Reaganomics vs. Obamanomics: It’s Reagan in a Rout
Much of the economic news immediately after the New Year was decent, even hopeful. The Institute for Supply Management’s Manufacturing and Non Manufacturing indices moved more solidly into expansion. Payroll and benefits giant ADP told us that the economy added 297,000 seasonally adjusted private-sector jobs in December, that report’s best monthly number in years.
Then came Friday’s Employment Situation Summary from Uncle Sam’s Bureau of Labor Statistics.
At first glance, that news also seemed acceptable. Seasonally adjusted, the national unemployment rate dropped from 9.8% to 9.4% in December, while employers added 103,000 jobs. The latter number trailed both expectations and ADP’s earlier report, but given the vagaries involved in seasonal adjustments, maybe it wasn’t all that bad.
Unfortunately, it was pretty bad. December’s BLS report capped off a year during which the post-recession consequences of Obama administration policies became all too clear. Two and a half years in, what I have been calling the POR (Pelosi-Obama-Reid) economy since the middle of 2008 has created a workforce which is disengaged and underemployed at levels not seen since the 1930s — which, not coincidentally, is the last time a Democratic administration’s supposedly stimulative policies created a long-term, high-unemployment economy.
Almost half of December’s unemployment rate drop occurred because on a seasonally adjusted basis, 260,000 people left the workforce. During 2010 (not seasonally adjusted, because it’s a year-over-year comparison), the civilian 16-and-over population increased by almost 2 million, but the ranks of those either working or looking for work only grew by 500,000. A primary reason for this is that a record number of those who could applied for Social Security retirement and disability benefits. Many surely would not have done so in a more favorable job market.
December’s seasonally adjusted workforce participation rate was 64.3%. The last time this rate was so low was in 1984, when many more families were intact and had one parent staying at home. The teenage workplace disengagement epidemic I addressed in September has become even more awful. In 2010, the 16-19 age group’s participation rate and employment-population ratio averaged under 35% and under 26%, respectively. Both were all-time lows by far. If the current rate of decline in the latter measurement continues, there may not be a single teenager employed anywhere in a dozen years.
It’s also hard to find much consolation in the number of jobs added during December, or even during 2010.
December’s not seasonally adjusted job results were worse than every December from 2003 to 2007. That indicates deterioration, as November 2010′s analogous figure was in the lower-middle end of the November 2003-2007 range. In a real recovery from a deep recession, this should not be happening. Well over 20% of the 1.35 million private-sector jobs added in 2010 came from temporary help services, even though that sector is less than 2% of total employment.
Well, at least the numbers are positive, and that’s good enough, right? Wrong. The real benchmark for evaluating this recovery’s employment and economic growth should be the post-recession, tax cut-driven Reagan recovery. In that contest, it’s Reagan in a rout.
Here’s how employment growth compares, without even taking into account our currently much larger potential workforce (source data: total; private):
No amount of proof will stop liberals from believing in Keynesian economics.
Reagan spent his way out of the recession. Look at the federal debt during his term in office. Reagan basically set in concrete the “republicans run up the debt” trend that’s followed since. Whether or not you call him a keynesian, he sure as heck liked to spend money.
In any case, the main reason for the early 80′s recession was tight monetary policy. That’s easily reversed when inflation comes back under control. The cause of the recent recession was a massive collapse of the US financial sector (taking a fair chunk of the world with it). That’s a bit harder to reverse, particlarly when it was grounded on inflated expectations of asset values.
In any case, I would have thought that the reagan example would give conservatives a moment of pause. He took a hammering in the midterms because he wasn’t seen to be dealing with the recession. Just like the democrats just did. Then it picked up and he walked it home in ’84. I think you’ll see obama do the same.
No, everyone (JPT particularly), don’t shout and stomp. Just wait and see
“Reagan spent his way out of the recession.”
That was addressed in the column, but since you seem to want a pile-on:
- Reagan’s annual deficits were less than $200 billion during the time-frame noted, about 65%-70% less than Obama’s first two years after adjustment for inflation.
- The spending that was good helped defeat the Soviet Union, unless you want to subscribe to the discredited belief that it would have fallen on its own (note how it hasn’t exactly worked out that way in North Korea or Cuba; that’s because to fall, someone will have to push them, like Reagan did to the Soviet Union).
- The spending that wasn’t so good was the result of broken promises to control spending by Tip O’Neil’s Congress.
- Government receipts went up about 65% under Reagan’s supply-side econ from FY1983 to FY1989 (Reagan’s last budget).
- Obama has run up the national debt by over $3 trillion, and we have less than one-tenth the private-sector job growth.
