It has been roughly five years since the crash of the U.S equity markets in 2008, as the economy suffered widespread losses. Millions of jobs were lost resulting in high unemployment, declining housing prices, and the American people suffering the worst recession since the Great Depression. America needed leadership that would provide a steady economic recovery; but stopping at par is not a part of the American dream. Unfortunately, throughout President Barack Obama's first term, he was unsuccessful in restoring a healthy American economy. It is argued that lackluster leadership from the previous Bush administration burdened President Barack Obama; however, President Barack Obama's economic policies have been in effect over the last four years and have yet to revive the American economy. To date, the economy has failed to resume robust economic growth predominantly due to President Barack Obama's healthcare, energy, and taxation policies.
To begin, President Barack Obama's healthcare reform policy, colloquially called Obamacare, restricts economic growth through uncertain implementations and increased employer costs. Despite President Barack Obama's admirable desire to provide universal healthcare, his actions have demonstrated unwillingness for a needed compromise. Due to President Barack Obama's argument that cost is the reason so many Americans are uninsured, his healthcare reform Obamacare seeks to lower the cost of guaranteed healthcare in order to make them more affordable for the average American family and to reduce the length of patent protection for pharmaceutical companies, in order for the cheaper, generic alternatives to be available sooner. President Barack Obama funds Obamacare through reforms in the insurance program and by forcing employers to provide higher contributions and broader coverage.
Since the implementation of Obamacare healthcare reform spans several years, an uncertain environment remains for employers, who are constantly trying to cope with changing regulations. Given their uncertainty as to what the future holds, employers' business models are constantly having to re-evaluate appropriate levels of costs to reserve for labor given the likely event that regulations change. All companies have a specified percentage of capital that they allocate to paying employees, and the more capital they have available, the more workers they are able to hire.
Obamacare reverses this effect, as it forces employers to allocate more capital to labor through higher health benefit costs which increases the cost of each individual employee and detracts from other parts of their business. Not only do corporations no longer have the capital they could be using to hire more employees, but also they are now unable to reinvest a larger amount of free cash flow back into their business or to pay off a greater portion of their net debt. Even worse, not only the large corporations valued at billions of dollars are affected, but also the small businesses including the "mom and pop" companies that are struggling to make ends meet.
Obamacare requires employers to provide increasing levels of benefits to their workers. This discourages companies from hiring more laborers, as they face the potential threat of a sudden need to provide more entitlements. This notion affects job-creating opportunities on a widespread scale, as thousands of employers across the country may limit their hiring or even lay off workers, as they may want to keep costs under control. The larger corporations typically have a sizeable amount of cash on their balance sheets allowing greater flexibility, but small businesses need all the capital they can muster to allow continued growth.
Furthermore, in addition to inhibiting economic growth through a poor healthcare program, President Barack Obama's energy policies constrain job-creating opportunities by limiting pipeline construction and offshore drilling. Notwithstanding his noble environmental agenda, the path to energy independence is a step America needs in order to regain jobs and increase economic stability. President Barack Obama's energy policies such as his New Energy for America plan have focused on reducing American consumption of foreign oil, investing in renewable resources and clean energy technologies, all of which do create some new jobs for Americans.
Be that as it may, President Barack Obama could achieve a plethora of new job-creating opportunities for Americans, opening thousands of jobs by loosening regulations so TransCanada (NYSE:TRP) and Conoco Philips (NYSE:COP) could build a pipeline such as the Keystone XL. The Keystone XL Pipeline could potentially span from as far as Alberta, Canada, to Houston, Texas (phase 3 of current plans).
In addition to creating thousands of jobs, the Keystone XL Pipeline would help stabilize the average price of gasoline, which has hovered around $4 a gallon for over the last year (another indicator that the Obama administration's energy agenda is having a dulling economic effect). Since oil is a global commodity and is subject to supply and demand fluctuations, the increasing supply level of crude oil from the Keystone Pipeline will unquestionably have a positive effect by decreasing domestic gasoline prices. Constructing the Keystone XL Pipeline would also help in the development of our own natural resources, such as Utica Shale, while providing an increased supply of resources from our Canadian partner. In addition, President Barack Obama's unsupportive position on offshore drilling also has a similar effect to not building the pipeline, as it ultimately prevents more job-creating opportunities while reducing American energy independence.
