He seems to be fiddling while Rome burns. And he’s the arsonist.
[Afternoon update]
More thoughts from Charles Krauthammer:
The logic of Obama’s address to Congress went like this:
“Our economy did not fall into decline overnight,” he averred. Indeed, it all began before the housing crisis. What did we do wrong? We are paying for past sins in three principal areas: energy, health care, and education — importing too much oil and not finding new sources of energy (as in the Arctic National Wildlife Refuge and the Outer Continental Shelf?), not reforming health care, and tolerating too many bad schools.
The “day of reckoning” has now arrived. And because “it is only by understanding how we arrived at this moment that we’ll be able to lift ourselves out of this predicament,” Obama has come to redeem us with his far-seeing program of universal, heavily nationalized health care; a cap-and-trade tax on energy; and a major federalization of education with universal access to college as the goal.
Amazing. As an explanation of our current economic difficulties, this is total fantasy. As a cure for rapidly growing joblessness, a massive destruction of wealth, a deepening worldwide recession, this is perhaps the greatest non sequitur ever foisted upon the American people.
At the very center of our economic near-depression is a credit bubble, a housing collapse and a systemic failure of the entire banking system. One can come up with a host of causes: Fannie Mae and Freddie Mac pushed by Washington (and greed) into improvident loans, corrupted bond-ratings agencies, insufficient regulation of new and exotic debt instruments, the easy money policy of Alan Greenspan’s Fed, irresponsible bankers pushing (and then unloading in packaged loan instruments) highly dubious mortgages, greedy house-flippers, deceitful homebuyers.
The list is long. But the list of causes of the collapse of the financial system does not include the absence of universal health care, let alone of computerized medical records. Nor the absence of an industry-killing cap-and-trade carbon levy. Nor the lack of college graduates. Indeed, one could perversely make the case that, if anything, the proliferation of overeducated, Gucci-wearing, smart-ass MBAs inventing ever more sophisticated and opaque mathematical models and debt instruments helped get us into this credit catastrophe in the first place.
And as to why the market is plunging? Ask the investors:
BusinessWeek interviewed a wide array of investment professionals, and many said the first six weeks of the Obama Administration have soured their outlook on the stock market…
…”The basic agenda of Obama’s Administration is going to be more leftist and less centrist than I had anticipated,” says John Merrill, chief investment officer at Tanglewood Wealth Management in Houston.
They’re shocked, shocked. Fools.
[Update a few minutes later]
More investor non-confidence from Silicon Valley.
And is it time for Geithner to go? As she notes, it’s really Obama’s fault for not staffing Treasury. I think that the Obamaniacs are discovering that governing is a lot harder, and a lot less fun, than campaigning. So they revert to campaigning and (among other things) demonizing the opposition.
He’s fulfilling the last Democrat president’s promise: he’s focused on the economy like a laser beam … a 200-MW laser beam, that mows down the most productive and successful, while any survivors flee for cover screaming.
I think you’re being kind, giving them the benefit of the doubt on the ability to light a fire.
I think there was a small, but building, blaze before the election. No doubt about it. The new administration is simply trying to quell it, with gasoline.
Unfortunately, we are seeing the ‘Real’ Obama. He’s a socialist who wants to use this time in our history to radically change the direction and governing of the US. Penn (of Penn and Teller) had a great analogy when he compared the stimulus bill with a time-share con – “Whenever someone tells you that you must sign now to get the deal, they are conning you”. Well, O conned alot of people during the election. He doesn’t care nearly enough about the economy (or just doesn’t understand it – equally scary) as he does about his social agenda.
It’s remarkable how Bush escaped blame for a terrorist attack 8 months into his administration, while Obama is blamed for the course of a recession that started 14 months before his inauguration. Reagan was credited with saving us from the last severe recession, which started in the second year of his first term, while Carter was blamed for starting it. For all their talk about responsibility, the GOP sure likes to pass it off to the nearest Dem scapegoat.
The Dow is dropping because the economy shrunk more than expected (in 2008), companies are reporting layoffs and lower earnings, car and home sales are below even lowered expectations, demand from the rest of the world is falling, etc. It isn’t falling because a future 3% hike in the top rate, or any of the other Obama tax policies that affect the top 2% of earners.