During months 19-30 after the 1980s recession, the economy added another 3.4 million jobs. It seems safe to say that Reagan’s lead of about 4 million jobs over Obamanomics will lengthen this year. To truly match Reagan months 19-30 on a population-adjustd basis, the economy this year will have to generate about 4.5 million jobs.
The GOP took a hit in the 1982 elections — nowhere near as hard as the Dems got hit in 2010 — because the stalling Dem majority in Congress wouldn’t pass the supply-side tax cuts in time for their positive effects to become sufficiently visible.
I addressed your argument about the economic environment here this morning.
‘- The spending that wasn’t so good was the result of broken promises to control spending by Tip O’Neil’s Congress.’
This is particularly important and often overlooked. Having been around then and for a good portion of Reagans’ tenure one of O’Neil’s constituents, I recall the confrontations between the two. O’Neil was a classic old school Boston Irish pol. He kept his power base in congress by handing out largess, but like Reagan, he was also extraordinary ‘everyman’ type speaker. Really messed up Reagan’s agenda. But the public at the time knew the score and I never got the sense that Reagan didn’t take this in stride. I also recall nothing but the utmost respect given one to the other. Reagan for his part reserved his contempt for the progressive types of his day. Tip was a democrat to the core but no progressive and as deeply and unreservedly proud of the US as Reagan.
On aside – Matthew, get over it. I told you that I’d leave you be until the next time I thought you dishonest and disingenuous on an issue. Debate honestly and I won’t beat you.
Matthew, get over it. I told you that I’d leave you be until the next time I thought you dishonest and disingenuous on an issue.
I’m glad to see that you’ve at least got past endlessly calling me a liar. How are you doing with the ‘troll’ thing?
Debate honestly and I won’t beat you.
Aah, I see – is that why you have to keep getting personal … Because you can’t “beat” me? How about worrying about “beating” me a bit less?
Call it good spending or just call it spending, but for all the talk of “supply side”, reagan’s recovery owed as much to stimulating demand. And the US economy really wasn’t facing the same sort of problems that bush left for obama.
Don’t get too complacent.
Thanks Tom, great post, those pesky facts keep getting in the way
Matthew….["The cause of the recent recession was a massive collapse of the US financial sector (taking a fair chunk of the world with it)."]
I respectfully disagree with your assumption!
While I absolutely agree that the dynamics are totally different between the 80′s and the current circumstance, I’ll submit that the current economic collapse was fully rooted by government led policies…..NOT any private sector financial policies.
From the 90′s aggressive loss of America’s industrial economic base the federal government got into the business of unsustainable superficial bubble economies legislatively created and supported. In both instances, the domestic and world markets was saturated with the increase in issued currency and inflated value for goods and services. The unsustainable superficial economy collapsed! Now we and globally, have a very serious three-prone problem with America no long having dominate industrial economic base and…..a gross inflation of goods and services trying to be propped up by the federal government to prevent an even worse economic collapse.
America no longer has an economic base that can support low unemployment and at the same time support the inflated values it is so desperately trying to maintain. Add to that, the third prong of the gross cost of running an out of control and over sized federal government and programs that are simply no longer sustainable under any circumstance.
Quite different dynamics for certain!
Yep. I think you’re probably right about some of that. But it’s not what caused the US financial industry to have to close its doors. If that hadn’t happened, there would have been no recession. Housing would still be in a bubble, sure. There might or might not be too much easy money floating around. But there wouldn’t have been a recession and there would have been no TARP bailout or stimulus programs.
Matthew…..Federal government policy drives the private sector economies! It should not be that way but since they abuse the Constitutions Article I, Section 8, Commerce Clause that is simply a commonplace fact.
The housing bubble was legislated by congress placing a “political policy” mandate on the private sector financial industry along with Freddie & Fannie. Hopefully, everybody knows how the financials works when engaged in the lending business…especially mortgage lending.
The housing bubble was designed for congress and administered by supposed intellectual elites who turned out to be among America’s newer generations of educated morons. It was a guaranteed loser within its basic design and ignored by the domestic and global market of investors.
You a betting man Matthew? Shall we lay something besides lip service on the line? You know, something easily measurable and not easily manipulated with
bullsh*trhetoric and spin? Like the number of votes casts and the final results?As you listen to the counter culture spin, try to remember one simple, indisputable and immutable fact. Reagan came within 3,000 votes of sweeping all 50 states. What kind of odds you require that Obama can’t match Reagan’s 2nd election Matthew, and how much you want to bet Obama can’t match that after the real midterm election shellacking?
