Posts Tagged ‘Obamanomics’
People avoid silence because they’re afraid of what they might hear. Although we value our freedom of speech, polite conversation in America is subject to one crushing rule, “Don’t talk about religion or politics!” Most of us were raised with this stifling warning in our ears. The purpose was to avoid arguments at the dinner table but the result is a population unconcerned in the two subjects affecting life the most. I can only talk about the weather for so long which displays the wisdom of memorizing sports stats and watching American Idol. With the two biggest topics off the table we’re faced with either trivial pursuit or silence. Bored with the weather and having neglected my memorization and viewing options I propose a topic to stimulate vigorous conversation without causing any bickering: economics.
Barry, Harry, and Nancy knew they had to take us through-the-looking-glass in four short years. With no effective break on their power for the first two years, Congress moved so fast their yesterday became our tomorrow. That tomorrow is now today. The ruling party rammed their agenda through without one opposition vote. Every revolution needs an emergency to justify radical surgery and the economy is the emergency available. Consequently, these descendants of FDR and LBJ shoved a raw deal down the throat of a great society.
Almost everyone is in agreement that the first stimulus failed. According to MSNBC, “In January, Obama’s economic team predicted unemployment would rise no higher than 8 percent with the help of $787 billion in new government spending.” However, according to the LA Times the unemployment rate in May reached a 25-year high of 9.4 percent. The President may see glimmers of hope but Say-it Ain’t-So Joe said he couldn’t rule out a second stimulus telling us the administration which ran on the slogan, “The worst economy since the Great Depression” misread how bad the economy was. How bad is it? What’s worse than the Great Depression? What’s their answer to this baddest of bad economies? What’s their Plan B? Try Plan A again, and again, and again? I think what our leaders need as they drive the largest economy the world has ever known over the cliff is Economics 102, Macroeconomics or how an economy works.
Most people, including the best-government-money-can-buy, look at the economy as if it were controlled by magic having no idea where the rabbit goes or where the doves come from, and since I doubt I’ll convince any of our all-knowing leaders to enroll in freshman macroeconomics I want to offer a crash course in Economic Reality.
- Government regulations distort markets and inflate bubbles.
- Every generation experiences at least one bubble and at least one bust.
- Every bubble bursts.
- Every burst bubble is followed by a panic.
- Panics inspire economic regulations.
- Economic regulations reflect political ideologies not economic realities.
- Economic regulations always regulate the excesses of the last bubble.
- Economic regulations are always blind to the excesses of the next bubble.
- Since consumption is the purpose for production any economic regulation that ignores this fact always leads to the misapplication of resources and the misdirection of effort.
10. Depressions are recessions with government help.
11. It is impossible to spend yourself into prosperity.
12. It is impossible to tax yourself into prosperity.
13. Higher taxes lead to smaller revenue and black-markets.
The New Economy leads straight to the Second World, from freedom to conformity from capitalism to Obamanomics. Instead of a fair race with the rapidly transforming economies of Asia, America runs hobbled like a child in a three – legged race strapped to the stiff-legged ideas of collectivism.
Why would our leaders want us economically hobbled? What would they gain if we fall into the swamp of poverty engulfing most of the world? Wouldn’t they be right there with us? Go to any Second or Third World country and you’ll see the rich and powerful behind walls in gated-communities where they live in the First World while everyone else sits in the dust eating leaves. In America, we avoided this fate with the growth of a massive middleclass. Under assault with stagnant wages, rising prices, and disappearing jobs the middleclass is being outsourced. How is this being accomplished?
Remember the mantra of the Clintons? “It’s the economy stupid!” That’s still the Liberal’s strategy, riding like a flea on a rat cradle-to-grave social engineering in the guise of economic policy. The Progressives drive the economy into the ditch all the while saying it is someone else’s fault and shrieking that we need more of what is causing the problem: bloated government and runaway spending. A lack of basic economic understanding is destroying the greatest economy ever forged. A zero sum game causes divisions and arguments about who gets what when we used to all strive for the same thing: success.
America is splintering as the melting pot becomes a smelting pot. What is its cause? The divisiveness of class-warfare encouraged by the only people who win through America’s split between red and blue, rich and poor, us and them. Who are they? If it isn’t us I guess it’s them.
