Friday, January 29, 2010

Obama the Savior

After President Obama's State of the Union Address on Tuesday, Republicans hit the airewaves complaining Obama can't continue to "Blame it on Bush." After all (goes their logic) Obama's been President for a FULL YEAR NOW.

Isn't Obama responsible for what happens on his watch?

This utter sophistry is made even funnier by the complaints of Republicans that Clinton didn't deserve credit for the boom of the 90's (that was the result of Reagan's 'pro-small government' policies after all); that Reagan didn't deserve any blame for the economic woes of 1982 and 1983, because that was, after all, the fault of Jimmy Carter's.... uh, "weakness".

Carter really had few economic programs which had ANY impact on the country outside of appointing Paul Vollker Fed Chair. Yes, the same Paul Vollker which Reagan later credited with ending double-digit inflation. Reagan first complained bitterly about Vollker's fiscal policy which tightened credit to kill inflation, but also made the massive deficit spending Reagan engaged in even more costly.

And finally, those same Republicans claim it was NOT Bush's fault that the economy tanked in 2002, but rather the poor policies of "Clinton/Gore."

The truth is that it sometimes takes several years for policies to have material effects on the economy. Bush really didn't deserve the 'blame' for what happened in 2002, nor did Reagan deserve blame for what happened in 1982, but neither did he deserve credit for what happened in 1997. George Bush Sr. and Clinton, combined, deserved credit for the surplusses of the late 90's. The internet boom and Y2K programming boom deserved credit for the increases in wages, just as the internet BUST and end of the Y2K threat, in part at least, brought about the problems of 2002 (rather than Bush Jr.).

The recession of 2008 really started in late 2007, got MUCH worse in 2008, and continued into 2009. It happened in large part due to an overreaction and fear of what transpired on Sept 15, 2008, when Lehman Brothers finally paid the price for years of issueing crappy paper, derivatives and Credit Default Swaps against poor quality loans. Lehman helped to bring down Reserve Management Corp, whose Primary and Reserve Government Money Funds floundered immediately, one of them 'breaking the buck' in Net Asset Value (NAV), something which was supposedly impossible. (It had happened only ONCE, ever, in the late 1960's when a very small firm, from malfeasance.) It was supposed to be impossible for it to happen to something the size of Reserves $120B in Primary and Government Money funds. The collapse of those funds froze the assets of tens of thousands of people for months, sent people fleeing the market, and caused corporations to lay off hundreds of thousands of workers. It was a massive over-reaction; it was mass-hysteria.

We had some really ugly months. We avoided the collapse of our banking system only by massive federal intervention, started by Bush. (Bush, in one of his few lucid and competent moments, appointed Hank Paulson and then Ben Bernenke to help stave off catastrophe.) It was continued by Obama and the Democrats.

Did Bush cause the collapse? In part yes, and in part no; he sat idley by while banks became roullette palyers. He encouraged their conduct, backing the ideas of Phil Gramm and Barney Frank to further deregulate banks. More important, was the repeal of Glass-Steagal. But Bush didn't cause the hysteria, and he DID react correctly when the collapse fully manifested. He responded, perhaps too slowly when the cycle began, often denying there was any problem at all. Does anyone remember Bush's 'booster shot' mentality in 2007?

Did Obama save us? No - not really.

What has occured is the country has moved back from the precipice, and begun rehiring a little of what they laid off. We have a huge unemployment problem to overcome and long way to go to regain any real prosperity. The fundamental truth is that until we start paying labor better, allowing them to at least keep pace with inflation, we will remain ill and sick and stagnant. Conumer spending IS 66% of the economy and it IS how we can pay off our obligations, through wage growth and thereby revenue growth.

But since we seem hell-bent to have 10 minute vision instead. I say..
along with CBS news:

http://www.cbsnews.com/stories/2010/01/29/business/main6154004.shtml

that Obama is the savior of our economy. We've had two quarters of GDP growth, and last quarter, at 5.7% growth, represents the best quarter since 2003. We've had that growth WITHOUT tax cuts and WITH increased government spending; the economy booms, and will continue to do so.

11 comments:

  1. "The truth of course is that it takes several years for policies to have material effects on the economy."

    This is often true, whether we like it or not.

    I think a lot of people know this intellectually, but then ignore it and complain immediately anyway. It's a sort of mass cognitive dissonance, and it's indicative of a sort of mass modern social attention-deficit disorder.

    I have said from the beginning of his presidency that this economy would become "Mr. Obama's Economy" one year after he took office. As far as I'm concerned, it became his economy about a week and a half ago.