I would say you’ve got a lot better odds of hearing those famous words of yesteryear, “I shall not seek, and I will not accept the nomination of my party for another term as your President.”
Let me know the wager…
Obama will still be president after the next election.
The democrats will take back seats after the republic/tea-party candidates disappoint their supporters. It’s too soon to know if the democrats take back both houses.
How’s that?
If so sure, let’s make a bet.
I’m sorry, but there’s no way to implement it. There’s no way in heck I’m tell you my email address, and I have no reason to believe that you’ll pay up anyway.
So no – you’ll just have to wait and see. Or, if you like, go down to a betting agency and put 100$ on your preferred outcome.
You are correct, to the average progressive liberal they approach it more like a religion. And the truth has no meanings.
It is a religion in all but name, it has its saints and its devils, and no matter what happens the true believers will not recognize that their policies will always fail.
I’ve said it before, and I’ll say it again. This is what Democratic-Socialist economies look like. About 9% official unemployment, give or take. It does highlight how anemic is the so-called “recovery”. It is pathetic. Welcome to the new norm.
You will never, ever, see any Democrats give any credit to Reagan or any of his economic policies. According to them, he was a fool, don’t ch’ya know? Even though he engineered one of the best recoveries we ever had, the Democrats will never give him the credit he deserves. Nope, to Obama and his ilk, we need more “stimulus” pork-barrel spending (only to labor unions, of course), more bailouts, and more big spending. And remember, the actual costs for Obamacare have not even kicked in yet. Wait until that happens, unless the Republicans are able to repeal it. Then you’ll really see some spending take place.
We are financially doomed, yes doomed, unless we STOP the spending, reduce the size of government, and stop all of the hyper-regulation that is killing business. But you’ll never get a liberal to see any of that. To Obama, it’s not “Drill-Baby-Drill,” it’s “Spend-Baby-Spend.”
Why pig-wrestle, Blumer? Especially when all of economics is overshadowed by an inherently insolvent monetary system (that gets no air-time on the right.)
The country’s spending and monetary system are fundamentally broken and have been from inception (think Federal Reserve Act of almost a hundred years ago and its institution of an unpayable, interest-bearing national debt.) Comparing that structure to a single Republican president’s temporary slowing of the inevitable is a minor thought at best.
Obarky v Reagan is ultimately an utterly incomplete dynamic. It gets page views but it signifies nothing.
Its over folks….
Democrats have been looting the treasury at every level- fed, state and local for so long, the jig is up, get over it.
Its so broken, it cant ever be fixed….
When my LOCAL school district pays its Leftist Union Bums 100K average salary, plus zero contribution bennies and retirement, AND THEY STILL HAVE THE NERVE TO GO ON STRIKE IN A RECESSION FOR EVEN MORE, we’re way passed doomed people. Were already dead.
This is ONE local striking school district, who’s (drunk driving, has to ride a bicycle to work) president says things to the media about the strike like:
“we know it takes two incomes to live here, mom or dad will have to use vacation/sick time to be home with the kids, I think we can outlast them”
or this gem:
“We shouldnt have to give back on OUR standard of living because parents cant keep up with the economy”
Remember, in her mind, merely SLOWING the typical 7-16% pay raises (that they have gone on strike for several times over the last ten years) is “giving back” or “decreasing” their standard of living….
That classic old Democratic formula, where any slowing of “expected growth” is called a “painful cut” with their media cheerleaders dutifully nodding their heads in agreement.
This is at the LOCAL level, folks, where the LOCAL Police Department used FEDERAL STIMULUS money for new light bar kits on their cars (sorry, not cars, they have big honkin SUV’s)
My county has about 2 million people, my borough has 2500, and they spend money….30 MILLION for renovations to the Board of Ed admin building including a glass atrium, 10 foot tall oak doors, and a multi media conference room out of a sci-fi movie, while my kid goes to school in a “temporary” TRAILER behind the middle school thats been there for 12 years.
Its over people….the rot is deeper than you imagine…The Liberal Termites have eaten all the structural beams, right down to the local level, and no amount of paint, pillows and lampshade redecorating can save the house now.
Its over.
Regarding ‘Reagan liked to spend money’ – the payoff so to speak was gaing allies in Central and nearly all of Eastern Europe, their becoming a free market, self-sustaining society.
As well as toppling a foe/market that was knowingly destroying itself with its counterproductive strategies.
What’s funny is commenter ‘Matthew’ presuming Obama will adopt Reagan’s economic strategy to improve matters.
It took Reagan nearly 20 years to be a full blown ‘Republican/Conservative’. heck, even when California’s Governor, Reagan still had some Liberal leanings on a myriad of matters.
