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.