    (And even that is rushing things, as it can take two or three years to feel the effects of certain policy shifts....)

    If we see any sort of sustained growth this year, it will be a major accomplishment for the president. After all, it's been the economic equivalent of a blink of an eye since the autumn of '08.

    I only wish more people would acknowledge that, frustrated as they are.

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  2. I really think that people sometimes hang too much on a president. After all when Bush entered Iraq a majority of Congress agreed including lots of Democrats,only when it took too long and too many died did Congress say "we didn't think that was what we were voting for." Kind of a cop out, if you aren't sure what you are voting for then make sure before you vote. By the same token I am sure Obama is frustrated at his own party over health care. They had a solid, filibuster proof majority, and could not agree amongst themselves how to do things. I personally am glad of that but it is not Obama's fault that Reid and Pelosi could not agree on things. Same thing with the promise of open meetings about health care on CSpan. Pelosi and Reid tossed out the cameras not Obama, but he made the promise so he is getting blamed. I think Obama could learn something from Reagan (the last really good orator to become president before Obama). Reagan went on TV asking people that voted for him as president to call and write their representatives and tell them to vote for the policies he campaigned on. Obama and Reagan won by similar margins and it worked for Reagan even when things were stalled by his own party.
    I did see a little about the banking laws and it sounds like he might be talking about bringing back a modified Glass-Steigal. I would be really in favor of this as any bank that is federally insured should be barred from certain investments (credit default swaps maybe). If you want to invest in those fine but if you lose everything the govt is not giving you a dime.
    One thing I have to disagree with you on is the bailout. We should have let a few of the big banks fail. There were plenty of very healthy smaller banks and credit unions that had not invested in the risky investments and the larger banks would have been forced to sell off the bad loans at pennies on the dollar. The smaller banks then would have had room to negotiate the loans to a reasonable rate so the foreclosures did not happen and the small banks still made a profit. Not sure that would have worked out quite that way but sacrificing Goldman-Sachs and Leyman Bros to let people stay in their homes sounds like a better plan to me than what we did.

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  3. TT wrote: " After all when Bush entered Iraq a majority of Congress agreed including lots of Democrats,only when it took too long and too many died did Congress say "we didn't think that was what we were voting for."

    TT, Congress was upset, because they found out after voting that Bush had LIED to them about weapons of mass destruction and the other phony reasons for going into Iraq. Another of the things that was misrepresented was how long we were going to be there and what we were going to do in Iraq.

    But it "took too long"????????????

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  4. Tuck,

    We are not in agreement on 'letting a few big banks fail'. Had we, we would be in the midst of a Depression, not just a pretty damned bad recession. It's a nice sound bite (no offense), but EVERY LAST person/economist I know of who understood the risks we were facing said that letting Bear and then Lehman fail was the worst possible thing we could have done, and letting any other fail, would have resulted in a collapse of the US currency.

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  5. Also Tuck,

    I have to take issue with your characterization of Congress' (especially the Democrats) stance on Iraq.

    It was 2003, the mid-term elections had just seen the Dems brutalized by the Repubs for being 'too weak' on defense. Bush laid out a 'smoking gun' mushroom cloud doomsday scenario and dared ANYONE to vote against it. It is revisionist to fail to account for the sheer intimidation and brutality of the political approach taken at that time. NO ONE, and I mean no one, wanted to be on the 'wrong side' of supporting protecting the country from another 9/11, or worse, of 'protecting' the country from the use of nuclear weapons on a US City - that not only was political suicide, it would have been abandonment of any semblence of responsibility to simply be a good American - and those who spoke out otherwise were labelled as traitors. Do you remember Bush and Rumsfeld saying that anyone not for us was therefore against us?

    The war, however, was as ineptly done as could possibly have been dreamed up. Rumsfeld ignored his generals, time and again, he put people in charge who knew next to nothing about quelling insurrection, and further put people in charge who were disdainful of the Iraqi citizenry itself. Bush allowed missionaries into the country in some idiotic attempt to 'convert' or 'save' the Muslims from themselves, how more arrogant can someone come across than to attempt to convert a defined monotheist into another monotheistic religion? It's only ever happened by violence on any large scale, and then the blithering idiot (Bush) used the word 'crusade' in describing our fight there.