Anticipating the same ‘metamorphosis’ from this pint-sized CiC in a mere 2 years to right the economic ship is a freaking joke and delusional.
Western Europe, EUROPE is using a more free market solution to remedy the economic bloodletting, even after Obama told PM Merkel to go ‘keynesian’, whereas she said ‘No’ and Germany’s GDP is leaving ours in the dust. The equity being removed/not being invested in the U.S. market is staggering. Period.
I believe a majority of the country has learned a lesson in the nonsensical practice of EEO/gender equality etc., in political arenas. Qualified, self sufficient, free market thinkers need only apply..
I think the majority of the current problem is cultural. The people elected a president who they thought will take care of them. The people wanted security, however false, and they got it. They wanted big government solutions with nothing expected of them in return, and they’re getting it. Never mind, it’s all a ruinous facade. The culture is all about gimme, self, hedonism, and intellectual and civic laziness.
Meanwhile, the adults, until this last election cycle, had stepped aside and allowed the leftists to infiltrate and take over the academy, media, Hollywood, even Wall Street (crony and PC capitalism) and the military (gay agenda). It will likely take a war to take it back, at least a war against some other existential threat like islam or an emerging China, not to mention Iran and other crazies out there. Good, honorable people will pay the price in blood, likely.
Bring back rugged individualism, honor, sweat and service above self and much of this disappears, or begins to. Bring back an assertive, (truly) educated and not indoctrinated electorate, and much of this blight disappears. IMHO, bring back God (the TRUE God) and this disappears, as these virtues are granted by providence. It seems to me, the Tea Party is by far the closest remedy we’ve got, if only judging by the rabid response of the evil left. WE, right now, are the GREATEST Generation once again, if we but step up to the plate and begin what we know we must do. We have it within us.
By the way, Tom, when did we take to hanging economies — bad and good — on President’s necks?
You are right of course – recessions are a part of free-economies that cannot be avoided. Decent fiscal and monetary policy can minimize their frequency and duration. Congress has control of the spending.
On the other hand, Reagan was able to get Congressional cooperation on taxes (not so much on spending). Obama had a Democrat Congress that did almost everything he asked for for two years.
“You are right of course – recessions are a part of free-economies that cannot be avoided. Decent fiscal and monetary policy can minimize their frequency and duration. Congress has control of the spending.”
I’m sorry, but do you really believe that the financial fubar couldn’t have been avoided? The US had lenders writing bad loans on the assumption that asset prices would endlessly keep rising, and then misrepresenting the risk of those mortgages when selling them on to major financial institutions. Are you telling me you really can’t think of anything the government could have done that might have prevented that from happening, or at least confined it to the fringes so that it didn’t bring down the whole financial system?
And don’t just cite the “regulations just make things worse” talking point. In this case, I think we have a pretty iron-clad example of when regulations most definitely would not have made things worse.
And no, this isn’t just matter of monday-morning quarterbacking. Australia had a review of the banking sector in the early 90′s (kicked off by our conservative government – one of john howard’s GOOD decisions) which gave our regulatory agencies the power to crack down on precisely the sort of thing that your investment banks were doing. One major investment bank was specifically warned about about doing what your banks were doing – assuming that rising asset prices and low interest rates meant that risk didn’t matter. We didn’t have banks writing loans to people who couldn’t pay them. And we didn’t have lenders lying about the risk. Upshot? Our financial system sailed through two major external financial crises (asian and american) with (almost) no government intervention (except a guarantee on deposits after ireland did it). And our banks have also not stopped being massively profitable since the early 90′s.
The problem is that the US political system can’t deal adequately with obvious problems until after there’s a major crisis. Then everyone whips out the talking points and pretends that labels like “keynesian” actually mean something.
No I don’t believe that recessions can be permanently avoided. We have to take our medicine once in a while.
But Bush, Obama, Congress all thought they could avoid a recession with bailouts and stimulus spending. Instead they made it much worse.
We also occasionally get sick – we can’t stay perfectly well every day of our lives. But it’s still a good idea to wash your hands and not drink poison.
Well, Matthew. you are right in some aspects. We here DO wait for a crisis. Even then, we often cannot act. We are engaged in a Cold Civil War. We are a house divided, and the divide is deep.
We already had things in place to prevent this sort of thing, but they were gutted under the Clinton administration. FHA lending standards were gutted. The CRA was strengthened. Glass-Steagall had key parts removed.
The government caused this.
