Obama Has Already Helped Wreck the Economy
So how can we expect him to save it?
After an awful week in the stock market, Team Obama sent its acolytes out to the Sunday morning shows to let everyone know that the president-elect’s campaign promise to impose tax increases on higher-income earners as quickly as possible probably won’t kick in until at least 2011.
By doing so, Obama and his inner circle finally, if only tacitly, acknowledged what they had refused to recognize during the presidential campaign, namely that economic expectations matter in the here and now.
This opens the door to the incoming administration’s next required admission — that their candidate, their party, and the expectations they created during the presidential campaign have been mostly responsible for the steep dive in the equity markets, and, nearly six months ago, put the economy into what will probably officially be declared a recession after this year’s fourth quarter. Nancy Pelosi, Barack Obama, and Harry Reid did this in the areas of energy, taxation, and, with heavy assistance from Henry Paulson and Ben Bernanke, bailouts. With the exception of forcing, with the help of public opinion, a temporary lifting of the Outer Continental Shelf offshore drilling ban, there is little George Bush or the Republican minorities in Congress have been able to do to stop them, or to manage expectations.
The recession, once it becomes official, will thus richly deserve designation as the POR (Pelosi-Obama-Reid) recession. Further, Obama’s and the Democratic Party’s performance on the economy must be benchmarked from June 1, 2008 — not Election Day, not Inauguration Day, and not, as traditionally has been the case, from October 1 of the new president’s first year in office.
Evidence of the POR triumvirate’s virtually unilateral damage to the economy began appearing as early as the fourth quarter of 2007, the first quarter of negative growth in six years. The POR recession itself began in June. The historically steep downward revision in second-quarter gross domestic product (GDP) growth from an annualized 3.3% to 2.8% in the government’s final September announcement was more than likely due to deterioration that occurred in the final month of the quarter.
It’s not at all a coincidence that June was the month in which it became crystal clear that despite sky-high oil prices, Pelosi, Obama, and Reid were hostile to the idea of drilling for more oil — offshore or anywhere else. Pelosi insisted that “we can’t drill our way out of our problems.” In the speaker’s world, this means that you don’t drill at all. Reid declared that we have to stop using oil and coal because “it’s making us sick.” Obama seemed pleased that gas prices were so high, saying only that “I think that I would have preferred a gradual adjustment” instead of the sharp spike. What a guy.
As would be expected, the country’s businesses, investors, and consumers, never having witnessed a political party dedicate itself so completely to starving its own national economy, reacted very negatively to all of this. I said at the time that “businesses and investors are responding to their total lack of seriousness by battening down the hatches and preparing for the worst.” Subsequent events have validated that observation.
Even as fuel prices have plummeted, the siege mentality in America remains. That’s because, until Sunday’s minor bow to deferring them, the POR economy’s architects seemed determined to ram massive Social Security and other tax hikes down the throats of the most productive 5% of Americans in the name of creating handouts — oh, I’m sorry, “refundable tax credits” — for millions of others. Americans know that you don’t increase taxes on anyone in a slowing economy, unless your goal is to slow it down even more. Until Sunday, that seemed to be what Pelosi, Obama, and Reid intended. But deferral is totally inadequate, both short-term and long-term. Instead of putting off tax hikes until the economy can supposedly “afford” them, what we need right here, right now, is another across-the-board tax cut. This would quickly free up money for capital investment and lead to stronger growth when recovery comes.
The cascade of bailouts finished the job of establishing recessionary conditions. These too can be laid at the feet of Pelosi, Obama, Reid, and Democrats in previous Congresses. The summer implosions at Fannie Mae and Freddie Mac — enterprises that were run into the ground by Democratic cronies who established irresponsibly lax lending rules that ultimately ruined the mortgage marketplace — exacerbated financial sector problems elsewhere and led to the SUCKUP (Seemingly Unlimited Cash Kitty Under Paulson) in late September.