The Dow fell 4,500 points from its high before the election was even held. It’s fallen about 2,000 points since inauguration. Let me guess: the first 4,500 drop was because of economic factors out of the White House’s control, while the last 2,000 is all about the Obama war on prosperity.
This is a severe case of seeing only what you want to see.
It’s remarkable how Bush escaped blame for a terrorist attack 8 months into his administration, while Obama is blamed for the course of a recession that started 14 months before his inauguration.
Nice try, but we’re not blaming him for the recession — that was inevitable. We’re blaming him for worsening it, and the stock market plunge.
The Dow is dropping because the economy shrunk more than expected (in 2008), companies are reporting layoffs and lower earnings, car and home sales are below even lowered expectations, demand from the rest of the world is falling, etc.
That’s not what the investors are saying. The plunging Dow is a no-confidence vote in this administration.
How Obama could possibly reconcile his ‘analysis’ of the causes of the economic downturn with the fact that those countries which have embraced the policies he pretends are the solution are suffering as badly or worse than the US is remarkable. Has the Smartest Administration of All Time taken a look at how the DAX is holding up, for instance? What an imbecile.
Just like clockwork, there’s old jimmy, coming in here to bash Bush and the repubs.
The problem with Obama is that he either:
1. Doesn’t care that he’s causing the market to implode (down 2500 pts this year) due to his policies
-OR-
2. Doesn’t understand that his policies are having a very negative affect on the market.
Either way, it’s bad news.
This is a severe case of seeing only what you want to see.
The irony is that you don’t even realize that that last sentence describes almost EVERY one of your posts.
The plunging Dow is a no-confidence vote in this administration.
So the surging Dow in the 90s was a vote of confidence in Clinton?
So the surging Dow in the 90s was a vote of confidence in Clinton?
If you mean the post 1994 Clinton who was neutered by the GOP Congress, then congratulations, you finally got one right!
So the surging Dow in the 90s was a vote of confidence in Clinton?
No, it was a vote of confidence that a Republican Congress would control his spending and messing with the economy. Which it did.
Where’s my bat? Oh, here we go. Jim, I’m going to take a swing at you too…
(1) Bush was not blamed for the terrorist attack because the opportunities to prevent it expired far longer than 8 months before it happened. Isn’t your side fond of “root causes” arguments, that you need to address “root causes” before terrorism goes away? Even if we restrict that to things like evil government sponsors and fomenting an impression of weakness (from the conservative side) or not enough foreign aid and fomenting an impression of imperialist arrogance (from the liberal side), clearly these things take years to have their effect. You think the fact that the “peace process” in the Middle East, land for peace, et cetera, hasn’t worked because it hasn’t been given enough time, right? Well, there you go. The opportunity to prevent 9/11 lay years in the past, well before Bush took office.
(2) You can argue the same thing about the recession, of course. But even if it’s true, then as Rand points out, the real criticism is not that Obama didn’t prevent the recession, so much as that his response to it has been ineffective, if not exacerbating. It’s as if Bush’s response to 9/11 had been to do something that brought on even more and worse terrorist attacks. We wouldn’t blame him for 9/11 itself — but we sure would blame him for his ineffectual or exacerbating response that led to more attacks!
(3) When you look at the Dow, you need to keep firmly in mind two things. First, again, it’s not that people blame Obama for the absolute value of the Dow, the fact that it’s 30% below its peak. What they blame him for are the continuing changes in the Dow. It’s not going up, it’s going further down and down. That is his problem, because — and this is the second point — the Dow is forward-looking. The changes in its value reflect the consensus investor judgment of what will happen to companies and the general economy in the future.
You don’t sell GM stock just because GM made crappy cars and had terrible sales last year, as some kind of punishment. You sell GM stock because you think GM is going to make worse cars next year and sell fewer, so that however little your stock is worth now, it will be worth still less next year. On the other hand, if you think GM is going to make better cars next year and sell more, you hold on to your stock, maybe even buy some more, because you expect it will be more valuable next year. This is true even if GM’s cars next year will still be worse than Toyotas.