Nah, really, I think we the evidence shows that, far from causing the problem, the government simply failed to prevent it. Greenspan didn’t want to regulate derivatives, the SEC’s been chronically underfunded for decades, bush apparently either wasn’t interested in taking advice, or wasn’t interesting in expending political capital on averting a disaster that might not happen on his watch.
I think the CRA claim’s been pretty well debunked. Honest. It just wasn’t a significant factor, and CRA-affected loans performed no worse than any other. If house prices keep going up, interest rates are low and if the risk can be hidden, then the only thing that prevents dodgy lenders from lending dodgy loans is the risk of getting caught. But nobody was looking. And you know what? They’ll KEEP not looking, and eventually it’ll happen again.
The bad loans were done because the dems in Congress passed a law calling for economic democracy, the insisted that a large percentage of all loans made had to be made to people with poor credit ratings who were living in poor sections of town.
No, they just weren’t. They really weren’t. That’s been thoroughly debunked.
The failure of the Keynesian model should be obvious to everyone, except people like Paul Krugman and Robert Reich who seem to think the problem is that the government just hasn’t spent enough.
Arguments about the success of “free market” strategies over dismal Obamanomics shouldn’t even have to be made.
However, in the ever increasing regulatory atmosphere, it seems that free market strategies are being strangled from every angle, so the question becomes can we even recover anything anymore resembling free market capitalism.
What the people voted for is not what they got. Everyone was so concerned about Bush being friends to big oil or whoever they were dreaming about at the time. This president has got One West Bank and all the wealthiest people in the USA calling the shots. Would Reagan have ever allowed the mortgage crisis to get in to the hand of a One West Bank. Never. The Resolution Trust Corp was above board (and governement cronies) to resolve the S&L crisis. Reagan knew the dangers of big government and the control by the rich. With the government backing the rich in the mortgage crisis it will only get worse for the little guy that voted for the community organizer.
What the Obama administration have failed to understand is that hiring another bunch of tax eaters does not expand the economy, it enlarges the deficit.
Ronald Reasgan’s spending spree worked because it invested in real industries and real jobs.
“Reagan’s policies created 10 times more jobs in the first 6 quarters after his recession ended than Obama’s.”
More nit-picking here – the quoted sub-title is somewhat disingenuous, as it presumes that the current recession has actually ended, and that it did so six quarters ago.
I don’t know of too many people who would agree with that sentiment.
Reagan wanted to make the USA better and stronger.
Obama wants to make the USA weak and beholden to the Gov. ( him ). All the while putting as much $ away as he can for his rainy day.( In favors of course )
I don’t think this argument holds any interest at all for the marxists. They don’t care whether an economic policy works or not. How would a good economy help their cause anyway? People aren’t angry when they are making money. Happy people don’t hasten change, they impede it.
The only reason they might tweak what they have been doing, which is working extremely well from their perspective, is if the rubes in flyover country are getting a little too worked up about things. Like last year when they had to jam in Obama’s generous tax cut over the objections of the Palinites. That soothed the savage beast a little bit. This year we might see some tax rebates thrown into the slaughter pit. Maybe another unemployment extension or two. That should be enough to give the yokels some bones to keep thier fingers off their triggers.
2012 is the big enchilada. They neeed the big brains all hands on deck working on the next big crisis, just in case they need it. Not too obvious, of course, and just big enough to convince a few more white women that only daddy bammy is going to take care of them.
Just history repeating itself.
Harding / Coolidge inherited a deeper recession than FDR. Compare Coolidge’s small government Roaring Twenties to FDR’s Great Depression. The numbers are even farther apart. But leftists hail FDR as a hero and an example to follow for some reason – and are still surprised by the results.
By actually comparing what works and what does not work is:
A) Racist
B) Homophobic
C) Violent rhetoric
D) Palin’s fault
E) All of the above
Nice work, Mr. Blumer. But, unless you incorporate vitriol and a visceral component in your writing, you’ll never appeal to the Left.
The Conservative audience can be very reticent, at times.
The names “Reagan” and “that one” (I can’t even write his name down, without having a bucket handy) don’t belong in the same sentence.
Tom notes: “Well over 20% of the 1.35 million private-sector jobs added in 2010 came from temporary help services, even though that sector is less than 2% of total employment.”
To me, this looks like a big, red flag. Businesses turn to Temp solutions when they want to reduce overhead, maintain flexibility, contain costs and limit commitment. Quickly, easily, with minimal cost, they can cut Temps loose should the economy or their specific industry dive south, slow more/again, or even develop a slight case of hiccups.