The time for drilling could not be better either, as there are now more rigs drilling for oil than gas for the first time in decades in the U.S., and the new directional drilling methods have higher service costs as equipment wears out faster. More drilling means more jobs, and faster equipment wear means more investment spending. Both of these would stimulate the economy.
Accordingly, President Barack Obama has failed to realize the true potential offshore drilling has to offer. At current economic levels, America's focus cannot be strictly on clean energy, as the technology needed to provide efficiency per unit either does not currently exist or is too expensive. The President has had a multitude of opportunities to promote policies to construct new rigs, refurbish idle rigs, and open up new areas for exploration. He had a big opportunity to open up the Artic National Wildlife Refuge to drilling, in addition to several other areas along the eastern coast of Southern America and along the Gulf of Mexico.
Similar to pipeline construction, increased oil exploration and production would open up thousands of new, desirable jobs (many in the manufacturing sector). At the end of the day, rig construction and utilization of our own natural resources will be the biggest step needed towards becoming energy independent, and President Barack Obama is not willing to make compromises to stimulate the economy.
Ultimately, in unison with an unsuccessful energy plan, uncertainty over President Barack Obama's tax policies and their resultant increases has been a large inhibitor of economic growth by increasing middle- and upper-income peoples' tax rates, which reduces their consumer confidence and limits their spending. Consumer spending is an important driver of the economy, so when it begins to fade as a result of people having less money in their pockets to spend, the economy is at a risk of decelerating. Many Americans are also living paycheck to paycheck, and certainly cannot afford to have increasing expenses, as that is sure to impact how they feel as a consumer. The psychology behind consumer confidence and spending is quite simple, as the less money people have to spend, the less likely they are to play their role as consumers.
Consumer spending fuels the economy, as it maintains stable and growing revenues for corporate America. Consumer spending is also solely vital to the protection of companies' revenue streams (with the exception of industries like defense contractors). Without consumer spending, the economy is unable to function, and growth will slow when there is a diminishing presence of it. In spite of this, President Barack Obama is continuing to tax the primary consumers, comprised of middle- and upper-income families, heavily, even though they are the ones that account for most of the spending. It appears almost as if those who drive the economy are being punished for it. While upper-income families may not feel a large negative shift in consumer confidence, middle-income families certainly will. Comprising most of America from a population standpoint, even the smallest move in the consumer confidence and spending of the middle-class will have grand repercussions.
A great idea for investors now would be to take profits in a market such as this one. Unemployment was very weak for March, and if the claims continue to show weakness Thursday, we could see market corrections for sure. Fundamental indicators aren't strong enough to fuel this type of growth. President Barack Obama's policies are likely to affect the market- not overnight- but over the next three years of his remaining term. They will reduce the amount of job creating abilities we have, on top of putting us at more risk for fluctuations in energy markets. As the Fed continues backing the economy by firing up the printing press, the markets are likely to continue their rally, but quantitative easing can only last so long before the effects turn somewhat harmful.
In the event of a sizeable market correction, investors may want to gain some exposure if not already entered, and continue adding to their position as the market continues in a downward trend. From a longer-term perspective, America is currently headed on a dangerous path, as current economic policies set in place by President Obama are racking up tons of debt and slowing our potential growth.
In conclusion, as of today, the economy has failed to resume robust economic growth predominantly due to President Barack Obama's healthcare, energy, and taxation policies. Though there must be a careful balance between stimulating the economy or taking care of people and protecting the environment, sensible policies can better achieve this balance. Obamacare has resulted in both uncertainty and increased costs for employers, while actually increasing the cost of healthcare. President Obama's energy policies have doubled the price of gasoline since he took office, in addition to reducing job opportunities through refusing to ease regulations to construct pipelines and oil rigs. Lastly, the President's taxation policies have resulted in people having less money in their pockets, which reduces their confidence as a consumer to make purchases, which is a huge driver of the economy.
The American people need leadership and policies that can get them back on the track to hardy economic growth. In comparison to the beginning of President Barack Obama's first term, we as a nation are not much better off than we were four years ago. Indeed, the American people need growth restored, and it seems that with current economic policies, they just are not getting it.