(The Root) — Have you ever had one of those moments when, the second you finish answering a question, you realize, "Oh, crap, I'm going to pay for that one"? I have. The tough part, particularly in a hypercharged political environment, is cleaning it up (or, as we like to say in Washington, "walking back your remarks") before your words take on a life of their own.

Such a moment occurred for President Obama when he uttered the words, "The private sector is doing fine."

To make matters worse (or at least more difficult to walk back), within hours of the president's declaration, the credit firm Standard & Poor's warned that our nation's economic outlook remains negative, and therefore the long-term credit rating of the United States will remain an AA+, which ranks us on a par with Belgium.


That announcement is a cold reminder of Aug. 5, 2011. History books will record it as the day the global economic position of the United States was diminished as S&P declared U.S. Treasury debt no longer to be one of the safest investments in the world.

The Wall Street Journal noted at the time that if the United States were a public company, the credit agencies would have declared a "no-buy or sell" stipulation because of the massive federal spending and borrowing over the past decade (and the failure of both political parties in Congress to control spending in recent years).

Americans are rightly upset, especially with the early-June report showing that the U.S. jobless rate increased in May from 8.1 percent to 8.2 percent amid a string of other bad economic news. Unemployment has been above 8 percent for more than 20 months, and the underemployment rate is far higher (the private sector is still 4.5 million jobs below its 2008 level). Furthermore, there are millions (pdf) estimated to have simply given up trying to find work in the private or public sector.

When President Obama was pressed to explain what he meant by his now controversial and implausible statement, he attempted to argue that the private sector wasn't holding back the economy. He said it was the public sector. Then, later in that same press conference, he still claimed, "We've actually seen some good momentum in the private sector," but later finally admitted, "It's absolutely clear the economy is not doing fine."


Of course, as the nation just witnessed in Wisconsin and California (where voters in San Diego and San Jose voted 66 and 69 percent respectively to cut back public-employee pensions), showering more money as a "stimulus" onto the public sector is less popular with taxpayers than asking them for some shared sacrifice.

So with our 2012 presidential campaign now shifting into higher gear, the national debate must focus on solutions that get us from where we are to a more secure economic future.


How we got here begins with massive home building and home-price appreciation in 2001. By 2005 the real estate market had begun to cool, and it ultimately slowed to the point of implosion. When the U.S. housing sector collapsed, it brought down other pillars of our economy to the point of triggering our deep 2008 recession.

The systemic housing problem aggravated by the quasi-government agencies Fannie Mae and Freddie Mac is now widely acknowledged. According to a column by J.C. Watts, the Washington-based Heritage Foundation put this Fannie Mae-Freddie Mac debacle in perspective: " 'In addition to fundamental miscalculations about the risk to and posed by (them), their management engaged in scandalous accounting practices, including manipulation of earnings to reach earnings targets to maximize bonuses to company executives.' "


Let's also not forget that the excessive monetary accommodation by the Federal Reserve and other central banks in Europe distorted the global credit market and fueled the recession.

All of these are systemic problems that still need a long-term fix. So the idea that the private sector or any sector of our economy is doing fine expresses a certain naiveté about the depths of this recession and the challenges we must still address to end it. But for now, let's focus on what can be done in the short term to get out of this "fine" mess.


While the president, in his recent campaign speech in Cleveland, sought to frame the November election as less a referendum on his policies than a choice between two "fundamentally different" views on how to create jobs and grow the economy, he essentially delivered a glorified stump speech. Still wallowing in the old idea that he could have done more if it weren't for the policies he inherited or the "stalemate" in the Congress, the president missed an opportunity to be bold and to act in a way that would have avoided the excuses and put an intransigent Congress back on its heels. 

First, the president could immediately make things a lot easier on employers and on hiring by ordering his federal-department heads to stop issuing expensive new rules that hamper business. This president has always had within his grasp the steps necessary for sustained long-term private-sector job creation, whether they involved tempering the aggressive efforts of his Environmental Protection Agency or approving the massive Keystone Pipeline project; pushing through significant reductions in the excessive spending and massive accumulation of federal debt, including the reform of Medicare and Social Security; or just adopting his own bipartisan commission's tax and spending recommendations (Simpson-Bowles).


The problem is that the president hasn't implemented such solutions for the private sector because he seems to think everything is just fine.

Michael Steele is the former chairman of the Republican National Committee and served as lieutenant governor of Maryland from 2003 to 2007. He is currently a political analyst for MSNBC.

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