    So, I'm sorry, the issue wasn't that people were 'FOR' it until it took to long, they were duped, they were threatened, and they were cajoled, and they were against the eventual prosecution of a war they voted for while holding their nose because it was so pathetically run it nearly caused the United States to lose a war against an enemy that had NO state sponsorship, and wasn't endemic and instead was an anethma to the indiginous populace, in short, it was about the biggest miltary blunder in known history. So yes, people opposed that cluster-flock of an abortion of a campaign, and rightly demanded change - and lest we forget it was only when Bush was FORCED to dump Rumsfeld and appoint Patreaus, someone whose approach Bush and the rest of his cronies mocked two years earlier, it was only THEN that things got better.

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  6. If you go back and look at statements people made before Sept 11, Bill Clinton, Al Gore, John Kerry, and Hillary all said they believed Saddam Hussein had and was trying to build or obtain more WMD. Now at least 2 or 3 of those, having recently been Pres, VP, and first lady, had access to the same info as Bush and it would have been hard for him to lie to them. What I still do not understand about all the people who hate Bush, is that after all the articles about discrepancies in UN inspectors numbers and such, do you continue to believe Bush intentionally lied when there is as much or more evidence that he was given bad intel?
    The too long piece is merely a reference to history. Go back and check, every war the US has been in, including the revolutionary war, at about the 4 yr mark a significant portion of the population begins to protest and urge a quick end even if it means just leaving or even losing. There were draft riots in the Civil War and WWI and WWII. I don't know if all our wars have a tendancy to not be going so well at the 4 yr mark or if the American public only has a 4yr attention span when it comes to wars but it seems like we want them to be done and over with, one way or another, within 4 yrs.

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  7. Tuck,

    The UN Weapon inspectors at the time felt that Bush was in too much of a hurry to invade. Most military analysts felt Bush wanted to start quickly to avoid the summer heat, but the UN inspectors felt instead it was likely that Bush wanted to invade rather than wait, because by waiting, they, the UN inspectors might complete their job of inspecting and declaw Bush's claims that they existed at all. It is also tue that many people believed they did, including Gore, Clinton, and a host of others, because 5% of his 1992 stockpile had never been accounted for and Hussein seemed like a guy who wouldn't quit making them BUT, there was no substantive evidence of him doing so. The accusation of lies comes from several components, First, he sent Collin Powell to the UN to present what was documentably and knowingly false evidence of mobile chemical weapons labs, second, he sent Condolleza Rice (then his head of National Security) around to the various news shows to phumper about alluminum tubing which was NOT truly proper for a uranium centrifuge but instead for oil pipelines, third, he presented evidence in his State of the Union address that Hussien had attempted to gain 'yellow-cake' from Niger, when it was known, known by his very close advisors, that such a story had been utterly debunked. Whether Bush personally knew it is of little significance, his advisors allowed him to say it, and every President presents speeches not of their construction, so he is as responsible for the content as any other.

    But more compelling to me, are two factors, first, as I said 5% of Hussien's stockpile from 1992 had not been accounted for. That was the essential element which kept alive our 'no-fly zones' as it was part of UN Resolution 1793 (iirc) which stipulated that following DSI, Hussien must destroy his entire stockpile. He provided evidence of having destroyed 95%, all that remained were, if memory serves, 300 gallons of VX and 3000 litres of Anthrax (e.g. about 500 gallons) all of it, every last bit, was inert by 1994. Further, Hussien HAD accounted for all but that 5%, twice, and hadn't attempted to lie about the remainder. Now look, Clinton kept this farce alive too, but Bush extrapolated it, because he wanted to - reference below...

    http://www.informationclearinghouse.info/article1176.htm

    continued below

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  8. The last component (of the two I said that bothered me) is this, there is a saying or theory called Occam's Razor, it means that which is the simplest explanation is often right - I argued in 2002 (December) that while I believed it was likely Hussien HAD WMD, without proof, it was at least possible that the last 5% had been destroyed in haste, and not accounted for. Remember that in 1992 and 1993, Iraq was in the middle of a civil war, and Hussien desparately wanted US troops shielding the Kurds and the south out of his way. Is it so hard to imagine that in that haste, 5% was destroyed (or even lost to enemies during that war)? If he had wanted to HIDE the remainder, wouldn't he have lied about what happened (or tried to)?

