With a pivotal election looming that could critically constrain his options, President Obama dares not campaign now in close contests. In the most important issue, the voting public already understands his empty promises since 2008 have truly not restored America’s economy to a robust growth track.
Scant days before we vote, the tone-deaf suggestions made by partisans that Americans are better off financially in 2014 merely compound woes for Democrats — repeated stridently and arrogantly, these assertions simply prove that Team Obama is economically illiterate, when compared to available evidence.
Information contained in the highly regarded Consumer Expenditure Surveys (prepared by federal government authorities) conclusively contradicts Obama administration arguments that Americans have benefited financially under his leadership.
The top 20 percent of American households earned an average of $162,720 per year before taxes in 2013, down 2.6 percent from 2012. During 2013, taxes increased by 219 percent for households in the top quintile — as a consequence, their after-tax incomes dropped 15.2 percent from $158,024 to $134,044.
For the 25 million households in the top 20 percent, decreased after-tax income in 2013 meant they added a smaller percentage to savings — 26 percent of their income in 2013 compared to 37 percent in 2012.
Meanwhile, the bottom 80 percent saw pre-tax household income drop 2.7 percent from $40,168 to $39,091, while after-tax income fell 7.7 percent from $39,635 to $36,963. In 2013, these households had to dip into their meager savings or borrow to make ends meet.
Three big-name examples
Poor results for the American economy taken as a whole in 2013 compared to 2012 are mirrored in recent financial results for several iconic U.S. companies — when Americans have less after-tax income, they spend less. Reduced spending means lower revenues, profits, and cash flow.
Founded in 1886, Coca-Cola Co. [KO-$41.03] currently has an enterprise value (market value of equity and debt securities, less spare cash and marketable investments) of $198 billion. This giant company operates worldwide with just 130,600 employees.
Last week Coke, reported disappointing financial results for the third quarter 2014 that are worth studying below surface level — revenues in North America dropped 1.3 percent compared to 2013, and after-tax profits dropped 15.2 percent in their key home market.
Dominant in Internet retailing, Amazon.com (AMZN-$287.06) has an enterprise value of $129 billion, and a worldwide headcount of 149,500, having been founded in 1994.
For the first nine months of 2014, Amazon’s revenues jumped 22 percent to $59.7 billion from $48.9 billion in 2013. However, the company’s minuscule net profit of $34 million in 2013 plunged to a loss of $455 million in 2014.
Moreover, Amazon’s alarming negative cash flows (net of capital expenditures) widened from an outflow of $2.6 billion during the first nine months of 2013 to an outflow of $3.6 billion during the same period in 2014.
Unlike other large, publicly traded companies, Amazon pays no cash dividends — how much longer will the public accord such high value to a company claiming “profitless prosperity”?
Founded in 1940, McDonald’s (MCD-$91.67) has a $90 billion enterprise value and 440,000 employees worldwide.
Like Coke, McDonalds reported accelerating declines during 2014 compared to 2013 in U.S. revenues (down 4 percent in the third quarter compared to down 2 percent for the first nine months of 2014) and in U.S. operating income (down 10 percent in the third quarter compared to down 4 percent for the first nine months).
In the real world, intractable government deficits, and declining financial results certainly do not represent solid “progress”.
As Monica Crowley so ably noted, we celebrate this week the 50th anniversary of Ronald Reagan’s seminal speech, outlining a simple way forward to put America back on the path toward lasting renewal and progress.
Ignore the hype emanating from fact-challenged political partisans in both parties — support candidates who engage on “stubborn facts” and put forward solid, comprehensible plans.
• Charles Ortel serves as managing director of Newport Value Partners (NewportValue.com), which provides economic research to executives and to investment firms.
• Charles Ortel can be reached at email@example.com.
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