Remember, the way to make money in the stock market is to buy stock in companies that are presently doing poorly and will do much better next year, and sell stock in companies that are presently doing well and will do much more poorly next year. Buying Amazon.com or Walmart stock, or stock in other companies that are doing well and will continue to do well won’t earn you money. Those stock prices are high and will continue to be high. Buy high and sell high is not a recipe for getting rich.
You can see the present value of the company, and what happened in the past is much less important than what you think will be the change in value. Investors are saying that they think companies that are presently doing well, which are not presently impacted by the recession, are going to do worse next year, and companies that are presently doing poorly aren’t going to do any better. That’s a judgment on what will happen next year. It’s a judgment on the expectations of the results of Obama’s policy choices this year. It’s a very negative judgment.
Ok, I’m convinced: stock market returns are an indication of how good a president’s economic policies are. Since 1929, $10,000 invested in the S&P 500 only under GOP presidents would be worth $11,733 as of 10/10/2008. If we only invested under Democrats, it’d be worth $300,671.
Clearly we should count on the stock market to tell us which party should be in the White House.
When these numbers showed up in the New York Times last fall Greg Mankiw posted an explanation for why they are meaningless (Google “Republicans, Democrats, and Stock Returns”). But don’t listen to Mankiw — it gets in the way of blaming Obama.
A word of advice for the Obama bashers — as with Bush Derangement Syndrome — Obama Derangement Syndrome (ODS is pronounced odious) shall prove exhausting.
These current levels of ODS hyper-ventilation are very likely unsustainable.
Besides, what alternative is there? Who is offering an alternative vision? Jindal? Palin? Crist? Limbaugh? Mitch McConnell? Newt Gingrich?
Jim Cramer and Larry Kudlow? Heh! Good luck with those two.
Arguments that a 35% top marginal tax rate is just right while a 39% top marginal rate is socialism won’t prove very persuasive except with the hard core 25% who have always been opposed to Barack Obama and always will be opposed to Barack Obama.
More seriously: While I don’t think Obama’s tax and budget policies have much to do with the stock market, I do think that some of the Dow drop has to do with the fact that we don’t know how much worse the financial crisis will get. Obama and Geithner and company deserve blame for their failure to inspire confidence in that area.
I don’t hear the right complaining as much about that, presumably because they have ideological reasons to pin everything on Democratic fiscal policies, and because no part of the political spectrum seems to have any great ideas on how to clean up Wall Street.
Tsk, tsk, Jim. Your numbers prove the exact opposite of what you think. Remember the golden advice? Buy low, sell high. When is it a good time to buy stock? When the economy is in the crapper, and everyone thinks the future will be still worse. That’s when stock prices are low.
When’s the right time to sell? When the economy is roaring along, and everyone things things will be still better next year.
So if the right advice is to buy when Democrats take office and sell when Republicans take office, what does that say? It says that when Democrats take office the economy will suck and give promise for sucking still more in the future, so stock prices will be low low low. And when Republicans take office, the economy will be doing great and look like it will do still better next year, so stock prices will be high.
C’mon, you can get this. It’s not that hard.
Ignoring the fact that you’ve set up yet another straw man, Bill (the concerns go far beyond the top marginal rate), are you saying that it’s a good idea to raise tax rates in a deep recession? You know, like Herbert Hoover did?
Obama and Geithner and company deserve blame for their failure to inspire confidence in that area.
Gee, ya think?
I don’t hear the right complaining as much about that
You must have your fingers in your ears. And not that I’m of “the right,” but apparently you didn’t even read this very post, which does exactly that.
Carl: So you think the market will be up when the GOP next takes the White House? Why then the hand-wringing about the Dow? Did you miss the part about the stock market being meaningless as a measure of economic policies?
Rand: Is there any time when you would approve of raising tax rates? Was it wrong for Clinton to raise rates in a recession?
Is there any time when you would approve of raising tax rates? Was it wrong for Clinton to raise rates in a recession?
