Obama’s Race Against the Economy
Let me be clear: Fourth-quarter GDP growth will be negative, perhaps deeply so. What Nancy Pelosi, Barack Obama, and Harry Reid — the architects of what I have been calling the POR (Pelosi-Obama-Reid) economy — did during the final five months of the presidential campaign to convince businesses, entrepreneurs, and investors that they were intent on starving them of the energy resources needed for growth and radically increasing their taxes, combined with their party’s decades-in-the-making housing and mortgage industry debacles coming to a head, virtually guarantee that.
But there are early, tentative signs that the economy is getting up off the mat. I detailed some of them on December 18. James Pethokoukis of U.S. News chimed in four days later.
The hopeful signs are these:
- As of December 19, oil is down over 70% from its summer peak. Many drivers are spending over $150 per month less on gas than they were just five months ago.
- The Fed has taken interest rate reduction as far as it can go, which has taken mortgage rates to historic lows. Refinancing activity has picked up, disproving the notions that credit isn’t available to worthy borrowers and that most of us are a bad hair day away from homelessness. This is an ideal opportunity for those who have good credit but poorly structured adjustable-rate or interest-only mortgages to get out of them, and for those carrying 6% or higher fixed-rate mortgages to lower their monthly payments or draw out equity. (Yes, Virginia, people in most states still have plenty of home equity.)
- A falling Consumer Price Index of -1.7% led to real earnings growth of 2.3% in November. A repeat performance but with smaller numbers looks likely in December.
- Christmas shopping season retail sales, while still far less than impressive, might not be as bad as originally predicted.
Pethokoukis pegs the annual impact of the first two items just noted at over $500 billion.
Good news “too soon” would be bad news for the massive $850 billion stimulus package Obama and the Democratic Congress wish to pass. If a recovery has visibly commenced, who, besides their pork-addicted constituencies and the endless line of bailout beggars who should know better, will need stimulation?
Obama, Biden, and the Democratic Party are engaging in their sharply negative jawboning on the economy for the same reason a mob hit man sends a person he knows to attend his target’s funeral: he wants to make sure he’s dead. Obama et al. want to make sure the economy seems dead, and that consumers don’t do something unhelpful like start spending again, until shortly after their party’s precious stimulus package becomes law — after which they, with the help of their lapdogs in old media, will joyously announce a resurrection.
Tom:
I must respectfully disagree with your assertions about the economy. While it is true the Democrats want control of our entire economic life and the MSM will happily blame everything on Republicans and pro-capitalist policies much damage has been done over the last year or so.
Banks have always been at risk by being over leveraged. But it was never a problem because their borrowers, for the most part, paid them back. The introduction of sub-prime and the subsequent defaults brought the house of cards down. But the house has been there for decades.
This collapse will take many years to unwind and no doubt Obama, like FDR before him, will make things worse. Americans have gone from buying things they want to buying things they need. This fundamental change in mind set is just beginning to ripple through the economy. And because of that change we find ourselves with too many factories making too many goods with too many stores to sell them.
In the 1990′s Japan tried the same FDR government interference tactics which Obama-Biden are planning to use in order to ‘fix the economy’, as a result of this interference Japan spent over a decade in an economic dump.
For such smart people why are they doing so many stupid things?
Recovery would have been so easy but the smart people decided to take the hard way.
As I sit here waiting for little ones to wake up an unwrap Christmas presents, and eventually throw toys aside for hours of Christmas joy with the boxes they came in. I wonder, is their future so bleak? Or will the epidemic opportunism of the body politic make it barren?
Newton’s Third Law, “For every action, there is an equal and opposite reaction.” Yes, we are in for hard times and quite possibly they can get much worse. However, for the sake of maintaining power and enabling dependency our “leaders” will fear-monger our mentally less gifted brethren to the point of government addiction. All the while creating a process that could easily spin out of their control, a control that is already based on illusion. Stimulus packages are the action, the only question left is, “What is the reaction?”
Often spoken of in the circles of Left is the alarmism generated by the GOP concerning terrorism. However, nary a mention of the Liberal economic voice of doom that is so often sounding our upcoming demise. This fear can be a motivator or it can be a generator of anarchy. On a national level, it is far to dangerous a tool to be using, just for the sake of keeping dominance.