Dr. Owens teaches History, Political Science, and Religion. He is the Historian of the Future @ http://drrobertowens.com © 2013 Robert R. Owens email@example.com Follow Dr. Robert Owens on Facebook or Twitter @ Drrobertowens / Edited by Dr. Rosalie Owens
Last Friday, July 27, I was watching the CBS Evening News and copied down a number of statistics they presented. In the past, I’ve always considered CBS to be a typical liberal pro-Obama media outlet. However, when they reported on the current state of the economy and how that could be affecting the presidential campaign, I was surprised at their honesty in reporting just how bad things are.
They started out talking about the slowdown in economic growth. In the first quarter of this year, the growth was at 2.0%. The second quarter of the year saw the growth slowdown to only 1.5%. The problem is that the economy needs a minimum of 2.0% growth to create job growth and maintain consumer confidence.
On the topic of job growth, they pointed out that in the first quarter of 2012, on average there were 226,000 jobs created each month. However, in the second quarter, that average dropped drastically down to only 75,000 jobs created per month.
Mesirow Financial Chief Economist Diane Swonk commented about the economy saying:
“Right now we have the highest risk of a second recession we have had since the financial crisis began.”
“We have subpar growth and a vicious cycle of hesitation and uncertainty because no one’s quite sure what’s going to happen next.”
“It’s peoples’ expectations about the future that are the most damaged right now.”
The CBS report also showed startling graphics that tracked the broadest unemployment figures for the past three months which includes those out of work, forced to work part time only and those who have quit looking for work. In April, this broader and truer unemployment figure was around 14.5%. Three months later that figure had climbed to 14.9% unemployment.
On the converse, consumer confidence dropped at the same rate the unemployment figure rose. They went on to report that many employers are not hiring because they do not want to go through another round of layoffs if the economy continues to fail as it seems to be doing.
A CBS News/New York Times Poll on the economy showed just how poor consumer confidence is. When asked how they felt the condition of the economy was, 27% said it is good and 71% said it is bad.
Lastly, they reported that in April, Barack Obama’s job approval rating was at 48%. In July, his job approval ratings had fallen to 44%. In the 32 years of CBS tracking presidential job approval ratings, no sitting president has won re-election with such low approval ratings.
The overall picture of the economy they presented is bleak and dismal at best. The United States is not easing back into another recession, we’re rushing towards it. From everything I’ve been seeing over the past few years, I believe this recession will be much worse than the first one a couple years ago. As matter of fact, if something isn’t done soon to counter the three and half years of disastrous economic policies of Barack Obama, I believe the looming recession could actually be so bad that it will become a second Great Depression.
We need a business man at the nation’s helm to turn the economy around. Someone with the background of running a successful business and knowing how and what to trim and cut in order to keep the business of the nation solvent is what America desperately needs. Obama has failed and failed big time. A second term with him will mean certain economic meltdown and collapse. America desperately needs a successful businessman like Mitt Romney if there is to be any hope left for us.
Read more: http://godfatherpolitics.com/6400/obamanomics-on-verge-of-another-recession-or-worse/#ixzz22ELpA6Yb
Prior to President Barack Obama’s marathon 54 minute speech in Ohio today, the Obama campaign sent our several statements promising the speech would be a major address framing the campaign going forward. Despite the hype, the speech was mainly a rehash of themes and ideas from the president’s recent stump speeches and his remarks were widely panned as overly long by the political press corps.
In the speech, President Obama outlined his view that this election is a choice between “two fundamentally different views of which direction America should take.” He characterized Mitt Romney’s vision as being the same as the “policies of the last decade,” specifically deregulation and tax cuts for the wealthy while he described his own “vision for America” as boiling down to five things: “Education. Energy. Innovation. Infrastructure. And a tax code focused on American job creation and balanced deficit reduction.” President Obama also stressed that the economic crisis began during the Bush administration and that is “started growing again” after he took office and has since “continued to grow.”
All of these points have already been featured in the president’s other recent speeches. Between the pre-speech hype from the campaign, the lack of new material and the overall length of the speech reporters were clearly dissatisfied with end result. Read on for a sampling of Tweets from the political press slamming the president’s speech.
Before the speech was over, MSNBC’s Mike O’Brien begged the president to stop.
Posted on January 25, 2012 at 8:42am by Becket Adams
This photo provided by CBS Sunday, April 25, 2010, shows Lawrence Summers, former Director of the National Economic Council as he makes a point on the Sunday talk show “Face The Nation” in Washington, April 25, 2010.