Private sector employers are sending loud, clear signals in a language this president cannot understand. They see an economic landscape littered with landmines – existing and threatened legislation, taxes, regulations and/or executive orders, coupled with rising inflation, reduced purchasing power and forced-purchase ObamaCare.
The POR team operates in a Dali-like landscape where ObamaCare (not jobs) is the first priority, a tapped-out government continues to spend, the debt ceiling is just a suggestion, and unemployment payments constitute economic policy.
I guess that’s not too surprising, when you realize the Chief Executive is also the ultimate Temp employee (part-time instructor, community organizer, short-term legislator, term-limited president).
…he has a weak spot for temps, especially of the illegal migrant, part-time worker type.
On a different subject, with temps in the upper 80′s today and a NorthEastern breeze from the Indian Ocean, it was a beautiful day to take a leisurely swim at Kilifi an idyllic resort East of Mombassa, Kenya.
A quick reminder, the recession Obama inherited from your man George was significantly worse than anything in the past 70 years. Far worse than Reagan’s economy. I guess we shall see what happens.
really? Perhaps you should do some reading.
Inflation was over 10% under Carter. Interest rates hit 20%. Mortgage rates were over 12%. Nobody could afford to buy a house. Unemployment was nearly twice what it was under Bush. Lines at the gas pump were over an hour long during parts of Carter’s term. Tax rates for average Americans could easily be greater than 50%. The top tax rate was 70%. Creating tax shelters was the only business that was booming. Those were also the years when people stopped buying American cars because they fell apart within a couple of years. Economically, the US was a banana republic.
You statement is surely the most ignorant one on this topic that I’ve ever heard. Truly bizarre. That a leftist could believe it is proof positive that the coup of the public school system is complete.
It is a little unfair to Obama sense his recession hasn’t ended and shows no signs of doing so.
But realistically Reagan couldn’t lose. His philosophy overall is based on a free people acting in their own best interest to benefit the whole. Obama’s philosophy is based on a handful of Ivy leaguers consolidating power for themselves regardless of what it does or means to anyone else.
It is the difference between a optimist and a narcissist.
“I’m sorry, but do you really believe that the financial fubar couldn’t have been avoided?”
Of course it could have been avoided; when president Clinton and congress rescinded Glass Steagal in 1999, it set the stage for Banks to loot their customers and loan each other funds to invest in derivatives and Junk bonds.
It is not rocket science; letting banks make up their own rules is a bad idea, and will always be a bad idea.
Another poster thinks the roaring 20′s was a good thing…the depression occurred as a result of free money policies in the 20′s, banks were lending against their own equity, which is what happened again after glass steagal was repealed in 1999…the free money policies and wild spending tipped the balance of the economy into recession / mild depression.
it was the perfect storm; wild spending in Iraq, free money policies, massive mortgage underwriting, etc, etc….it all came to a boil and taxpayers are the frog.
This too is nonsense propaganda.
The dominant reason for the economic crisis was the suicidal government decision to force banks to lend money to people who could not make the payments.
In addition, the government forced the banks to disguise the crime by packaging the bad loans in derivatives. Then the government further compounded the problem by having Fannie Mae back the worthless paper.
Private business acted completely rationally. Knowing that the government was backing the worthless loans, and with a gun to their heads to enact the lunatic policies, they stuffed their pockets with guaranteed profits. It made no sense for private business to point out the insanity of the governments dictates. When the Bush administration did so 23 times, the leftists made it federal case out of it. This is the only fault the Bush administration has in the matter. They should have overriden the screeching of the left and forced the situation to the ground.
Personally, I think the repeal of the Glass Steagel act was a bad move, but it had nothing whatsoever to do with the actual problem. Zero. Zilch. The actual problem is 99% the result of insane leftist policies and 1% the result of the Bush administrations refusal to force a reversal of the insanity.
Bush could not have overridden the Dems..
He needed them to keep funding the war. Good or bad, Bush had to throw them bones to continue the efforts in the fight against terrorism.
His only choice was to keep showing them the errors ( 23 times ) and hope their common sense would win over their greed.
Ugh. Nonsense. You’ve really drunk the kool-aid on this one.
If the only loans that went bust were CRA-related, it would have been a minor blip. If companies had been FORCED to lie about risks, then everyone would have known that, and banks would have taken it into account when regarding the mortgages them as assets. Clearly they didn’t know about it.
