The Obama Economy

[Gaf The Horse With Tears]

The Obama Economy

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.

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.

[phee]

Interesting opinion artical.

[Soulrev]

Well, everyone thinks they have the solution to the world's problems. And, opinions are like assholes.. Everyone's got one, and usually, they stink.

That being said, I wish Mr. Obama and his administration the best of luck on fixing the economy. While I say that, I am seriously considering moving out of this country in the next 5 years. No, this is not some radical "anti-Obama, I'm going to leave the country" statement. No, rather, I find that this entire country as a whole lost it's luster a long time ago before Reagan was a crease in a seat in the white house.

With my recent "legal troubles" and seeing just how well the judicial system works, first hand, in this country, and having served in the military, I think I'm about tired of calling myself an American. Not quite totally, but just about. This, I'm sure, is the greatest country in the world as far as freedoms and such go, but, we're kind of taking some big steps towards socialism in our political system and I really don't want to be around for that one. I have no idea where I would go, but I'm rather frustrated that a nation who used to have the most powerful economy in the world is now being taken down to the same level as the other struggling nations out there.

I mean, it's pretty fucking sad that the job market is so bad, that even I have come to the conclusion that the only way I'm going to secure a future career is by either going back to working on cars as a mechanic (not the brightest future but it will ensure my family what they need) or, go back to the military. And, I'm just not sure if this is the America I would want to give my life for anymore.

[the eternal]

Gaf, can you please either post articles or make it very clear that you always post right-wing opinions but present them as non-biased articles?

[Slogo]

Well, everyone thinks they have the solution to the world's problems. And, opinions are like assholes.. Everyone's got one, and usually, they stink.

That being said, I wish Mr. Obama and his administration the best of luck on fixing the economy. While I say that, I am seriously considering moving out of this country in the next 5 years. No, this is not some radical "anti-Obama, I'm going to leave the country" statement. No, rather, I find that this entire country as a whole lost it's luster a long time ago before Reagan was a crease in a seat in the white house.

With my recent "legal troubles" and seeing just how well the judicial system works, first hand, in this country, and having served in the military, I think I'm about tired of calling myself an American. Not quite totally, but just about. This, I'm sure, is the greatest country in the world as far as freedoms and such go, but, we're kind of taking some big steps towards socialism in our political system and I really don't want to be around for that one. I have no idea where I would go, but I'm rather frustrated that a nation who used to have the most powerful economy in the world is now being taken down to the same level as the other struggling nations out there.

I mean, it's pretty fucking sad that the job market is so bad, that even I have come to the conclusion that the only way I'm going to secure a future career is by either going back to working on cars as a mechanic (not the brightest future but it will ensure my family what they need) or, go back to the military. And, I'm just not sure if this is the America I would want to give my life for anymore.

and what bothers me is the 1st country i'd of went to (Iceland) also failed

[phee]

Gaf, can you please either post articles or make it very clear that you always post right-wing opinions but present them as non-biased articles?

+1

[Homicidalheathen]

He inherits all these problems because of greed and imbalance...he does not sugar coat things and he admits things may not get better...but he will try.

You can't blame obama...this has been coming a loooong time.

Edited March 6, 2009 by Homicidalheathen

[Gaf The Horse With Tears]

Gaf, can you please either post articles or make it very clear that you always post right-wing opinions but present them as non-biased articles?

How exactly did I misrepresent what this is?

[Rev.Reverence]

and what bothers me is the 1st country i'd of went to (Iceland) also failed

Awe...what a beautiful land it is...

[Der Nister]

He inherits all these problems because of greed and imbalance...he does not sugar coat things and he admits things may not get better...but he will try.

You can't blame obama...this has been coming a loooong time.

Yup - our current sad state of affairs is brought to us by eight years of neglect. Funny how some will not even consider that one party (that had a majority control for most of the last administrations life span) failed to at least slow down the speeding train that became a wreck that we call this recession.

I like how David Letterman said it the other night,

It's like the white house was closed for business for eight years and is just now open and they are trying to fix what should've been fixed years ago.

.

But it's all good, Bush did everything right and shouldn't be held accountable for how things are now because as we all know, Obama made things this bad since he took office Jan. 20th. Before that - things were just cheecky here in the good ol U.S.A.

Right????

Oh and let's not forget we need to blame Clinton too because all he did was hand over a country that had cleared its national debt to Bush. That Mr. Bush is a saint I tell ya.

[Gaf The Horse With Tears]

Yup - our current sad state of affairs is brought to us by eight years of neglect. Funny how some will not even consider that one party (that had a majority control for most of the last administrations life span) failed to at least slow down the speeding train that became a wreck that we call this recession.

I like how David Letterman said it the other night, .

