Last week, President Obama played tough, scolding Congress as he tried to pivot the national political narrative to job creation. The President’s pivot, which he’s tried numerous times before, includes a host of excuses like “headwinds” and “uncertainty” but little in the way of real solutions.
A recent uptick in gasoline prices, gone largely unnoticed by the Washington crowd that was focused on raising America’s debt ceiling, will make job creation even more difficult. Since bottoming out toward the end of June, gas prices have been slowly rising. Last week, the average price for a gallon of regular stood at $3.71, up more than 13 cents since President Obama belittled Congress into cancelling their Fourth of July recess.
Consumer spending is a major driver of the American economy, and consumer confidence is a key economic indicator. As energy costs – specifically gasoline – increase, Americans have less money for goods, services and recreational activities like vacations. For every one-cent increase in a gallon of gasoline, Americans’ disposable income drops by about $600 million per year.
Last week, the government reported that Americans cut back on their spending for the first time in nearly two years. After a decade of personal borrowing spurred by a housing bubble, spending less and saving more is not necessarily a bad thing. However, declines in consumer spending and consumer confidence as an economic indicator paints an ominous picture.
Of course, rising gas prices – up nearly $1 per gallon from this time last year – are not solely responsible for the bleak economic outlook held by consumers. Bad manufacturing numbers, high unemployment and weak housing prices all contribute. However, gas prices remain one of the most visible and comprehensible reminders for Americans that our economy is in serious trouble. It is something that Washington could take action to correct.
Here to Help?
Of course, President Obama’s mantra is Washington is here to help. All too often (always?), his solutions favor government intervention over economic competition.
In late June, President Obama misguidedly released 30 million barrels of oil from our Strategic Petroleum Reserve (SPR). At the time, Americans were paying around $3.61 for a gallon of gas. In other words, the gimmick failed.