Is it unfair to want leaders whom speak in terms of reality? Why is it so difficult for one person to have the courage to step up and say, “Times are hard, but we can survive.” “It’s up to you, America.” Unfortunately pragmatic honesty has gone the way of the dinosaurs as might the United States. All for the sake of power.
God Bless
syn:
They are doing this because they don’t know what to do since in they end they don’t believe in free markets and they want total control.
Also people sometimes mistake action for progress. Obama appears to be doing something and until that something doesn’t work people will be happy.
Obama is as confused regarding the economy as he is regarding his strange religious bent.
The decrease of a trillion dollars toward the purchase of minerals and oil mostly from the middle east and the decrease in interest rates on top of home sales decline total up to several hundred dollars a month in more free cash flow per household. Nobody talks about the gain in buying power from deflation and much cheaper fuel. There are some improvements in the economy but very few know them. The MSM gets no traction in good news.
The bottom line is Obama’s itch to be a sudden savior of the economy by creating a bubble. It makes me glad to see the green industry bubble that the left wanted is crumbling.
It is crumbling at several levels. Ethanol production industry is insolvent. Science shows us it take more fossil fuel BTu’s to create fewer ethanol fuel BTU’s. Crude is down. That prohibits conservation of crude. If people are still cash poor, buying solar panels, wind generators and other non essentials won’t happen.
Obama is striving so hard to have a grade in Econ 101 lower than Carter had.
So nice to have the assist coach tell us we are all losers.
“When things are really bad and the team is behind tell them to win one for the Gipper.”
Reaganomics worked for a few years, and star wars was a joke,He even apologized for Nicaragua and Oliver North.
But the old ‘Gipper’ coach always inspired us to do greater things.
We waved flags and America became strong again after the loser democrat Carter told us we were all losers.
I really dread 4 years of Joe Biden, maybe Hillary can keep him buried in the back pages.
Biden will never be accused of being an evil genius, directing a secret agenda behind the scenes.
Merry Christmas, everyone!
I’ve spent my holidays in Chicago, and here in Los Angeles. In both places for the past month, the stores and malls have been simply jammed. Parking has been a terrific problem. And shoppers are going back to their cars chock-full of purchases. What am I missing?
Big government economic policies provide “elites” with power, and often financial remuneration. More libertarian policies essentially tell them to mind their own business and stay out of the way. It’s as simple as that. The historical evidence that Franklin D. Roosevelt worsened the Great Depression is beyond serious debate. However, once one accepts this contention—you can no longer remain a member of the Democratic Party. You must immediately become a libertarian or conservative Republican. Some people, alas, have too much of themselves invested in big government ideology. They may also even be put in the awkward situation of having to go out and find a real job!
Hey to all who pay taxes. Fill out a new W4 and have less tax withheld from your paycheck and create your own stimulus package, you know better than the government how to spend and save your money. It gives those retards in Washington less money to spend.
phd you are missing that Government and the media play on your fears to set their agenda of cradle to grave care for all and big government with high taxes. You cannot take care of yourself they say. Ignore the crap on the news and live your normal life.
Seattle stores are jammed likewise, despite a get-’em-out-of-their-cars Mayor who refuses on principle to invest enough resources into clearing snow off of unpassable streets.
So those who can’t get to stores in person are reduced to shopping online, and stiffing the poor saps who run brick-and-mortar businesses. That is, stiffing the guys who therby pay the City’s ‘business and occupation’ taxes, and the Mayor’s sacred salary.
Fear Obama writes:
“I really dread 4 years of Joe Biden, maybe Hillary can keep him buried in the back pages.”
Mr. Fear,
Just a quick wish for a Merry Christmas and to let you know that I enjoy your responses a great deal (no sarcasm). As you and others have commented, this might be the most terrifying aspect to the Obama presidency: his reliance on his dumb ass VPOTUS who was, after all, selected to provide the experience that Chimpy, the Kenyan lacked.
I wonder what the MSM and the Dems (again, synonymous) will make of a budding economy in Springtime. Possibly ascribing it to The Magnificent One’s mere presence in the Oval Office would be a hard sell for John Q. Public..
..but, then again, they bought off on this loser back in November.
I think the author has a point, but I think the inertia of bailouts will prevail. The economy will improve before the bailouts have any effect, but then the tax increases that follow will slow things down again.