But it's all good, Bush did everything right and shouldn't be held accountable for how things are now because as we all know, Obama made things this bad since he took office Jan. 20th. Before that - things were just cheecky here in the good ol U.S.A.

Right????

Oh and let's not forget we need to blame Clinton too because all he did was hand over a country that had cleared its national debt to Bush. That Mr. Bush is a saint I tell ya.

You are right. Lets lay some blame where it belongs.

Bush and the Republicans did have control of Congress for 6 years... 6 years of the highest rate of economic growth the nation has ever known. Then the Democrats took control of both houses and everything went to shit.

Also, Bush did try to stop this from happening. Every single one of his budgets tried to address the looming housing crisus starting back in 2001, the Democratic minority killed every measure he tried to take. Barney Frank (google his various speechs on this subject) was constantly telling us that nothing was wrong with Fanny May and Freddie Mac... even just a few days before the bubble burst. There are a few websites, that I have linked to in another thread, that have exact Bills that Bush tried to get passed to stop this from happening.

And yes, lets lay some blame on Clinton.. It was Clinton that spear headed to push to lower the guildlines for giving out homes loans. It was Clinton that backed and passed laws that forced the banks to give people loans that the banks knew they had no means to pay back.

And last but not least... lets lay some on Obama. His constant gloom and doom speachs about Wall Street and the coming melt down of our economic system is driving the market down and slowing any economic recovery.

[Gaf The Horse With Tears]

BTW... Bush inherited a recession too. People seem to forget that.

[n0Mad]

and what bothers me is the 1st country i'd of went to (Iceland) also failed

There's only one man strong enough who can hold all this together ... MAGNUS!!!

[phee]

You are right. Lets lay some blame where it belongs.

Bush and the Republicans did have control of Congress for 6 years... 6 years of the highest rate of economic growth the nation has ever known. Then the Democrats took control of both houses becuase everything had gone to shit.

Also, Bush did try to stop this from happening. Every single one of his budgets tried to address the looming housing crisus starting back in 2001, the Democratic minority killed every measure he tried to take. Barney Frank (google his various speechs on this subject) was constantly telling us that nothing was wrong with Fanny May and Freddie Mac... even just a few days before the bubble burst. There are a few websites, that I have linked to in another thread, that have exact Bills that Bush tried to get passed to stop this from happening.

And yes, lets lay some blame on Clinton.. It was Clinton that spear headed to push to lower the guildlines for giving out homes loans. It was Clinton that backed and passed laws that forced the banks to give people loans that the banks knew they had no means to pay back.

And last but not least... lets lay some on Obama. His constant gloom and doom speachs about Wall Street and the coming melt down of our economic system is driving the market down and slowing any economic recovery.

Anyone but Bush eh?

[Der Nister]

You are right. Lets lay some blame where it belongs.

Bush and the Republicans did have control of Congress for 6 years... 6 years of the highest rate of economic growth the nation has ever known. Then the Democrats took control of both houses and everything went to shit.

Also, Bush did try to stop this from happening. Every single one of his budgets tried to address the looming housing crisus starting back in 2001, the Democratic minority killed every measure he tried to take. Barney Frank (google his various speechs on this subject) was constantly telling us that nothing was wrong with Fanny May and Freddie Mac... even just a few days before the bubble burst. There are a few websites, that I have linked to in another thread, that have exact Bills that Bush tried to get passed to stop this from happening.

And yes, lets lay some blame on Clinton.. It was Clinton that spear headed to push to lower the guildlines for giving out homes loans. It was Clinton that backed and passed laws that forced the banks to give people loans that the banks knew they had no means to pay back.

And last but not least... lets lay some on Obama. His constant gloom and doom speachs about Wall Street and the coming melt down of our economic system is driving the market down and slowing any economic recovery.

You are so right - the republican party is so perfect. Now I see what you see.

I vote we get rid of that other clumsy party that only seems to fuck things up when clearly the only people that have the right solutions/answers for us is the republican party.

We need to go back to Reganomics and the trickle down theory of give everything to the already rich and whatever trickles down to the lower classes well, if anything, should boost our economy.

I mean, it's the only way to save us.

Who's with me on this?

[Gaf The Horse With Tears]

Anyone but Bush eh?

History will tell. So lets look at history... Show me one of his economic policys that are directly related to the current housing crisis that has caused the bank to fail and I will point the finger of blame at him for his contribution.

I have not seen an economist be able to do it yet but I am sure you know more than they do.

[phee]

History will tell. So lets look at history... Show me one of his economic policys that are directly related to the current housing crisis that has caused the bank to fail and I will point the finger of blame at him for his contribution.

I have not seen an economist be able to do it yet but I am sure you know more than they do.

I doubt even if History remembers him as one of the worse presidents of all time it will change your opinion

[Gaf The Horse With Tears]

You are so right - the republican party is so perfect. Now I see what you see.