Now, let’s have some references from people who know about stuff, like numbers and things:
GWB appointee to the FDIC, Sheila Blair, says CRA had nothing to do with it:
http://www.fdic.gov/news/news/speeches/archives/2008/chairman/spdec1708.html
GWB economic adviser and bush-era reserve bank governor, randal kroszner says the CRA had nothing to with it, and (incidentally) that CRA-related loans were only a small fraction of the subprime loan activity in the first place:
http://www.federalreserve.gov/newsevents/speech/kroszner20081203a.htm
Aaron pressman from businessweek says the CRA had nothing to do with the subprime mortgage meltdown:
http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinvestment_act_had_nothing_to_do_with_subprime_crisis.html
Daniel gross from slate says the CRA had nothing to do with it:
http://www.slate.com/id/2201641/pagenum/all/
Robert gordon from the american prospect says the CRA had nothing to do with it:
http://www.prospect.org/cs/articles?article=did_liberals_cause_the_subprime_crisis
Luci ellis, from the bank for international settlements, says the CRA had nothing to do with it, that non-CRA lenders were more likely to write subprime loans, and it wasn’t even just a subprime mortgage crisis anyway – in fact, she lists a few much more credible reasons, which you’d do well to pay attention to:
http://www.bis.org/publ/work259.pdf?noframes=1
And, of course there’s that economics nobel-prize winning guy who reckons the whole CRA thing’s a complete beat-up. But nobody here likes him because he was mean to sarah:
http://krugman.blogs.nytimes.com/2009/11/02/cre-and-the-cra/
http://krugman.blogs.nytimes.com/2009/11/10/armey-of-ignorance/
A summary: CRA-regulated institutions didn’t actually (in practice) find CRA-related loans risky. They were generally profitable. But only a small fraction of subprime loans were actually written by the regulated lenders – the other ones were a bigger problem because they were completely unregulated, and far more predatory. And it wasn’t just subprime loans that went bust anyway. When housing prices fell, owners couldn’t get refinancing because they had negative equity, and the way US mortgages are structured, it was easier and cheaper to just walk away. The oversupply of empty houses then pushed prices down faster (and led to a rise in mosquito-borne diseases in california as backyard pools lost their chlorine).
Those are facts.
Gee, I had no idea the government and Paul Krugman are defending the CRA. Who could have imagined that.
But dont you have any quotes from Barney Franks, Chris Dodd, Maxime Waters, Jim Johnson or Franklin Raines. I thought Moveon had all that stuff on the shelf.
By the way, the other villain in the whole sordid episode was the fed. Keeping interest rates at rock bottom rates while the CRA demanded that loans be made to people who didnt even have jobs was kerosene on the fire. Greenspan should be in the same jail as the rest of the crew.
Of all the liberal idiocies, the CRA con and the aftermath has to rank in the top 10 crimes of all time. Is it higher than the suckling of Stalinist Russia, the leg spread for Fidel, the cynical destruction of the Black family, the decades long disaster created by the Great society, the Medicare fraud that is scheduled to end US, the Carter administration cluster, the elongation of the Great Depression by 10 years? Nobody knows for sure, but it sure is high on the list.
Never in history have more stupid people communally patted themselves on the back while their own little Lenins sneered at them behind their back. Of course, we can’t know for absolute sure that there werent more idiots in the USSR and Maoist China. Those idiots are all dead.
You’re just not interested in facts at all, are you? You can actually go through the numbers in those links and check them for yourself but you’re not going to. You just don’t care. Anyone or anything that might tend to undermine your (frankly wrong) argument can be dismissed without even looking because it’s obviously part of the vast, left wing conspiracy. A conspiracy that seems to have included the bush administration, incidentally. And then you have the chutzpah to claim it’s somehow MY fault that you choose to remain completely uninformed.
There actually are reasons for the sub-prime (et al) meltdown. They’re pretty obvious to anyone who’s bothered to look for the arguments on both sides and think for themselves. You don’t like those reasons though. You’re much happier thinking (or at least claiming) that it’s all carter’s fault … that a program that startedf in the 1970′s, that had no deleterious effect for 30 years, that wasn’t a factor in at least two very serious previous recessions, only became the single most important factor in the last 5 years and suddenly destroyed everything.
Why didn’t a subprime meltdown happen during bush’s post-2001 recession? At least answer me that. That was a pretty serious knock to the US economy (post 9/11 and SARS) and yet no financial meltdown. Why was that? Enlighten me with your extensive fact-based understanding of economics.
I don’t think you’re even interested. You don’t care what the facts are. You just want to barrack for the team, no matter what. You ignore the facts and just call me a stalinist, a sneering lenin, collectively stupid. Way to go.
Now, I would have at least gone through some of those links and refuted a few of the claims specifically. Look around, you’ll see that’s what I do. Maybe a modicum of effort might make your position less laughable. Or … you can just post some more abuse. That’s what you guys do best.