    The argument Bush promoted in December 2002 was that Hussien must produce evidence of compliance with UN Resolution 1783 or there would be war, no matter what, that all the rest aside, his treatment of his own population, whether he could or couldn't produce such weapons now, even whether he was likely to provide such weapons to terrorists or his support FOR terrorists in Isreal, all of that was secondary and essentially irrelevant - either comply or WAR. Now here's the thing, in argumentation you are never asked to disprove a negative, at least not by anyone who isn't a fool - for how can you PROVE you don't own a home, have a car, etc.. after all, you COULD be hiding it anywhere. What Bush did was create a logical trap, a trap which the country didn't recognize and from which Hussien couldn't possibly escape, if he TRULY didn't have the weapons any longer - i.e. the simplest and most logical answer given they were inert - then war would occur, because WHAT COULD HE PRODUCE? and if he did, then war because he lied. In short, Bush, by that statement, put us in a position where war was unavoidable, and at the SAME TIME, he was saying that war was his last resort. THAT was a lie, he intended to go to war all along, and his actions behind the scenes, whether we're talking about yellow cake, or ginning up stories about chlorine gas or mobile chemical weapons labs, ALL point to that, and scant little points away, and Occam's Razor simply says, when it looks like a duck, it's usually a duck.

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  9. Finally Tuck, there is this - we never DID find any weapons - so the truth was he didn't have any. We had inspected EVERYWHERE imaginable other than his private palaces by 2002. I supported threatening Hussien with war, as did many, because it was seemingly the only way to let David Kay and the inspectors look at those palaces, which they started to do in early 2003. When we invaded in March, (or just prior), Kay TOLD Bush, "Give me 6 more weeks, just 6, and you'll know for certain." Bush refused to wait. There isn't a sufficient explanation for NOT waiting - the heat of the summer was going to happen in 2003, but we could have waited until 2004, and there was NO EVIDENCE, ZERO that Hussien was 'just about ready' with a nuclear device (the CIA put him no closer than 15 years from a nuclear weapon).

    However, had Kay finished, and not found anything, the consequences would have been a disaster for Bush politically (and probably personally). Again, given the 'no win' trap Bush had created for Hussien, Kay would be letting Hussien out, and so waiting wasn't an option if you truly wanted to go to war. To suggest there was uunanimous opinion about WMD at the UN is incorrect, Kay, for one, beleived whatever capability Hussien might have, it was extraordinarily limited and remote. MOST people looking at Hussien felt that his first and foremost goal was to remain in power, and looking back with hindsight at docuents from Hussien's government show JUST that. They show that rather than seeking to secretly develop WMD, Hussien was obsessed with NOT doing so, with making sure nothing appeared to be even close to it.

    In the end then, it was the case that the simplest of truths WERE true, that dictators aren't normally suicidal (as Hussien would have had to have been to risk providing WMD to terrorists), that weapons inert and unaccounted for during a civil war probably were lost or destroyed in haste, that disproving negatives WAS a fool's errand, that deception about such evidence was purposefully done, that a man desired to go to war despite the best advice of his military and intelligence staffers, and lastly and most importantly, that he engaged in deception and logical tricks to gain that end, to the massive detriment of our country, our treasury and our reputation.

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  10. Obama is neither the deliverer nor the messiah of the American Economy. I will reserve my opinion on how good of a President he is/was for the end of his current term in office. Color me cynical I seriously doubt that all in all anything meaningful will change. He's a politician. Half of what a politican says is a lie and the other 50% is untrue. If you want to blame anything for the current state of the economy blame the board of directors of the companies that the Federal Government bailed out of trouble and blame the media (liberal or otherwise) for crying to the hills several years ago about how we're heading towards a recession, because as Penigma said a rather large portion of the economy is depending of Consumer spending and when you tell folks that a recession is coming they curb their spending, which means less money is flowing through the economy which means less revenues for businesses which leads to few employees needed, meaning less jobs, meaning fewer people employed, then less money to spend and leads back to people curbing their spending. I don't know about you all but it certainly sickens me.

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  11. Personally, I think getting rid of Hussein was the right thing to do but we should have stated the case differently. He gassed the kurds at least twice, he paid terrorists to attack Israel, he pretty much terrorized his own people. All of that is a good reason to get rid of him. We did find 500 metric tons of yellowcake from Niger and shipped it to Canada to be used in their nuclear plants, in July of 2008. Now from what I read there is a 50/50 chance this was purchased from Niger way back when he was trying to build the nuclear reactor the Israeli's took out but he did have it.

    Tav, you are quite right about recession talk becoming a self fulfilling prophecy. I read an article the other day about how the recovery is not going as well as it should because of uncertainty. Pelosi says they will let the Bush tax cuts expire then Reid says well maybe not while the economy is still recovering then Obama says we might let them expire but not the parts that would affect the middle class. All that adds up to businesses, especially small ones, being very conservative in their hiring and expansions, not necessarily because they fear their taxes going up but because they do not know what their taxes are going to do.

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