Columnist Ryan Lizza’s in-depth New Yorker article (“The Obama Memos”) examines some of the strategies and reasoning behind the Obama administration’s handling of the U.S. economy. But unlike most op-eds, his column involves more than just speculation and conjecture. As one of the article’s chief resources, Lizza uses a 57-page, “Sensitive & Confidential” memo written by the economist Larry Summers in 2008.
For those unfamiliar with that name, Larry Summers is the former Director of the United States National Economic Council for President Obama. And although he resigned from this position in November 2010, as the White House’s chief economist he “played a leading role in crafting the administration’s interventions in the economy,” according to the Wall Street Journal.
Summers’ influence being understood, this “sensitive and confidential” memo helps explain why certain economic strategies and initiatives have been adopted, and in many cases maintained, by the Obama administration. But it does a little more than that: the memo also sheds some light on why the administration has failed to revive the economy.
Summers’ 57-page memo is “striking for two reasons,” writes Dean Baker of The Guardian. “First, it…showed the economic projections that the administration was looking at when it drafted its stimulus package. These projections proved to be hugely overly optimistic.”
Many critics would agree.
The other striking part of this memo is the concern with “bond market vigilantes”. The memo discusses the need to focus on the medium-term deficit with the idea of reaching deficit targets by 2014. The highest deficit target listed in the memo for this year was 3.5% of GDP. The memo also includes calculations with a deficit target of 2.5% of GDP, and a balanced budget.The deficit for the fiscal year that ended last October was 8.5% of GDP. Depending on how the payroll tax debate, the extension of unemployment benefits and a few other issues get resolved, the deficit is not likely to be very much lower in 2012.
This means that getting from a 2012 deficit near 8.0% of GDP to even the 3.5% target for 2014 would require some very serious budget cuts in an economy that will still be suffering from massive unemployment. The difference between a budget deficit of 8.0% of GDP and 3.5% of GDP is equal to almost $700bn annually.
So what does this mean?
Larry Summers and Barack Obama.
“In short, the Obama administration made plans that were quite obviously based on a far too rosy view of the economy,” Baker concludes. “While this favorable assessment was the prevailing view at the end of 2008, what is inexplicable is why the administration never appears to have strayed from its original path – even when it became clear that the economy was doing far worse than projected.”
Just how poorly did Summers and the Obama administration “fail to grasp” the seriousness of America’s economic situation?
For an answer to this question, one can turn to James Pethokoukis of The American, the online magazine for the American Enterprise Institute.
The following are the most “stunning revelations” about what President Obama’s economic team was thinking as the financial crisis was blowing up (as compiled by Pethokoukis, with quotes from the 2008 memo itself):
1. The stimulus was about implementing the Obama agenda.
The short-run economic imperative was to identify as many campaign promises or high priority items that would spend out quickly and be inherently temporary. … The stimulus package is a key tool for advancing clean energy goals and fulfilling a number of campaign commitments.
2. Team Obama knows these deficits are dangerous (although it has offered no long-term plan to deal with them).
Closing the gap between what the campaign proposed and the estimates of the campaign offsets would require scaling back proposals by about $100 billion annually or adding new offsets totaling the same. Even this, however, would leave an average deficit over the next decade that would be worse than any post-World War II decade. This would be entirely unsustainable and could cause serious economic problems in the both the short run and the long run.
3. Obamanomics was pricier than advertised.
Your campaign proposals add about $100 billion per year to the deficit largely because rescoring indicates that some of your revenue raisers do not raise as much as the campaign assumed and some of your proposals cost more than the campaign assumed. … Treasury estimates that repealing the tax cuts above $250,000 would raise about $40 billion less than the campaign assumed. … The health plan is about $10 billion more costly than the campaign estimated and the health savings are about $25 billion lower than the campaign estimated.
4. Even Washington can only spend so much money so fast.
Constructing a package of this size, or even in the $500 billion range, is a major challenge. While the most effective stimulus is government investment, it is difficult to identify feasible spending projects on the scale that is needed to stabilize the macroeconomy. Moreover, there is a tension between the need to spend the money quickly and the desire to spend the money wisely. To get the package to the requisite size, and also to address other problems, we recommend combining it with substantial state fiscal relief and tax cuts for individuals and businesses.