Other POR economy agenda items loom ominously in the background: “windfall” profits taxes on energy producers, unionization of the unwilling through secret ballot-ending “card check” legislation, and a plethora of economy-choking environmental initiatives, to name just a few.
Collectively, these factors have weighed down the economy for nearly half a year. In recognition of when they began doing what they have done, Team Obama and the POR economy’s performance must therefore be benchmarked against where things stood on June 1, 2008, as follows:
* Inflation (June 2007 through May 2008) — 4.2%.
* Unemployment — 5.5% (as of the May report; currently 6.5%).
* Prime rate — 5.0%.
* DJIA — 12638 (down 36% as of the November 21 close).
* S&P 500 — 1400 (down 43% as of that same close).
* NASDAQ — 2523 (down 49%).
* Quarterly GDP growth before the June-related adjustment — 3.3%.
The economy is in trouble . Everyone agrees that a stimulus is necessary and this will mean a larger deficit.
But the stimulus can come from a big spending program called bailouts or income redistribution or ir can come from a further tax cut.
My money is on the tax cuts. Studies have shown that 5/6 of the money redistributed goes to paying down debt and only 1/6 is spent. To create government spending programs is not near as efficient as letting wealth producers do what they do best.
Ted, will you next be posting articles on nuclear physics authored by those who “own a training and development company”? This imbecile, par excellence, Tom Blumer insists that, “Obama’s and the Democratic Party’s performance on the economy must (emphasis, mine) be benchmarked from June 1, 2008″. Why? So that economic conditions four years from now can be artificially compared to the peak economic conditions on a date conveniently selected by Blumer?
The seeds of the current economic and financial crises were sown over sixteen years of 1) a Democratic administration which, amongst other transgressions, implemented a new CPI methodology which has broadly understated true inflation by perhaps 3-4% per year and made it possible for Alan Greenspan to maintain borrowing rates well below where they should have been, and 2) a Republican administration which, amongst other transgressions, steered us recklessly into a $1 trillion war which sustained that inflation (read your history on the economic impact of all major wars) leading to record budget deficits and whiplash on mortgage borrowers as interest rates inevitably rose in response.
Raising taxes is never a good idea but as I’ve posted, America’s household saving rate is about to expand significantly in response to economic uncertainty. Private investment will subsequently shrink due to the drop in consumption and if the government doesn’t spend that saving, no one will. GDP will collapse.
A Republican partisan who writes for an internet organization comprised of those who consistently supported George W. Bush through eight years of monumental political malfeasance has zero cred.
Spaminator, please…
American Economy 101:
America once had a great economy, because they made things that Americans and people around the world bought. But the insane Democrats teamed with the insane labor unions to make American goods uncompetitive in terms of price and quality. So the insane Republicans shipped all the American factories over to China.
Tha left a hollow American economy based on nothing. We made our living by selling things made in China to each other and taking a cut of the profits. This does not lead to prosperity or growth. So instead, the insane greedy selfish Wall Street bankers cooked up a pyramid scheme based on selling houses to poor Americans and illegal Mexicans who could afford the payments as long as they had jobs. The white middle class homeowners sold their homes to the poor Americans and illegal Mexicans at inflated prices, and moved up to McMansions at inflated prices, which they could afford as long as they had jobs.
The pyramid scheme finally reached an end when we simply ran out of new homebuyers. Once the expansion stopped, a contraction started as people began to lose their jobs and could not afford their home payments. This is a self-sustaining and accelerating contraction as more and more people lose their jobs, and we run out of money to buy things made in China from each other.
When the bottom is reached, we will be in a new and unhappy steady state. There will be a class of the super-rich who own everything. There will be a shrunken middle class who have jobs. And there will be a large permanent underclass of blacks, Hispanics, and poor whites who have no jobs, no skills, no prospects, and who will have to be supported on welfare.