I see the stupendous rise is oil and commodity prices in general, as the basic cause for the crash that occurred in September. But it took a while to happen. Those increases that no one could pass on were justlike one big world wide tax increase. Now prices of everything have been adjusted, and we’ll get back to some kind of normal.
Housing will be the first to recover. Autos will be one of the last.
All this political talk about “jump starting” and infrastructure investment stimulating the economy, is just talk. The politicians can’t control the economy to the good, just like they haven’t a clue how to control the climate. Hell they can’t control themselves.
But they can do harm, and tax increases are the problem that’s coming.
There is a worldwide recession. The globalized over leveraged economies have to delever. The politicians are trying to stop the business cycle adjustments because a whole generation of young Americans have never experienced a real recession.
So a lot of Americans are spending money on stuff they really do not need and not saving. In 1932 the US was a creditor country. Now we are the biggest debtor country in the developed world.
Printing money to try to stop the business cycle will eventually result in high inflation. I do not believe that the Fed will be able to sanitize all the liquidity they have injected into our banking system.
We will monetarize our debt and destroy the stability of our democracy. Uneducated optimism is dangerous and a government micromanaging an economy is catastrophic.
We are where we are because:
1) The Barney Franks and Chris Dodds snapped the clip into the gun by giving Fannie and Freddie free rein to insure and acquire huge amounts of bad debt on negligible reserves.
2) The oil-price runup chambered the round by squeezing those lower-middle-class mortgageholders’ cash flow from one direction, and
3) The Fed pulled the trigger when it saw those rising energy prices as inflationary through its blinkered macroeconomic view of the world and aggressively cranked up interest rates, clobbering those same debtors from the other side.
There’s lots of other issues involved, prolonged weakening of the dollar for one, but the Fed took a bubble that was already starting to leak and blasted a huge hole in it.
Frankly, I think right now the auto industry would recover very nicely if there were just a little more credit out there; people with jobs and/or money in their pocket are scavenging some incredible deals, and sub-$2 gas is a very reassuring factor. As long as it stays that way.
The current financial crisis is not a hiccup recession that will sort itself out shortly. How I wish it were!
In the past two years the wealth that is the global capital stock has fallen in value from $80 trillion to $60 trillion.
Brad DeLong
Re comment 5 by “Seven”:
You said, “If people are still cash poor, buying solar panels, wind generators and other non essentials won’t happen.”
If we can have energy cheaper than oil, why wouldn’t we take it? Solar power will be dirt (silicon) cheap by the time we get through applying our technological wits to the problem. Let’s save the crude oil for plastic and medicines. Let’s keep the money here rather than giving it to Saudi Arabia.
See Daniel Nocera’s work at MIT.
Google CPV – concentrated photovoltaics
As far as I am concerned, the low oil prices are the same thing as adjustable rate mortgages (ARMS) – cheap now, pay through the nose later. The low prices have already killed the solar business like Emcore and LDK here in the US. Who would be stupid enough to buy solar panels at current electric rates. Who would invest in these companies now. Let’s try to take a longer view, please.
Have to agree with SAF. Time will tell, but expect to see waves of layoffs, price reductions, plenty of stores shutting, house prices in retreat…
Obama and team will make it worse and longer lasting than it needs to be.
It will be worse in other countries.
Q. Why so many tales of an economic apocalypse in the papers?
A. The scribblers who haven’t been laid off yet are in fear that their employers will file for bankruptcy ahead of GM and Chrysler.
Oh wait, some already have!
Remember, although it’s nowhere to be found in the Bill of Rights, we do have a guarantee of separation of media and reality.
I’m not entirely sad about the current situation. It had to happen. If they’d just leave it alone, the weak (businesses) would die and other grow to take their place. We are looking to move out of our house, rent it out, and buy a new one. Time’s great to be renting out, and time’s great to be buying. My husband and I are in the healthcare feild, which is not under the same performance gun as other enterprises. We are pretty secure, until the boomers die off. And our 401k has decades to recover before we need it. I’m buying GE at a bargain right now!
People who were living in a debt-shuffling house of cards are in trouble. People who’s jobs depend on those who do so, are in trouble. The rest of us are ok.
7.Douglas…and your point is?
No matter how many accused Mr. Bush of whatever, their accusations (and lack of factual basis) nearly always illustrated much more about them than it did about him.