5. Liberals can complain about the stimulus having too many tax cuts, but even Team Obama thought more spending was unrealistic.
As noted above, it is not possible to spend out much more than $225 billion in the next two years with high-priority investments and protections for the most vulnerable. This total, however, falls well short of what economists believe is needed for the economy, both in total and especially in 2009. As a result, to achieve our macroeconomic objectives—minimally the 2.5 million job goal—will require other sources of stimulus including state fiscal relief, tax cuts for individuals, or tax cuts for businesses.
6. Team Obama wanted to use courts to force massive mortgage principal writedowns.
The next step in the housing plan is responsible bankruptcy reform along the lines of the Durbin bill you cosponsored. This would allow bankruptcy courts to write down the principal of primary residences to the current market value. We recommend announcing this reform to begin immediately following the close of the enhanced Hope for Homeowners period.
7. Team Obama thought a stimulus plan of more than $1 trillion would spook financial markets and send interest rates climbing.
To accomplish a more significant reduction in the output gap would require stimulus of well over $1 trillion based on purely mechanical assumptions—which would likely not accomplish the goal because of the impact it would have on markets.
8. Greg Mankiw, economic adviser to Mitt Romney, was dubious about the stimulus.
Greg Mankiw is the only economist we have consulted with who refused to name a number and was generally skeptical about stimulus.
9. But the Fed was a stimulus enabler.
Senior Federal Reserve officials appear to be of the view that a plan that well exceeds $600 billion would be desirable.
10. IPAB was there at the very beginning.
There are two possibilities for making tough decisions on the long-run budget, which could be done either separately or together: creating an executive-branch “health board” (which focuses on one part of the issue) and a Congressionally chartered commission (which could focus more broadly).
11. The financial crisis wasn’t just Wall Street’s fault.
A significant cause of the current crisis lies in the failure of regulators to exercise vigorously the authority they already have.
Perhaps more unsettling than Pethokoukis’ list is the fact that the Obama administration has done very little to update any of these ideas. It’s as if Summers set the tone in 2008, and nobody has looked back since.
Therefore, given what some have called a naïve (if not willfully ignorant) handling of America’s economic crisis (based on just these eleven examples), is it any surprise that Obama administration has been set on all sides with severe criticism? Consider from just one side of the political spectrum, the conservative commentators who, although having once possessed “a surprising degree of hope and good cheer” for his presidency, have denounced Barack Obama and his administration as abject failures:
In 2009, the president was a dinner guest in the home of conservative commentator George Will, according to Lizza. By 2011, Mr. Will had declared President Obama a “floundering naïf” and someone advancing “Lenin-Socialism.”
In 2009, Fox News commentator Charles Krauthammer wrote that Obama could be “a president with the political intelligence of a Bill Clinton harnessed to the steely self-discipline of a Vladimir Putin” who would “bestride the political stage as largely as did Reagan.” By 2011, Mr. Krauthammer had written the president off as “sanctimonious, demagogic, self-righteous, and arrogant.”
In 2009, the economist Larry Kudlow claimed that the president loved “to deal with both sides of the issue,” when it came to business and the economy and that he “revels in the back and forth. And he wants to keep the dialogue going with conservatives,” according to Lizza. By 2010, Mr. Kudlow had accused President Obama of presiding over a government of “crony capitalism at its worst.”
In 2009, while commenting on the violence set off by Iran’s rigged elections, the supposed “Reaganite” Peggy Noonan gushed “Mr. Obama was restrained, balanced and helpful in the crucial first days, keeping the government out of it.” By 2011, Miss Noonan had declared the president “a loser.”
Given the fact that the Summers memo only confirms what many these critics had already feared (i.e. that the Obama administration is woefully incompetent in regards to dealing with the U.S. economy), perhaps their “over-the-top” criticism isn’t that far off the mark.
A two-year tax reprieve is better than current law but far from ideal.
Does President Obama like or loathe the two-year tax deal he has struck with Republicans? It was hard to tell from his grudging, testy remarks Monday and yesterday, but perhaps that’s because he realizes he is repudiating the heart and soul of Obamanomics as the price of giving himself a chance at a second term.
