Wednesday, September 08, 2010

Part of the Problem

There's a lot of discussion about the economic problems we're having, and Junior asks a cogent question in comments.
So did Obama cause this economic disaster we're having or did he inherit it and is desperately trying to fix it?
That's a good question.

Most of our problems today came from the Bush era. Not that G.W. Bush was responsible, but they happened under his watch. As I understand the current problem, they started several decades ago, when the Congress forced banks to give loans to people who couldn't afford to pay for the houses they were buying. FOr a good history of the problem, go here, and see that there is enough blame to go around. The guy who was supposed to be in charge of oversight was Barney Frank, who at the time was actually sleeping with an executive from the agency he was in charge of overseeing.

G.W. Bush tried to warn Congress that the housing bubble was unstainable, but they failed to do anything about it, and in fact, Barney Frank continued to defend Fannie Mae until the whole world was laughing at him. If, in fact, the blame can be laid at Bush's feet, it is only that he didn't sound the alarm forcefully enough. The problem lies with Congress, and that's why I don't vote for incumbents any more. They all share the blame, severally and as a group.

When the housing bubble collapsed, Congress tried to prop it up. We poured billions of dollars into unsustainable loans that should have been allowed to default. We poured more billions of dollars into companies (like GM and Dodge) that were suffering from building products that the public didn't want to buy at the prices they wanted to sell them. Then we had the "Cash for Clunkers" program which didn't really turn the car market around, but only pushed sales forward a couple of months, and totally devastated the used car market.

On top of it all, government spending went crazy. Everyone bemoaned the Bush deficits, but the simple fact is that Obama makes Bush look like a piker. The most current charts I can find show that under Obama, deficit spending has exploded.

Now, it's fashionable to lay that on the cost of the Iraq War, but the simple fact of the matter is that the cost of the stimulus under President Obama dwarfs the cost of the Iraqi War.

Add in all the increased government regulation under the current administration and the projected costs of National Health Care, and you have a business climate where uncertainty reigns. Business doesn't know what Obama is going to do, so they're hedging their bets. Business are closing, employers are laying off people.

Today, the President outlined another huge spending plan, when it's becoming increasingly apparent that government spending is killing the economy. He intends to spend another $50+ Billion, when we don't have that money to spend. Even Congressman Dennis Kucinich, a huge Obama supporter, said today that the middle class is in real trouble.

President Obama has been in office now for almost two years. This economy is his, for better or for worse.


Bob@thenest said...

Well said, PawPaw. That's how I see it, too.

BTW, if Absinthe doesn't kill you, it'll at least screw up your taste beds for a while. I think there's a reason it looks like Antifreeze. Phewtttt. Yep, stick with the burbon!

Termite said...

BHO didn't cause the least not most of it. Neither did the Shrub, at least not all by himself.
The problem is that BHO's fix is all wrong. He's borrowing from FDR's play book, and we know how well that didn't work.

I'm not an economist, but I do know the following:
#1. You don't lend money to people that you know can't pay it back.
#2. You don't throw good money after bad.
#3. If you spend more money than you take in, it's called deficit spending, and increases the total debt.
#4. If government prints a bunch of money when there is not an increase in the total number of goods and services, it devalues the currency.

J said...

Termite, FDR's plan DID work. The Great Depression ended, and the USA didn't collapse.

Ess! said...

Sounds alot like the American History lessons for 1868, we are having in class. And history seems to be repeating itself. How many goverment workers are needed to take care of 30,000 contracts, 29,000! And how many foreclosures will it take before, they realise that the middle clas is in the same fix they were in over a hundred years ago. I may not have the facts completly write, but I think I am close!!

Pawpaw said...

Actually, old friend, there is some rather stark disagreement among academics about whether the New Deal worked. It had some successes, and most students learn that we were turning the corner in 1933-34. However, unemployment remained stubbornly over 15% until we became involved in WWII.

Full employment during WWII ended the Depression. Most economists peg full employment at 5%, because even during prosperity, some folks are always moving between jobs.

At the current time, small business is retrenching. Small business is the powerhouse of our economy and they simply can't afford to hire people under the current uncertainty. What small businessmen are seeing is a burgeoning government regulation industry, a huge National Healthcare bill, and increased taxes on business and personal income. It doesn't make any sense to hire under those circumstance.