Sunday, July 12, 2009

Time Is On Our Side

Just clearing up a couple of memes circulating through the politicos and the media:

1) the economy is generally President Obama's fault
2) the stimulus is not working because unemployment is still increasing

Ipso facto, President Obama's economic policies are hurting, rather than helping.

This is a dubiously far-fetched connection being purported by the talking-heads whom would like to see President Obama fail. Which, of course, is the main reason they are pushing such an unfounded storyline.

For starters, let's all remember Obama has been in office 6 months. Upon entering office he was handed the largest deficit in U.S. history, two wars, a collapsing financial system, rising unemployment, and a host of other White House scandals to clean up.

When George Bush took office the unemployment rate was 4.2 percent, when he left it was 7.2 percent. This is a 42 percent increase. I note this because David Gregory, on Meet the Press, was implying to Charles Schumer than the stimulus was a failure because of an increase of 32 percent in the unemployment rate since Obama took office. The difference - Bush was handed a surplus and a economy that was very manageable. Obama walked into the Titanic. [Although, according to BLS data, January unemployment was 7.6 percent, June finshed at 9.5, which is a 25 percent change. The 32 percent number seems pulled from thin air.]

National debt under George W. Bush increased from $5.7 to $10.6 trillion, a 46 percent increase. The average premium for family medical coverage increased from $6,230 to $12,680, a 51 percent increase. Americans in poverty under the Bush administration increased from 31.6 million to 37.3 million, a 15 percent increase. The U.S trade deficit, under George's guidance, increased from $362 billion to $688 billion, a 47 percent increase.

A Center for Economic and Policy Research report, Are you better off now than you were 8 years ago?, dissects the many failures of the Bush administration in-depth.

Andrea Mitchell also pointed out, on Meet the Press, that Ronald Reagan's approval rating in 1981 was the same as Obama's is now, and the unemployment rate in 1981 was 11 percent. But the country realized change takes time, so they gave ole' Ronnie a chance, and he was allowed to steer policy over a period of time [it should be noted Reagan's supply-side and tax-cutting policies are different than the Obama policies and approach to economics]. The fact that Reagan's policies were such failures - increasing debt, deregulation, privitization, more power to the financial sector, lower corporate taxes, etc. - should reinforce Obama's vision to restructure our society more equitably, be given our full support, and have the time-allowance to undo 30 years of supply-side, deregulatory debacles.

Also, the "bailout" process began under George W. Bush. After years of allowing their cronies to misappropriate gains from the economy, and in the process of destroying it, even the Bush administration knew action was necessary to try and correct things, or at the very least, stop the bleeding.

This wasn't muslim/socialist Obama entering office with dreams of nationalization. [Aside - could the Republicans be any more demeaning, racist, childish, and offensive in their behavior and their tone in these policy debates?]

Economic instability and volatile employment will prevail until the output gap is corrected. Stabilizing the enormous financial mess we find ourselves in will take some time. To imply otherwise, one is either a Pollyanna or deliberately disingenuous. Basically the government needs to step in to fill the decline in demand from the private sector and from consumers. Paul Krugman warned, in the planning stages during Obama's initial round of stimulus, that the stimulus was insufficient. Therefore, the stimulus has only established a floor - we're not falling as fast as we were - but we've not significantly closed the gap.

The only reasons Republican don't like this publicly visible payment from the government to private business is because there are strings attached (although not enough in my opinion). The government can dictate Boards, compensation, and actually have a say in how these companies operate. [They've actually had this power all along - especially with the ability to charter corporations - they've just chosen not to exercise it and have allowed the corporate community to regulate itself.] If you want your risk-taking, mismanaging ass to be bailed out, you've got follow our rules. Republicans prefer to be able to pay-off their cronies through tax breaks and other non-transparent activities. They like pilfering money from the government, they don't like the government "regulating" acceptable uses for the spending.

So, to recapitulate, this economic disaster of epic proportions was a legacy, first and foremost, of Ronald Reagan, supported by Bill Clinton, and put on steroids by George W. Bush. And, it's going to take time to return to normalcy. Recession and near-Depression conditions do not turn around in a year. To suggest otherwise reveals a complete ignorance of economic history.

For Further Reading:
Debunking The Reagan Myth
Finance and Stability
Financial Crises
Financial Crisis
Manias, Panics, and Rationality
Noam Chomsky on Reagan's Legacy
Reagan's Legacy
Ronald Reagan
Ronald Reagan's Legacy
Ronald Reagan's Legacy
The Minsky Moment

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