Often we hear from our small business clients about the State Of The Union and Washington's policies. In talking with hundreds of small business owners we have never seen an almost unanimous opinion: the Obama Administration's economic strategy is a failure!The current consensus is that the economy is not growing fast enough to produce jobs and there is little recovery in sight. Most are deeply concerned that the budget deficit will remain in excess of $1 trillion for years to come, putting the U.S. into a deeper fiscal crisis. What is most frustrating to are clients is that neither party has a realistic plan to start solving the problem. It seems doomed to only get worse.
Obama's Administration believed that with a temporary stimulus the economy would revert back to a state similar to pre-financial crisis and counted on the personal savings rates going back to the 3% range of disposable income or less and new housing starts recovering to the $1 million unit level. They believed this approach would give the needed economic shot in the short term to stabilize markets, which would be followed by increased personal spending which would restore growth.
Unfortunately the Administration didn't see the true macro economic drivers of the crisis. Consumers had hit the debt-wall from years of over-spending, while years of neglect on the US critical investment needs such as infrastructure, and energy had been neglected. The US has been losing its long-term competitiveness, hidden behind all the growth in consumer consumption that was creating jobs and a middle class in China.
So what happened was the savings rate has doubled to over 6% and of course housing starts barely creep along above the half-a-million units per year. The US economy needs much more than a temporary stimulus fix. It needs a structural change which is taking place by natural market forces. More savings equals more investment into the critical components the US needs to stay competitive.
All of American Finance Solutions' clients agree, that its going to get worse before it gets better. They all are ready to bite the bullet and have had a lot of practice over the past two years in surviving the storm. They want the needless spending stop and start having Washington make investments for the long-term, not for the political flavor of the day, even if it means serious sacrifices in the short-term, including another recession.