I vote we get rid of that other clumsy party that only seems to fuck things up when clearly the only people that have the right solutions/answers for us is the republican party.

We need to go back to Reganomics and the trickle down theory of give everything to the already rich and whatever trickles down to the lower classes well, if anything, should boost our economy.

I mean, it's the only way to save us.

Who's with me on this?

We could just try sound economic policys too. Ofcourse, that would require Obama and the Democrats to drop most of thier spending bills.

[phee]

You are so right - the republican party is so perfect. Now I see what you see.

I vote we get rid of that other clumsy party that only seems to fuck things up when clearly the only people that have the right solutions/answers for us is the republican party.

We need to go back to Reganomics and the trickle down theory of give everything to the already rich and whatever trickles down to the lower classes well, if anything, should boost our economy.

I mean, it's the only way to save us.

Who's with me on this?

Too soft.... lets just ship the poor out on garbage scows and dump them in the Atlantic....

[Gaf The Horse With Tears]

I doubt even if History remembers him as one of the worse presidents of all time it will change your opinion

No, I'm willing to admit when I am wrong. Prove me wrong. Instead of witticisms and sarcasm.. how about you post some actually facts with links to back them up? It would be a welcome change to your usual style.

btw... if history shows him to be one of the best or even... just average (which is where I place him) are you going to admit being wrong?

[phee]

No, I'm willing to admit when I am wrong. Prove me wrong. Instead of witticisms and sarcasm.. how about you post some actually facts with links to back them up? It would be a welcome change to your usual style.

btw... if history shows him to be one of the best or even... just average (which is where I place him) are you going to admit being wrong?

I think there have been a lot of facts and figures that have already proved him as such (for example the Iraq war alone), but such things are very easily discarded when one has already made up ones mind ("That figure is wrong because of liberal xyz... look at this real figure from conservative abc, my figures are real-er then yours.")

If History does show differently then I will admit I am wrong... yes....

[Der Nister]

We could just try sound economic policys too. Ofcourse, that would require Obama and the Democrats to drop most of thier spending bills.

Wow - yes again, you are right. Obama and the democrats are the one's that spent this country into dept.

Has nothing to do with Bush and the republican's spending habits because as we all know, military spending (even if it drives our dept up) is the only thing that matters.

Oh - that and - bailing out our banks (ya know, those rich CEO's that were living in dire poverty and needed poor American's to come rescue them for what the Democrats had done to them.)

Ja ja ja - I was happy as a pig in shit when I heard that Bush couldn't sign his name fast enough to bail out his filthy rich supporters er, I mean, friends, er I mean - people he didn't have any ties with what so ever.

You are right in condeming Obama for wanting to bail out middle America because the average American would just do something stupid like, try and catch up their bills or, heaven forbid, buy food or clothe their children.

Why should we do that when we can send billions of dollars to rich bank people that will turn around and give out bonuses for not doing their jobs very well.

It all makes sense now.

[phee]

This is the kind of thing that makes me kinda like Obama (sorry Gaf) http://news.yahoo.com/s/ap/20090306/ap_on_...bama_stem_cells

[Der Nister]

One of the differences between Obama and Bush is that Obama is actually working on finding a solution.

What ignites me is when conservative supporters blast Obama for trying. Those supporters talk as if just because Obama isn't shooting his mouth off acting as if he has all the answers that he is not doing any good for this country.

But I remember hearing Bush deny that this country was having any economic troubles until he couldn't frickin ignore it anymore and by then, it was toooooooooooooooooooooo fucking late. Mr. Bush then became comfy with the idea of riding out his second term as the lame duck president he was the entire time he was in office.

Let's call 'em as they are.

[Gaf The Horse With Tears]

Wow - yes again, you are right. Obama and the democrats are the one's that spent this country into dept.

Has nothing to do with Bush and the republican's spending habits because as we all know, military spending (even if it drives our dept up) is the only thing that matters.

Oh - that and - bailing out our banks (ya know, those rich CEO's that were living in dire poverty and needed poor American's to come rescue them for what the Democrats had done to them.)

Ja ja ja - I was happy as a pig in shit when I heard that Bush couldn't sign his name fast enough to bail out his filthy rich supporters er, I mean, friends, er I mean - people he didn't have any ties with what so ever.

You are right in condeming Obama for wanting to bail out middle America because the average American would just do something stupid like, try and catch up their bills or, heaven forbid, buy food or clothe their children.

Why should we do that when we can send billions of dollars to rich bank people that will turn around and give out bonuses for not doing their jobs very well.

It all makes sense now.

Obama isn't bailing out middle America. He's buying votes in the next election. or have you have not seen the economic forcasts that show that what Obama is doing is going to be bad for the economy in the long run?