In the clearest indication yet that Obama's policies are harming the country and the economy, the US balance of trade showed a $50 billion deficit for May spurred by high oil prices, spurred by a weak dollar and lack of domestic energy production- all policies favored/created by Hurricane O's economic gurus.
The deficit increases the odds that economic growth for the year will have to be revised downward again from 1.9 percent annually, threatening to push the economy into recession territory again.
Watch for the jobs market to sink back into the red. And whatever happens with the budget, don't count on federal revenues to go up.
"Had it not been for a dramatic improvement in the trade deficit in the fourth quarter of 2010, GDP growth would have been over -0.2%, not 3.1%," says Dirk Van Dijk from Zacks Investment Research.
"Unless we see a dramatic turnaround in June, it seems pretty clear that net exports will be a drag on growth in the second quarter. It now looks like the economy will have to be very lucky to match the 1.9% growth rate of the first quarter. The Fed will probably have to again ratchet down its growth expectations for the full year."
The deficit shows three of the key weakness of the Obama administration: Energy policy, Trade policy and Reality.
"May's trade deficit of $50.2 billion was dramatically above April's $43.6 billion (only marginally revised from $43.7 billion) and a market consensus of $44.0 billion," said David Sloan, Economist at IFR Economics according to Reuters. "The deficit is the highest since October 2008. The higher than expected May deficit should be seen alongside a lower than expected April deficit."
Sixty percent of the trade imbalance this time around is from oil imports as prices surged in a low interest rate environment and the extra liquidity brought by QE2.
Despite our president's assertion to the contrary, it’s not our addiction to oil however, that’s caused the problem: Through April oil imports are down year-over-year in 2011.
It's high prices.
"The average price for the oil we imported in May was $108.70 per barrel, up from $103.18 in April and $76.91 in May of 2010," says Van Dijk. "On the oil side, the deficit soared to $30.45 billion from $26.14 billion in April, and 38.7% above the $21.95 billion level of a year ago. The non-oil deficit rose by $2.19 billion or 7.0%. Relative to a year ago, the non-oil deficit was up 5.3% or $1.70 billion."
To some extent, the rise of the price of oil has been as a result to a flight to quality, just as gold prices have remained under inflationary pressure in the wake of loose money policies favored by the US.
Peter Morici, business professor from the University of Maryland, says also that oil is a key component to the trade imbalance along with policies Obama has pursued regarding the China trade.
"America needs to tap one of its strengths -- abundant domestic energy -- and confront Chinese mercantilism that makes U.S. goods overpriced at home and abroad," says Morici.
The truth is that the US has the natural resources to be entirely self-sufficient in energy. We just have goofballs making policy so they can send money to special interests.
"At 4.0% of GDP, the trade deficit subtracts more from the demand for U.S.-made goods and services than President Obama's stimulus package added. The Obama stimulus was temporary and is now dissipating, whereas the trade deficit is permanent and is swollen again."
In other words, if Obama was really interested in stimulating economy, and not just tax increases, he'd stimulate domestic energy and trade.
But doing so, he’d give the economy a stimulus worth of spending, create jobs without it costing American taxpayers one single dime.
And that’s the problem: The Democrats just can’t stand not costing the taxpayers money.
In the interest of “fairness,” that kind of policy, to them, would just seem really unfair.
Especially to their “green” company donors, one of which just got a $4.5 billion loan guarantee from the Obama administration.
As our contributor Marita Noon reported last week, the administration approved “sending $4.5 billion in stimulus funds …to one lucky publicly-traded [green] company (First Solar) that coincidentally contributed significantly to the Democrat Party during the 2010 election cycle, including candidates Harry Reid, Gabrielle Giffords and Joe Sestak.”
It’s a good thing too because First Solar’s shares had plunged from $170 in March down to $115 in June before they got the loan bailout.
But don’t worry: The company’s shareholders have made about a billion dollars so far through the generosity of the Department of Energy’s loan guarantee.
And it only costs us about $30 billion last month out of our own pockets. Fairness, indeed.
Don’t expect Obama to say he’s sorry.
See also these top features from Townhall Finance:
| The Ticker | Daily Market Commentary |
| Larry Kudlow | The Tea Party Is Ceiling the Deal |
| John Ransom | Obamanomics: Never Say Sorry to a Cash Contributor |
| George Friedman | Libya and the Problem with The Hague |
| David Malpass | Debt Outlook Stark |
| Tony Marsh | If Barack Obama Wins Reelection, This Will Be Why |
| Mike Shedlock | Inflation Wild in BRIC Countries |
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