Yes. History shows that lowering tax rates stimulates economic economy while raising rates depresses activity. The very worst time to raise tax rates is during a recession. This, combined with other Obama policies such as ramming through nearly a trillion dollars in so-called stimulus spending and working to nationalize health care, is what many see as Obama’s economic blindness/ignorance/malice.
Is there any time when you would approve of raising tax rates?
Yes, if we were in a serious existential war (e.g. World War, Second). But not progressively.
Was it wrong for Clinton to raise rates in a recession?
That’s a complex question (i.e., based on a false premise). Clinton never had a recession in which to raise tax rates. The recession ended before he took his first false oath of office.
But yes, he would have likely had better economic growth had he not increased tax rates. He might also have retained control of Congress, though Hillarycare and the “assault-weapons” ban played a role as well.
I should amend that last. I think that income taxes are in general a bad idea, from an economic growth standpoint. There are much better ways to generate government revenue, if needed. We managed to get through the first half of our country’s history, including one of the bloodiest civil wars in history) without a federal income tax. I’m all in favor of repealing the amendment (sixteenth, I think, without looking it up) that allows it.
But the point of an income tax (and particularly a “progressive” one) isn’t about raising revenue. It’s about “fairness” (as The One pointed out in the debate in which he said he’d increase capital gains tax rates even if it resulted in less revenue for the government), and social engineering.
So you think the market will be up when the GOP next takes the White House?
Well, your own numbers suggest that history tells us that the Dow will rise when a Republican wins the next election. Does that make it a guarantee? Of course not. If anyone knew for sure how to predict the Dow, he’d be wealthy beyond dreams.
Why then the hand-wringing about the Dow?
Sigh. C’mon, Jim, you’ve got more brains than that. Let’s just replace “Dow” with “home prices” in your statement. Listen, house prices will eventually rise because of this or that event. So why the hand-wringing over their appalling plummet right now?
D’you think we might hope for a rising Dow later and right now? Must we pay for future growth in prosperity by present decline in prosperity? That does seem like the leftist zero-sum intuition about the economy. But we on the right tend to think it’s possible for prosperity to grow all the time, for everybody.
Did you miss the part about the stock market being meaningless as a measure of economic policies?
No. It was too stupid a proposition to bother addressing. You might as well argue that all wages and prices have nothing to do with government taxing and budgeting and spending policies. In which case, Jim, what’s the point of that $800 billion stimulus?
Raising taxes can be justified by any number of social justice or collective-action problems. But it’s not possible to justify raising taxes for any macroeconomic purpose. It always puts a brake on the economy. No matter what you do with the revenue, it’s always a net loss. Keynesianism, in other words, is complete nonsense.
Raise taxes if you need government to get something done — win a war, build Interstates, do basic research — or if you want to prevent the underclass from revolting by distributing wealth downward. But to raise them in the hopes that by moving wealth from here to there against its natural tendencies you can create more of it is unworkable madness, a form of economic free lunch swindle.
What we need to stimulate is spending.
Representative Boehner is proposing a spending freeze (or so I read) which is exactly the WRONG strategy when workers are being laid off because people have stopped buying things.
If the federal governments spends (and I’d like to see the Post Office re-fleeted with plug-in hybrid Ford Escapes) and we do not raise tax rates at the top teh deficit will be even bigger.
But remember, back in 2001 I asserted that the Bush tax cuts were preemptive class warfare to benefit folks that already were millionaires and billionaires.
39% marginal tax rates over $250,000 is merely swinging the pendulum back to where should have been all along.
Carl, raising taxes on the very wealthy keeps the deficit in check, long term.
Ideally, I suppose we could do the Keynesian thing without raising taxes but in that scenario the deficit numbers would be much more scary than they are now.
Of course, if Bush hadn’t needlessly cut taxes on the top 1% seven years ago we wouldn’t be in the present pickle.
Larry J,
A significant percentage of the recent stimulus package was tax cuts not spending. That was part of the deal to get it through Congress.
So no, the stimulus bill does not contain a trillion dollars in new spending. Not even close.
