The Obama Recovery: America’s Wealth Declines
At a recent appearance in Austin, Texas, President Obama attempted to make the case that America was back in the swing of things and that the Obama Administration’s initiative for economic recovery was truly coming to fruition. “Terrific things are going on in communities all across America,” the President proclaimed, quickly adding in a swipe at Congressional inaction as the impediment for greater progress.
U.S. consumer confidence in May was at its highest in six years, stock market gains have been impressive, and there has been some uptick in U.S. home prices. But considering how far down these indicators had been and for how long, this comparatively rosy picture of economic conditions is far from something to jump for joy about.
In fact, a new essay by the Federal Reserve Bank of St. Louis’ new Center for Household Financial Stability paints a stark and analytically supported assessment that examines, “the circumstances that led to large declines in household wealth, make the case that such wealth has not fully recovered.”
Some of the major takeaways from the Federal Reserves report include: Average household wealth in real terms, contrary to recent headlines, has not fully recovered; indeed, it is only about halfway back to prerecession levels. While many Americans lost wealth because of the recession, younger, less-educated and/or African-American and Hispanic families lost the most, in percentage terms. Those subgroups had higher-than-average concentrations of their wealth in housing and higher debt-to-asset ratios than less economically vulnerable groups. The very families most exposed to the economic fallout of a deep recession—fallout that came in the form of job loss or reduced income—possessed the weakest and riskiest balance sheets.
Among the many stark revelations this report puts forth is the harsh realization that American household wealth declined by 55 percent since the Great Recession and it still has not rebounded, nor has it been evenly enjoyed by all economic income classes. As the report explains, “Of the total recovery of $14.7 trillion between the first quarter of 2009 and the fourth quarter of 2012, $9.1 trillion, or 62 percent, of the gain was due to higher stock-market wealth. Stock wealth is unevenly held, with the vast majority of stocks owned by a relatively small number of wealthy families.”
Perhaps even more profound is one of the report’s summative observations, “Considering the uneven recovery of wealth across households, a conclusion that the financial damage of the crisis and recession largely has been repaired is not justified.” Even the Federal Reserve is pouring cold water on part of the President’s stump speeches that boast of significant economic recovery. It’s worth repeating the observation: “a conclusion that the financial damage of the crisis and recession largely has been repaired is not justified.” That’s a pretty powerful, albeit dismal, dose of reality.
As a supposed champion of the middle class, one would imagine that the President would be doing more than simply chastising Congress for doing nothing. Yet the President seems resigned to hit the campaign trail, criticize an ineffectual Congress, and peddle a rosy picture of economic growth. Unfortunately, this picture is a decoration over a glaring hole, a penchant symbol for Presidential inaction, and the incarnation of dismissive partisan rhetoric, and it is painted in the absence of substantive facts as well as much needed Presidential leadership. Stump speeches and talking points that tout unrealized progress, especially when the truth is fare less genuine is simply better known as ‘fuzzy math with rose colored glasses.’