WASHINGTON - If President Obama ever expected the economy to improve significantly before the 2012 election, Fed Chairman Ben Bernanke buried that hope this week.
The Fed's grim forecasts of what the Obama economy will look like throughout next year were bleaker than its modest earlier estimates. High unemployment will persist throughout 2012 along with sharply slower economic growth rates.
The Federal Reserve took no action at this time to deal with the chronically weak economy, sending yet another unmistakable message to the White House and a divided Congress that any real, long term improvement will require a change in fiscal policy.
Clearly, with the presidential election campaign officially beginning in two months, the White House was hoping the Fed would come up with some new, substantive initiatives to improve economic conditions. That won't happen anytime soon.
With unemployment at around 9 percent (more than 16 percent when part-time and temp workers are included), the Fed forecasts that the jobless rate will remain around 8.6 percent by the end of next year. Worse, unemployment will still hover somewhere between nearly 7 percent and 8 percent by late 2014 unless there is a dramatic change in economic policies.
The Fed had expected the labor picture to improve by now, forecasting in June that unemployment would be down around 8 percent by the end of 2012.
This summer the Fed bullishly predicted the economy would grow by between 3.3 percent and nearly 4 percent in 2012. It sharply and sheepishly lowered that forecast Wednesday to between 2.5 percent and 2.9 percent, an growth rate that cannot make much, if any, of a dent in the now 25 million Americans who cannot find full time jobs.
To see how far away the failed Obama economy is from any kind of a full recovery, listen to University of Maryland business economist Peter Morici:
"The economy must add 13.4 million jobs over the next three years -- 373,000 each month -- to bring unemployment down to 6 percent. Considering continuing layoffs at state and local governments and federal spending, private sector jobs must increase at least 400,000 a month to accomplish that goal."
The Fed's bearish report came as a cold shower for the White House and the Obama campaign. The president's latest $447 billion tax and spend jobs scheme is opposed by Republicans, and a number of Democrats facing tough re-elections next year, and stands no chance of passing Congress.
Pieces of the plan may be enacted, such as extending the payroll tax cut and unemployment insurance benefits, but the major provisions are dead.
With his job approval numbers running in the low 40s as he gears up for a tough election battle, the odds against him winning a second term are daunting at best. No president since the New Deal has won re- election with the unemployment rate over 8 percent.
Not only has his 2009, $800 billion economic stimulus plan failed to drive down the unemployment rate or put the economy on a permanent growth path, his critics say the rest of his tax and regulatory agenda has placed severe roadblocks to future expansion and job creation.
The list of anti-growth, anti-job policies under Obama is long, costly and unpopular: The sweeping employer taxes and health insurance mandates embedded in Obamacare have already made much of the business community drop its health care plans, hike worker health care payments and reduce payrolls to reduce its exposure to future costs.
In the first three years of his presidency, critics said that Obama's leftist policies to sharply curtail domestic fossil fuel exploration and development and halt swift action on trade expansion for U.S. exports imposed new obstacles to economic growth and jobs.
But the president and his party took no action on three trade agreements negotiated by President George W.Bush until just recently, and any serious moves to begin energy expansion to lower prices remains in limbo.
Obama has proposed a laundry list of limited remedies to pull the country's housing industry out of a depression but without any success.
Consumer confidence continues to decline. More and more Americans say they're struggling to make ends meet. The economy and unemployment remain far and away the No. 1 concern of voters. No other issues come even close.
"Anecdotal reports indicate that businesses are cutting back. They don't expect a recession but are gearing up for persistent subpar growth in the United States, slower growth in Asia and virtually no growth in Europe," Morici writes in his latest weekly economic analysis.
As far as the Fed's reluctance to come up with any new additional initiatives for the time being, the truth is that it really doesn't have any new tools to accelerate economic growth, monetary or otherwise.
This is a job for growth economics on the fiscal side of the policy equation -- tax reforms that offer new incentives to unleash capital investment and accelerate new business formation; negotiations for new fast-track trade agreements for American exports; and opening the spigots for expanded oil and other domestic energy production.
This is a great and prosperous country with a long and proud history of overcoming economic adversity. It can do so again under the right policies. Obama's policies are not working and are never going to work.