Jim, I wonder how old you are. Here are the two best times in America in my lifetime:
1959 – 1967 (Kennedy Tax Cut, NASA)
1983 – 1990 (Reagan Tax Cut, double revenue to the Fed’s)
In 1974, with Magna Cum Laude grades in Engineering, couldn’t get job offers due to oil embargo. In 1979, had gas lines due to Carter with a 21% misery index. Carter pumped money into the cities (pre ACORN) for his 1980 election and got drubbed.
I’ll grant that the 1994 till 2007 period wasn’t awful, but it had little growth after inflation, regardless of the stock market. Much was due to overseas competition and Goldman Sachs (i.e. Robert Rubin of Clinton) Brazil Russia India China (BRIC) strategy of killing U.S. companies. The BRIC strategy resonates with the Liberal “Hate America First” people like Soros and BHO. Maybe you’re one of them also.
Scott Noble, you bring up Reagan.
Well, okay:
In 1983, Reagan made one of the greatest ideological about-faces in the history of the presidency, agreeing to a $165 billion bailout of Social Security. In almost every way, the bailout flew in the face of conservative ideology. It dramatically increased payroll taxes on employees and employers, brought a whole new class of recipients–new federal workers–into the system, and, for the first time, taxed Social Security benefits, and did so in the most liberal way: only those of upper-income recipients.
Bill,
Government spending on capital assets (roads, infrastructure) is justified, as it is with borrowing for a home. Spending on ACORN and government personnel (as with credit cards) is total waste. Read Hayenk “Road to Serfdom” or “Atlas Shrugged” for the answers here. Keynes has been proven wrong multiple times.
Cutting government (dead weight) personnel is a must, as it is in the private sector.
Scott: I’m 43, so I have some recollection of what things were like under Carter and his successors. But one person’s recollections can be at odds with impersonal statistics. The post-war president with the highest rate of annual job growth was, to my surprise, Jimmy Carter. Bill Clinton was 3rd (LBJ was #2). The two George Bushes were the worst. The economy certainly felt better under Reagan, but in terms of jobs and median incomes (much less the national debt and trade deficit) it wasn’t anything special.
And if you really think that George Soros and Barack Obama hate America, I think you need to adjust your meds.
“The post-war president with the highest rate of annual job growth was, to my surprise, Jimmy Carter. Bill Clinton was 3rd (LBJ was #2). ”
….and correlation (and lack of context) does not equal causation.
Rate is an instantaneous measure, not an overall measure.
Not to mention it is hard to create jobs at an insane rate when you are already at or near full employment like we were untill a few months ago.
“back in 2001 I asserted that the Bush tax cuts were preemptive class warfare to benefit folks that already were millionaires and billionaires”
Good grief. Why does politics make so many otherwise sensible people, so stupid?
As for Obama, his reckless dash to grow government power combined with his cynical tactic of fashioning Rush into a political strawman reminds me of Venezuela’s Chavez. Not that I believe Obama wants to be dictator, just that his tactics eerily echo.
Rather than Obamamessiah or other tags used to make fun of Obama, I think “le petite Chavez” hits the mark.
Jim,
There are liberals that loved America – Truman, Kennedy, Hubert Humphrey, Ed Koch – all hated communism.
There are liberals that hate America – Bill Ayers, Rev Wright, Michelle Obama, all socialists / marxists. Soros made his money destroying countries – it seems like he’s doing that now to the U.S.
Has anybody done the exact same historical market comparison for congress? It seems like they have a bit more to do with domestic policy than the president under “normal” circumstances…
As I see it, the markets have “decided” that Obama is not good for the markets. The first sharp downturn in the markets happened when the “Palin effect” was failing for the McCain campaign and Obama appears to be heavily favored.
My take is that the success of Obama’s campaign was part of the reason the recession happened when it did. I’m not saying that Obama caused the recession, merely that his success determined that it would start in late September. Much like how a discarded cigarette can start a brush fire. The real cause is the flammable brush not the cigarette.
The current decline might happen anyway even without the moves Obama has made. I don’t know for sure. My take however is that Obama is not helping the situation as far as investors are concerned.