God bless Obamerica/Mexamerica. By the way, eventually we will have to start making our own things again, and keep out Chinese products with tariffs.
I can’t believe the arbitrary nature of the “bailout” to date. Personally, I don’t think that it is the business of government to bail out banks and corporations. If they have any value then the marketplace will decide on who is bailed out. The way it is being done seems painless but I can’t help wonder how printing trillions of dollars will impact the future.
They used to count on a growing economy to make the huge debt seem smaller and more manageable. Now they have to pray that demand slows so much that all the dollars sloshing around from the government presses will not lead to rampant and uncontrollable inflation. Government is banking on a depression for a long duration to avoid the breakdown of society.
I hate the idea of government picking and choosing winners and losers. I also dislike a world where every person and business is so coddled and protected from pain that every corporation on the dole can act and carry on irresponsibly; not giving the consumers what they want, and not designing good products, etc.
Obama will just continue what Bush is doing only he will tax the rich to redistribute more – and although this sounds Marxist, it is no worse than coming up with billions of dollars in a matter of two days by one or two officials acting in secret for the benefit of bankers who followed the path of lending to those on the brink and then repackaging the debt and disguising it as some kind of valuable grab bag of worthless junk.
I’ll try again…
This imbecile, par excellence, Tom Blumer insists that, “Obama’s and the Democratic Party’s performance on the economy must (emphasis, mine) be benchmarked from June 1, 2008″. Why? So that economic conditions four years from now can be artificially compared to the peak economic conditions on a date arbitrarily selected by Blumer?
The seeds of the current economic and financial crises were sown over sixteen years of 1) a Democratic administration which, amongst other transgressions, implemented a new CPI methodology which has broadly understated true inflation by perhaps 3-4% per year and made it possible for Alan Greenspan to maintain borrowing rates well below where they should have been, and 2) a Republican administration which, amongst other transgressions, steered us recklessly into a $1 trillion war which sustained that inflation (read your history on the economic impact of all major wars) leading to record budget deficits and whiplash on mortgage borrowers as interest rates inevitably rose in response.
Raising taxes is never a good idea but as I’ve posted, America’s household saving rate is about to expand significantly in response to economic uncertainty. Private investment will subsequently shrink due to the drop in consumption and if the government doesn’t spend that saving, no one will. GDP will collapse.
A Republican partisan who writes for an internet organization comprised of those who consistently supported George W. Bush through eight years of monumental political malfeasance has zero credibility.
William Shakespeare, Henry VI, Part 2(Act IV, Scene II): “The first thing we do, let’s kill all the lawyers”. If there had been supply-side economists in 16th century England, Shakespeare would have put them in his now famous quote.
The real fraud will be when enough people realize the MBAs took over in the late 1970′s, and it’s been downhill for the U.S. economy ever since.
Every commenter 1-7 is correct all or in part
Way back when I had an appliance store where I sold brown and white goods and did my own financing of my poor black and white customers. It wasn’t always like that but the people with money moved to the suburbs and I stayed put. In those days we worked on the principle of 33% or bust. That was the basic cost of doing business. The real profit after all said and done was on the store financing which I provided to our customers. That was the only way we could compete with the big chains. When RCA and Zenith could no longer compete with the Jap imports they moved production to Japan or like Zenith and Motorola got out of the business altogether, There were many other very American name brands like Philco, Admiral,and a host of others. America wanted to sell abroad big ticket items, so they allowed Japanese competitors to destroy certain American Markets. Philosophy of bigness over many of the small. Funny America still protects agriculture but not Industry. Sorry that’s not true either America protects big agriculture and let small farmer go to hell.
None of Americas problems are recent they are systemic based on a philosophy of shark mentality, where the only thing that counts is the current bottom line. American consumers ceased to feel buying American was a patriotic duty and that as much as anything brought most of American industry down or out.
Let the anti-Christ be warned – sorry, you’ve been dethroned by the NATIONS OF ISLAM!