As the Dow drops, the Obama Admin. runs out of people to blame.
The Obama Economy
As the Dow keeps dropping, the President is running out of people to blame.
As 2009 opened, three weeks before Barack Obama took office, the Dow Jones Industrial Average closed at 9034 on January 2, its highest level since the autumn panic. Yesterday the Dow fell another 4.24% to 6763, for an overall decline of 25% in two months and to its lowest level since 1997. The dismaying message here is that President Obama's policies have become part of the economy's problem.
Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it's become clear that Mr. Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence -- and thus a longer period of recession or subpar growth.
[Review & Outlook]
The Democrats who now run Washington don't want to hear this, because they benefit from blaming all bad economic news on President Bush. And Mr. Obama has inherited an unusual recession deepened by credit problems, both of which will take time to climb out of. But it's also true that the economy has fallen far enough, and long enough, that much of the excess that led to recession is being worked off. Already 15 months old, the current recession will soon match the average length -- and average job loss -- of the last three postwar downturns. What goes down will come up -- unless destructive policies interfere with the sources of potential recovery.
And those sources have been forming for some time. The price of oil and other commodities have fallen by two-thirds since their 2008 summer peak, which has the effect of a major tax cut. The world is awash in liquidity, thanks to monetary ease by the Federal Reserve and other central banks. Monetary policy operates with a lag, but last year's easing will eventually stir economic activity.
Housing prices have fallen 27% from their Case-Shiller peak, or some two-thirds of the way back to their historical trend. While still high, credit spreads are far from their peaks during the panic, and corporate borrowers are again able to tap the credit markets. As equities were signaling with their late 2008 rally and January top, growth should under normal circumstances begin to appear in the second half of this year.
So what has happened in the last two months? The economy has received no great new outside shock. Exchange rates and other prices have been stable, and there are no security crises of note. The reality of a sharp recession has been known and built into stock prices since last year's fourth quarter.
What is new is the unveiling of Mr. Obama's agenda and his approach to governance. Every new President has a finite stock of capital -- financial and political -- to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his "stimulus" spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest.
His Treasury has been making a similar mistake with its financial bailout plans. The banking system needs to work through its losses, and one necessary use of public capital is to assist in burning down those bad assets as fast as possible. Yet most of Team Obama's ministrations so far have gone toward triage and life support, rather than repair and recovery.
AIG yesterday received its fourth "rescue," including $70 billion in Troubled Asset Relief Program cash, without any clear business direction. (See here.) Citigroup's restructuring last week added not a dollar of new capital, and also no clear direction. Perhaps the imminent Treasury "stress tests" will clear the decks, but until they do the banks are all living in fear of becoming the next AIG. All of this squanders public money that could better go toward burning down bank debt.
The market has notably plunged since Mr. Obama introduced his budget last week, and that should be no surprise. The document was a declaration of hostility toward capitalists across the economy. Health-care stocks have dived on fears of new government mandates and price controls. Private lenders to students have been told they're no longer wanted. Anyone who uses carbon energy has been warned to expect a huge tax increase from cap and trade. And every risk-taker and investor now knows that another tax increase will slam the economy in 2011, unless Mr. Obama lets Speaker Nancy Pelosi impose one even earlier.
Meanwhile, Congress demands more bank lending even as it assails lenders and threatens to let judges rewrite mortgage contracts. The powers in Congress -- unrebuked by Mr. Obama -- are ridiculing and punishing the very capitalists who are essential to a sustainable recovery. The result has been a capital strike, and the return of the fear from last year that we could face a far deeper downturn. This is no way to nurture a wounded economy back to health.
Listening to Mr. Obama and his chief of staff, Rahm Emanuel, on the weekend, we couldn't help but wonder if they appreciate any of this. They seem preoccupied with going to the barricades against Republicans who wield little power, or picking a fight with Rush Limbaugh, as if this is the kind of economic leadership Americans want.
Perhaps they're reading the polls and figure they have two or three years before voters stop blaming Republicans and Mr. Bush for the economy. Even if that's right in the long run, in the meantime their assault on business and investors is delaying a recovery and ensuring that the expansion will be weaker than it should be when it finally does arrive.
Re: As the Dow drops, the Obama Admin. runs out of people to blame.
Stop right there, have you factored in how long Obama has been in office and what effect the "Obama Economy" could have on the previous "Bush Economy" in said time-span?
Na, you didn't.
