Whatever the mix of the underlying causes of the election results, there is little doubt that lingering anxiety about the weak economic recovery was a major factor. In a Wall Street Journal opinion piece a couple of days after the election, Daniel Henninger identified it as the primary determinant of electoral outcomes–you preside over a low growth economy, you lose. And that is exactly what we have had. Since World War II, the average annual growth of GDP is 3.3%. Since 2008, the best year was 2.8% in 2012 and the labor force participation rate is the lowest in forty years. Again, you preside over that performance, you lose.
This lack of consistent GDP and job growth will continue as long as we persist in the uncertainties of the consequences of Obamacare, the credit-stifling regulatory climate of laws like Dodd-Frank, the continuing threat of an aggressive EPA, the mindless delay in approving the no-brainer completion of the Keystone XL Pipeline, and the continuing misguided Federal Reserve monetary policy, which has distorted the price of money, misallocated capital, and provided enormous benefit to the affluent participants in the equity markets to the detriment of the middle class.
And now we learn that the Federal Housing Finance Agency director plans to propose down payments as low as 3% for Fannie Mae and Freddie Mac qualifying mortgage loans, which will be a repeat of the “affordable housing” policy that provided the impetus for the disaster of 2008-09. It seems this is where we came in to this picture!
If Obama really wants to play ball with the new Congress and provide some answers that the American people have just demanded, he could start by rolling back this regulatory madness that I have just listed and start using his pulpit and whatever credibility he has left to hint to the leadership of the Federal Reserve that they should take a close look at the election returns. But don’t hold your breath.