COMMENTARY | Many Americans tuned in Tuesday night to watch President Obama’s State of the Union Address, where he outlined his plan to move America forward and give America an economy that is “built to last.” Since the economy is the top issue in the upcoming election, given the “new transparency” being shown by the Federal Reserve and the Federal Market Open Committee, it remains a surprise that more Americans do not tune in to watch their news conferences. While presidents have a “bully pulpit” from which to encourage a certain path or direction for the country and its economy, it is the policies of the Federal Reserve System that truly affect the economy.
Wednesday afternoon the Federal Reserve Open Committee concluded its two-day meeting, at which time it released its statement of the condition of the economy and its projections moving forward of what monetary policy will be in order to meet its dual mandates of “price stability and maximum employment.” Federal Reserve Chairman Ben Bernanke then conducted a press conference to discuss the released statement and answer questions from the press.
While a new NBC News/Wall Street Journal Poll released Wednesday night seems to indicate that Americans are starting to feel more hopeful about the economy, and this is translating to an increasing approval rating for President Obama, when listening to Bernanke’s remarks Wednesday about the true state of the economy, it is obvious that the Federal Reserve does not share the average American’s growing enthusiasm for the economy.
According to Bernanke today, “the economy has been expanding moderately,” and economic growth is expected to be “moderate over coming quarters.” Bernanke then continued his remarks about the future economy saying, “Looking further ahead, economic activity is expected to accelerate gradually, in conjunction with strengthening consumer and business confidence, improving financial conditions, and the continuation of a highly accommodative stance for monetary policy.”
Regarding unemployment, Bernanke went on to say, “”the unemployment rate remains elevated,” and “will decline only gradually. ” “The projected unemployment in the later quarters of this year has a central tendency of 8.2 to 8.5 percent.” Over time, the unemployment rate is only expected to decline to “6.7 to 7.0 percent in the fourth quarter of 2014.”
While many Americans were encouraged by the images of a recovering America, an America that, “is back,” in President Obama’s speech Tuesday night, as well as the trending improvement in hiring recently, when one listens to Bernanke’s remarks Wednesday afternoon, it is impossible to deny the projection that an unemployment rate at 8.2 to 8.5 percent in November is exactly where it is today. Economic growth is projected to be a tepid, “2.2 to 2.7 percent for 2012,” according to Bernanke, much where it was last year.
If the Federal Reserve is correct in its projections, when the dazzle of President Obama’s speech wears off, it is likely that many voters may return to their former disenchantment with the economy and state of the union. This is likely to affect President Obama’s approval rating. The only question that will remain at that time will be if voters’ returning disenchantment with the state of our economy will be enough to cause them to “hold their collective noses” and vote for the one of the four Republican contenders that has managed to secure their party’s nomination by that time. Despite a poll in South Carolina’s Republican Primary that indicated over 40 percent of Republicans wish they had another choice than the four that are running, and stories of personal and financial scandals following some of the Republican contenders, Democrats would be wise to not count their chickens before they hatch in the November election. At that time, when voters likely realize that there will be no quick and easy economic recovery regardless of whomever is elected president, the proverbial chickens may well come home to roost for both Democrats and Republicans.