The Dow has been jumping up and down for months now, and been on a steady decline long before Obama. Give it some time before you say "Obama did it."
Re: Re: Re: As the Dow drops, the Obama Admin. runs out of people to blame.
Get over what? I'm not the one passing the blame so early in the game.
The very article says he inherited a shit economy, blaming him for what he's inherited is a piss-poor tactic.
Like I said, the guy's been in office a very short time, give it some time for his policies to alter the state of affairs positively (or negatively) before you pounce.
"Obama has inherited an unusual recession deepened by credit problems, both of which will take time to climb out of. But it's also true that the economy has fallen far enough, and long enough, that much of the excess that led to recession is being worked off. Already 15 months old, the current recession will soon match the average length -- and average job loss -- of the last three postwar downturns. What goes down will come up -- unless destructive policies interfere with the sources of potential recovery."
Re: Re: Re: Re: Re: As the Dow drops, the Obama Admin. runs out of people to blame.
If you'd rather not look at the bigger picture and just do a shove-head-in-the-ass manuever, sure.
Guaranteed the Republican party will take [try] to take credit when it goes up, regardless of a Dem or Rep house/senate. They've already blamed the Dems (which they are in part to blame) solely for the economy, despite the Reps having the houses under Clinton and for six of Bush's eight years.
Gender: Male Location: Southern Oregon,
Looking at you.
Re: Re: Re: Re: Re: Re: As the Dow drops, the Obama Admin. runs out of people to blame.
I'm not giving you my opinion. I telling you a political reality.
The only way to change this reality is to form a third party. The political parties in the US are not capable of doing anything good from the common person's point of view.
Re: Re: Re: Re: Re: Re: Re: As the Dow drops, the Obama Admin. runs out of people to blame.
That was more of the royal "you" and not you Shaky, even though you're a passive-aggressive closet Republican.
Agreed, we do need a strong third party with the potential of taking way votes, if for the only reason to keep the two we have now honest and sticking to what they say during elections.
Gender: Male Location: Southern Oregon,
Looking at you.
Re: Re: Re: Re: Re: Re: Re: Re: As the Dow drops, the Obama Admin. runs out of people to blame.
I'm really a Libertarian, but they are too wimpy in my state for my taste. So, to call me a passive-aggressive closet Republican is to just insult me. It would be just as bad as to call me a Democrat. I am registered as an independent.
I will stand up for Obama when someone insults him just like I stood up for Bush when someone insulted him. I simple believe in never insulting the president, ever.
However, I find it far game to blame the current president for the economy from day one. That is just how I am. If you think that is unfair, then change the political reality that we live in today, and I will do what I can to help.
Gender: Male Location: Southern Oregon,
Looking at you.
Politics today have nothing to do with rational. Please keep in mind that I believe that both parties have screwed the US over to the point where we are today.
Re: Re: Re: Re: Re: Re: Re: Re: Re: As the Dow drops, the Obama Admin. runs out of people to blame.
Okay... then see my 'head-in-the-ass' comment. Why stop there though?
Why not blame Obama for the misshaps in Iraq due to poor leadership and foresight or anything else (good or bad) that happened under Bush, for that matter?
Barney Frank is to blame more then anyone else, IMO. Anyone that pushed the sub prime housing agenda on banks should take most of the blame, it just so happens that was the Democrats.
Gender: Male Location: Southern Oregon,
Looking at you.
Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: As the Dow drops, the Obama Admin. runs out of people to bla
People have the right to do that. Please understand that I am not telling you that I believe that Obama is to blame or not. All I am telling you is that it is fair game because the people in power now did that same thing to the people in power in the past. In this case the Dems set the bar low, therefore the Repubs have every right to meet that low standard.
I have told you what I personally believe, and it has nothing to do with Obama.
I could wish that things were different, or I could even stick my head up my ass and pretend that everything is flowers and rainbows.
That's something the masses obviously don't get. Unless we can start putting true outsiders in Washington and not just the whitehouse we will never get REAL change.
Notice how the "stimulus" bill just passed loaded with earmarks (read pork) from both parties.
It will do nothing other than add to our already enormous national debt. It's business as usual. All the "change" we kept hearing about during the campaign was just a hollow campaign promise.
KMC Community Forums
Mar 4th, 2009 03:02 PM
I'm really a Libertarian, but they are too wimpy in my state for my taste. So, to call me a passive-aggressive closet Republican is to just insult me. It would be just as bad as to call me a Democrat. I am registered as an independent.