Well Karl, apparently there are three ways to run the economy:
The right way, the wrong way and the Obama way.
The Obama way is a lot like the wrong way except it is several times faster.
Bill White Says:
March 6th, 2009 at 4:23 pm
Larry J,
A significant percentage of the recent stimulus package was tax cuts not spending. That was part of the deal to get it through Congress.
Bill, Obama’s so called tax cuts aren’t. He is reducing the withholding rate so that the average worker will get an additional $13 a week (be still my heart!) but the tax tables aren’t being adjusted. People will have to pay back that money next year. In short, his tax cuts are a lie just like most of his stimulus spending which won’t even take place this year.
> Obama is blamed for the course of a recession that started 14 months before his inauguration
The recession didn’t start 14 months before Obama’s inauguration. The US economy grew in Q1 and Q2 2008. (The stock market hit its peak in late 2007, but that’s not how we measure recessions – the stock market “predicts” more recessions than actually happen.)
The recession started in Q3 2008, when folks realized that Obama was the likely Dem nominee and thus the odds-on favorite to be the next president.
Andy: The National Bureau of Economic Research declares when recessions start and end, and they say that the U.S. has been in a recession since December 2007. You can look it up.
Larry J: The American Recovery and Reinvestment Act includes $288 billion in tax relief; see Wikipedia.
Mike: Yes, correlation does not imply causation (see yesterday’s XKCD comic). And yet this thread is based on the premise that everything bad that’s happened to the U.S. economy since January 20 (or election day, or when the “Palin effect” wore off — take your pick) is Obama’s fault. Correlation is not causation.
Karl: The markets tanked because Obama took a lead in the polls, and not because Lehman Brothers went bankrupt? I suspect that the Lehman Brothers failure caused both the market drop and Obama’s lead.
Scott: I think you have confused hating America with offending your personal sense of what America should be. The two are not the same thing.
The NBER’s report (http://www.nber.org/cycles/dec2008.html)doesn’t support its own conclusion.]
First the conclusion. “The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. ”
Then the “supporting data”.
“The product-side estimates fell slightly in 2007Q4, rose slightly in 2008Q1, rose again in 2008Q2, and fell slightly in 2008Q3. The income-side estimates reached their peak in 2007Q3, fell slightly in 2007Q4 and 2008Q1, rose slightly in 2008Q2 to a level below its peak in 2007Q3, and fell again in 2008Q3. Thus, the currently available estimates of quarterly aggregate real domestic production do not speak clearly about the date of a peak in activity.
Other series considered by the committee—including real personal income less transfer payments, real manufacturing and wholesale-retail trade sales, industrial production, and employment estimates based on the household survey—all reached peaks between November 2007 and June 2008.”
Karl: The markets tanked because Obama took a lead in the polls, and not because Lehman Brothers went bankrupt? I suspect that the Lehman Brothers failure caused both the market drop and Obama’s lead.
Here’s my take. If Obama had looked very weak in late September and had lost the election, the stock market would have been higher which would have meant assets of struggling banks would have more value. That alone might have kept most such banks out of bankruptcy until early in a McCain administration.
The traditional definition of economic recession is two consecutive quarters of a drop in the GDP. That the economy was tottering before 2008 no one disputes as the FED was dropping interest rates for a long time to try and keep the economy humming. But the revisionist crap during the 2008 election campaign redefining ‘recession’ so as to push the date back into 2007 was partisan B.S. designed to aid the Democratic Party.
The current recession was brought on by many factors, some of which date back to the Clinton years. But one factor cannot be denied which is the amazing propaganda employed by the press and the Democrats which have talked down the economy every year of the Bush administration. How much that has led to the panic conditions which are deepening the current recession should not be underestimated. The contrast to the Clinton years with it’s similar popping of the dot-com bubble economy are highly instructive. Much of the current crisis is due to demogauge liberals pouring gasoline rhetoric on the economic fire.
Just want to note that someone earlier got the definition of Obama Derangement Syndrome wrong. ODS is the belief that Obama can do no wrong.
It’s a derangement syndrome for the exact reasons Rand and company have noted above about Obama’s performance.