Based on your implied analysis of Biden’s “lack of accusability” (?), Jimmy Carter was a great president. Good grief. You people are so desperate to prop up Bambi and Biden you are saying things that are the mental equivalent of “My dad can beat up your dad.”
Although there are a number of fundamentals that seem to point to a recovery, there are two things that will prevent that from happening soon. 1) Uncontrolled Gov’nt spending. This WILL without question cause high inflation as the printing presses run 24/7 to cover the yearly budgetr defencies not to mention the 100-150 trillion owed to the Social Security “Trust Fund” that are comming due 2) Demographic trends point to a growing number of persons who are simply unwilling to be productive and are, as Ayn Rand said, “Looters”. Until economic conditions (i.e reality) forces people to carry their own weight and the gov’nt to face the truth about spending, things will just continue to get worse. A conservative truth worth remembering in times like these is that behavior will only change when the consequences of not changing becomes unbearable
God help us if the American people ever figure out that the Congress is now (and for the past 2 years) being run by Democrats. So far, Pelosi and Reid just aren’t believable as Congressional leaders, so the American people still continue to believe that the Republicans must be running things still.
Actually, what Baby Boomers will be shocked to find out is that there is no legal obligation for us to pay off on any money beyond what has been borrowed from the Trust Fund. Once that money has been repaid and spent, benefits will drop to accommodate the current FICA tax receipts.
Funny how a large American housing problem can drive down the world economy. Jeez, maybe some American responsibility balanced by our freedoms just might help us all ? Gee, do ya think ? Wow, strange thought here: maybe people who know for a fact that they can afford their new home should buy. And those who can’t should rent. Strange concept, huh ? Wow, MAN. Like totally cool…….the truth is that we can blame the whole world for all of our problems, but if WE don’t act responsibly in financial decisions, then WE are to blame.
The same group of Democrat politicians and journalists from the government-run media were telling us just a few months ago that $200-a-barrel oil was both inevitable and permanent. They were lying then, and they are lying now when they portray the current economic situation as the Great Depression Part II.
Cutting taxes to get the monkey of big government off the grass roots back is a good start.
If part of the problem is banks need money, then eliminate the tax on grass roots savings interest, and provide matching funds for CDs of 1 year deposits.
Screw the top down approach — All that’s going to create is political donations to politicians for more of the same from any big wig or union that benefits from the handout….
Well of course they fear a recovery – that would remove their excuse to loot the exchequer for the benefit of themselves and their creepy friends.
The dems very much resemble the classic arsonist profile: start the fire, call the fire department and then tell the fire department how to fight the fire, the whole time getting the biggest thrill from the mess.
Disgusting and chilling. They are very, very stupid, self-centered and just LOVE power over other people.
We’re all about to get a lesson in semantics. When Democrats do it, it’s called “Job Creation.” When Republicans do it, it’s called “Corporate Welfare.”
See how that works?
And the media will be only too happy to oblige. The negative stories about evil big corporations getting tax breaks will disappear and we will begin to see stories about how Lord God Obama is creating jobs with tax breaks designed to put American’s back to work. It’ll all sound noble and patriotic and it will last until Republicans take over and then it’ll go back to being corporate welfare.
It will be just like how homelessness was suddenly eradicated the day Bill Clinton became president.
tter how many economic stimuli (a.k.a. billions of dollars Obama and Biden throw at the problem, the revovery is not going to start any time soon. For three decades grpwth had been underwritten by indebtedness. Now most people have borrowed all they can – and those of us who have no debts aren’t planning on getting some just to help Sidi Obama out.
I do not know how all you right-wingers can be so confused about economics. Whenever I get into debt, and lack work I just max out my credit card and go even deeper into debt, and then, as I stimulate the local economy, more work appears and I get richer.
Can’t you guys do basic math?
The housing and credit markets are a mess and that’s a drag on the economy and stock market. It’s a real problem but like all problems can be overstated – its not the great depression or armageddon. Like most problems there are common sense solutions such as reducing interest rates, cutting taxes on investment, and helping bankrupt firms fail quickly so their assets can be taken over by healthier firms.
But of course liberals love a crisis as it allows them to gain popular support for their goals of seizing the world’s productive assets and redistributing them as they like. If there’s no crisis they will manufacture one by turning a problem into a crisis. The goal is to turn you from a free and productive member of society into human livestock dependent upon bureaucrats for your safety and prosperity.