In accepting the deal to cut payroll and business taxes and extend all of the Bush-era tax rates through 2012, Mr. Obama has implicitly admitted that his economic strategy has flopped. He is acknowledging that tax rates matter to growth, that treating business like robber barons has hurt investment and hiring, and that tax cuts are superior to spending as stimulus. It took 9.8% unemployment and a loss of 63 House seats for this education to sink in, but the country will benefit.
In this sense, the political symbolism is as important as the policy. Mr. Obama is signaling that businesses must be encouraged to make profits again so they can hire more workers, that “the rich” he so maligns should be able to keep more of what they earn, and even that wealth built up over a lifetime shouldn’t be confiscated wholesale at death. In policy if not in Presidential rhetoric, class war and income redistribution are taking a two-year holiday.
The tax deal is at best a transition from the failure of Obamanomics to what we hope is a better growth agenda.
This is not to say the deal is optimal for economic growth, and Republicans should not pretend it is. A two-year reprieve is far better than an immediate tax increase amid a still fragile recovery, but it also means that the policy uncertainty is carried forward. In the Keynesian universe, “temporary” tax cuts are virtuous because they stimulate immediately while ostensibly allowing government to reclaim the revenue later when the economy is stronger.
In the real world, businesses make investments based on the estimated return on capital over time, including the expected tax rate. What matters is the overall cost of, and return on, capital. The temporary nature of the tax cuts will provide less incentive to invest than would permanent reductions in the cost of capital. (See Messrs. Cooley and Ohanian nearby.)
The provision to allow business a 100% expensing deduction for 2011, and 50% in 2012, will help growth in those years. But it will do so in part by pulling investment forward from 2013. This is good for President Obama’s re-election chances, but not so good for increasing the permanent level of business investment.
The same goes for the temporary cut in the payroll tax in the name of encouraging more hiring. The one-year cut to 4.2% from 6.2% in the employee portion of the Social Security tax increases the incentive to work. Because it doesn’t favor some workers over others, it is also superior to the tax credits that Democrats wanted. But the proposal does nothing to reduce employer costs, even as ObamaCare is raising those costs as its mandates and regulations take effect.
This incentive to work also conflicts with the disincentive to work provided by another extension in jobless benefits. The deal’s 13-month extension will cost taxpayers about $56 billion. As economist Larry Summers noted before he joined the White House, every jobless person has a “reservation wage,” or the minimum wage he’ll accept to take a job. The jobless rate will thus stay higher for longer as benefits induce some people to hold out for a better job than those that are available.
Another half-victory is the provision to set the estate tax at 35%, with an exclusion of $5 million. The rate was set to return to 55% with a $1 million exclusion on January 1, and Mr. Obama had wanted 45%. While the 35% rate also lasts only two years, the level of bipartisan support will make this rate politically difficult to increase even if Mr. Obama wins re-election. Meanwhile, Republicans can continue to campaign for repeal of this immoral tax on a lifetime of thrift.
Should Republicans have held out for more, since they would return in January with a stronger position? We wish they had won a longer extension, kicking the next possible tax hike further into the future. As it is, Mr. Obama made clear on Monday that he’ll try again to raise taxes in 2013, figuring he’ll be politically stronger if the economy improves. The growth policy victories here are partial and temporary.
Yet this deal is superior to anything we could have imagined six months ago. Much credit goes to Mitch McConnell and Senate Republicans for holding together against the class war attacks of Chuck Schumer and other Democrats. By holding firm, they divided the opposition. This proves again that Republicans win the economic debate when they make the case for lower taxes for everyone in the name of faster growth and job creation.
They should nonetheless not advertise this deal as an economic panacea. It is at best a transition from the failure of Obamanomics to what we hope is a better growth agenda when it expires in two years. GOP Presidential candidates in particular can explain why this deal improves on the last four years but also where it falls short and how to restore the prosperity of the 1980s and 1990s. Tax reform is one promising area for Republicans to tackle in the wake of endorsements by the deficit commission and Mr. Obama’s own economic advisory group.
As for Democrats, many and perhaps most in Congress will oppose this deal as an ideological betrayal by Mr. Obama, but it is really an admission of reality. Democrats lost the election because their economic policies failed. Their caterwauling now is mostly short-attention-span theater for the MSNBC crowd. Mr. Obama’s heart is still with the left, and he’s making it very clear that he’ll return to fighting to redistribute income in 2012, but for now he had to dump the Democrats to save his Presidency. As he likes to say, elections have consequences.