I have read thru the articles you linked, Matthew. It would be off-topic to get too far into debating them. I will just take up one fundamental concept used in the arguments.
50% of the institutions were not subject to the CRA, so therefore, the CRA did not cause it.
Nonsense. The government sets the rules by which everyone plays. When it gets involved, it distorts the market. 50% were not subject, but the other 50% were! How your competitors act in the marketplace affects how you must act. You have to be able to compete. Furthermore, when the government is basically giving away money, folks are going to take it.
When the government passed the CRA, they were trying to do “good”. Their actions had unintended consequences. You must look at the unintended consequences to know if the CRA had any effect on the financial collapse, and the answer is, of course it did. It was passed in ’77, and strengthened in ’95. ’95 is when the bubble began, because that is when the intervention became big enough to distort all the markets. It is just hard to nail down, because that was also the dot.com era, also affecting Real Estate.
“50% of the institutions were not subject to the CRA, so therefore, the CRA did not cause it.”
I’m sorry, but WHA?!?!? Is THAT all you got from those articles?
Other people should go read them for themselves. I hope that others will notice things like
- CRA-regulated loans were not considered risky by the lenders, and were profitable.
- CRA-regulated loans performed no better or worse than normal non-subprime loans
- CRA-regulated loans were a tiny fraction of the subprime market, the rest of which loans were written by non-CRA-regulated lenders.
- Those lenders wrote those loans entirely of their own free will.
- It was THOSE loans that constituted the bulk of the subprime meltdown.
- And it wasn’t just a “subprime” meltdown anyway.
Those facts are all contained (with numbers and references) the articles I linked to.
Matthew loses all credibility, as if he had any in the first place, by blindly, and proudly stating his conviction of an Obama re election. Too many states that Obama won in 2008 will certainly go the other way, as there are new Republican Governors in several of those states now.
After a week off for the Arizona disaster, the House is coming back next week with their second deficit cut bill. They will be doing this weekly for awhile. Bills are being posted online, for real this time, unlike the previous progressive leaders. The american people are behind the new Congress. Federal budgets going forward will be reduced from them massive budgets from he recent past.
Livng thru the Carter and Reagan administrations, I can attest that the transition from Bush to Obama, has been a disaster, while the Carter to Reagan transition really was, “Morning in America”.
“Matthew loses all credibility,”
Bannish heeeem!
as if he had any in the first place
Oh, you don’t mean that.
by blindly
Ah, that explains the tripping over and stuff.
and proudly stating his conviction of an Obama re election. Too many states that Obama won in 2008 will certainly go the other way, as there are new Republican Governors in several of those states now.
Yes, well, we know what yogi berra said about predictions, don’t we (or you will a few moments after you google it). That’s the nature of predictions – you’ll just have to wait and see.
Talking to a troll is like talking to a tree. Only a tree doesn’t get paid to go on conservative websites to lie.
I agree with Matthew when negating, ‘..loans made to unqualified people in poor parts of town..’.
Actually, we’ve witnessed here in Northern VA middle-upper middle class neighborhoods/counties go bellyup for giving home loans to said unqualified minorities.
Prince William, Prince George Counties for starters. Montgomery County, MD doing their best impression of the, ‘St. Louis white flight’, due to draconian measures (forced alternative energy taxes, ‘local’ upcoming DREAM Act vote, 67% increase of taxes on natural gas and _% increase on oil reliant energy etc.,). Viva la diversity.. for all but Anglos!
“proreason
This too is nonsense propaganda.
The dominant reason for the economic crisis was the suicidal government decision to force banks to lend money to people who could not make the payments.
In addition, the government forced the banks to disguise the crime by packaging the bad loans in derivatives. Then the government further compounded the problem by having Fannie Mae back the worthless paper.”
Pro reason, Do you work in the Banking Sector?
Since 1933 Glass stegal prevented banks from selling mortgages to consumers and then packaing the mortgage and sell as derivatives to investment banks, which the banks also had interest in.
In 1999 congress repealed it, allowing Banks to once again go on wild investment programs that spiraled into massively overleveraged instruments that could only collapse under their own weight, as they did in the great depression.
You merely need to google “Glass Stegal mortgage meltdown” to educate yourself how Banks lobbied congress for 30 years to repeal the restrictions placed on them in 1933 and prevented the looting of the American Taxpayer. Once these restrictions were lifted banks again sold higher and higher risk instruments fully backed by unknowing US Taxpayer
Govt forced banks..?? This is a fantastical statement. It was Banks that lobbied congress for decades to repeal glass stegal to allow them access to securities markets previously restricted for good reason.