy will have on the election. “The public is certainly unhappy with the economy. But the vast majority of the public has already decided who will get its vote, and Obama is slightly ahead,” he notes.

Mike Sullivan, global business development executive, points out the fact that recent recessions weren’t as severe as the ones in the past and thinks that President Obama isn’t fully responsible of the current state of the economy. “Since the banks are not lending and the Republicans fought all bills to enhance labor force increases, including the Small Business Jobs and Tax Relief Act, which an independent firm estimated would create nearly 1 million jobs, including approximately 630,000 across small businesses, I find it impossible to blame the President for the continuing woes of the economy,” he says. In Sullivan’s point of view, US is better off as a nation than 3.5 years ago, when President Bush left the office. “This country’s economy was ‘dropping off a cliff’ when President Obama actually took office. Dow was at about 6500 (1/2 of what it is today), unemployment reached about 9% in February 2009, President Bush had taken the billions of surplus left by the Clinton Administration and run it into a 9+ Trill. Deficit,” he continues.  Furthermore, he highlights the major drawbacks, which have slowed down the recovery process. “Yes, recovery has been slow, but the first two to three years were required to just stop the bleeding, put some decent controls in place, and tackle other left-over problems like the 2 major wars, terrorist leaders still at-large, a severely tarnished international image, laws which continued to pay major corporations for creating jobs overseas and much more,” he explains.

Rick Rybeck, an attorney and public policy director, holds both of the major political parties responsible for the economic downturn. “Real estate speculation leads to booms and busts in real estate prices. This cycle of real estate booms and busts precedes every major recession and depression in our history. Yet, neither party attempts an explanation nor a solution to this parasitic activity that adds nothing of value to the economy and periodically brings the economy to its knees,” he notes. According to Rybeck, enforcing a reduction in property taxes may be an alternative solution. “Fortunately, some jurisdictions have enlisted a property tax technique to discourage speculation while rewarding property construction, improvement and maintenance. They have accomplished this by reducing the property tax rate applied to building values and increasing the tax rate applied to land values,” he explains. “Without sacrificing revenues, these jurisdictions have helped reduce speculation while reducing real estate costs for residents and businesses alike. Jurisdictions implementing this reform have increased infill development and employment compared to neighboring jurisdictions that did not.”

By Idil Kan

Zintro, Inc

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