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Don't Blame Bush: This is Obama's Economic Depression

Politics / US Politics Sep 05, 2011 - 06:50 AM GMT

By: Mike_Whitney

Politics

Best Financial Markets Analysis ArticleThis is Barack Obama's economy now. George Bush can no longer be blamed. And if the economy dips back into recession--as it most certainly will--then that will be Obama's fault, too. Because it's Obama's fiscal policies that are driving the economy back into the ditch. This is no small matter, because Obama's failure will likely result in political change that will deliver the White House to the GOP in 2012. Then the deficit hawks will control both houses of congress and the White House, and they will slash spending and push the economy into another Great Depression. This is not speculation. This WILL happen. Obama has made sure it will happen by shrugging off the warnings of every competent economist in the country, all of whom have said repeatedly that we needed more stimulus to lower employment, to reduce the output gap, to increase GDP, and to put the economy back on track.


Now--according to the Bureau of Labor Statistics (BLS)--the economy is producing no new jobs. Obama's policies are producing ZERO JOBS. Let that sink in for a while.

At the same time, GDP is sputtering below one-half percent for the first 6 months of 2011 and the output gap has reset at a level that will cost the country 5 trillion dollars in lost production in the next 4 years.

Is it any wonder why consumer confidence is in the dumps and everyone is so pessimistic about the future? It's because there is no future, Obama has made sure of that.

The economy is dead. That's what it means when there's no growth and no new jobs. How would you describe it?

Obama had the economy going in the right direction. When he took office he already had his economics team in place and they quickly implemented his $787 billion fiscal stimulus plan just a month after he was inaugurated. The country was losing 750,000 per month, the stock market was plunging, and GDP was deep in in the red. Exports, retail sales, manufacturing and consumer spending were all falling faster then they had during the Great Depression. But the stimulus turned things around, and in just 6 months, the hemorrhaging of jobs slowed to a trickle and the economy returned to positive growth. By the 4th Quarter of 2009, GDP had climbed to a healthy 5.0 percent while unemployment slowly began to retreat from it's peak of 10.1 percent earlier in the year.

What seemed like a miracle was nothing more than basic economics; Keynesian economics. Not Voodoo economics, not supply side economics, not make-it-up-as-you-go faith-based Republican economics, but Keynesian economics, which is to say, economics that is grounded in observable phenomena, facts, science; y'know, reality-based economics.

When consumers are unable to spend because of the losses they sustained when the housing bubble burst, ($8 trillion in losses) then the government must provide sufficient resources to keep the economy running, otherwise activity will slow, businesses will trim costs and lay off workers, government revenues will shrink, the deficits will rise, and the economy will go into a long-term funk.

Simple, right? If there's no demand, the economy nosedives.

And, that's what was happening when Bush left office. The economy was tanking. But, Obama applied the right ideas, and the economy responded. In other words, ideas count. If you apply stupid ideas--like the GOP deficit hawks--then you will get bad results. This seems so obvious that it hardly seems worth repeating repeating. But, we have to repeat it, because we're dealing with people who insist that stupid ideas are smart ideas, and, regrettably, there's a difference. And the difference is quite excruciating for the people who end up being victims of these flawed ideas.

So, even though Obama could see the results of the fiscal stimulus, and even though he could see that GDP had risen to the 3 percent range for the entire time the stimulus was feeding into the economy, he decided to do a 180 and start preaching the ideology of his rivals, the gospel of austerity.

Is this a fair account of what happened?

It's not that Obama merely brushed off the considered advice of liberal economists like Joseph Stiglitz, Robert Reich, Paul Krugman, Mark Thoma, Dean Baker etc etc etc. But he also ignored the main players in his former economics team; Lawrence Summers, Christina Romer, Peter Orzag, all of whom strongly recommended more stimulus (to avoid another downturn) in editorials in leading US newspapers.

But Obama knew better than all of them, after all he was a community organiser, right? Besides he had other things in mind, like hammering out a structural adjustment plan (the "debt ceiling" agreement) that would constrain public spending forever making it impossible for the government to increase deficits even in an economic emergency. In other words, Obama was fulfilling the right wing "wish list" to strangle big government and to ensure that entitlement spending faces savage cuts in the future.

That was the game-plan, right?

So, now the economy is headed back into the toilet; manufacturing is sputtering, consumer spending is off, business investment is falling, GDP is barely positive, housing remains in a historic swoon, unemployment is stuck at 9.1 percent, the 10-year Treasury is signalling "deflation", 47 million Americans are on food stamps, and there are NO NEW JOBS. And--Oh yeah--Obama is still jabbering about "cutting the deficits".

Does that sound about right?

Obama can't fix the problems the country faces because he's owned by Big Business and Wall Street. Everyone knows that. But to continue to pretend that the Democratic Party is a viable alternative to the GOP, is beyond misguided; it's delusional. The policies that are presently in place--and which are largely supported by the Dems in Congress--are destroying the economy, the country's reputation, and our children's future.

There's got to be another way.

By Mike Whitney

Email: fergiewhitney@msn.com

Mike is a well respected freelance writer living in Washington state, interested in politics and economics from a libertarian perspective.

© 2011 Copyright Mike Whitney - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis.
Individuals should consult with their personal financial advisors.

Mike Whitney Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Paul
05 Sep 11, 15:07
there is another way

There is one way left Mike, but it involves the torches and pitchforks approach. It also requires the phony distinction between opposing parties in the West generally be ignored as the farce it is, and pollies on both sides receiving equal helpings of public justice.


Rick
05 Sep 11, 17:18
Smoot-Hawley Tariff Act: A Sure Answer To Job Creation

Wrong, wrong and flat out wrong. First, let me correct you on one small matter. Barack Obama inherited this Depression from the Bush administration. So don't you think that President Bush should deserve some credit for this calamity too?

Now if the Republicans do manage to take over the reins in 2012, at least we might entertain a balanced budget for a change (and preferrably even enjoy a sizeable surplus). Spending on social entitlement programs (Social Security, Medicare, Medicaid, Welfare, Food Stamps, Unemployment Benefits, etc.) not only has to be slashed, but eventually curtailed. The federal government simply can not afford to assume the role of a caretaker for the aged, the infermed and the desitute any longer.

As for the stimulus programs, all that these voo doo Keynesian concoctions have accomplished thus far is to further drive this nation into the red. If these ballooning deficits aren't addressed now, I can pretty much guarantee you that S&P and other rating agencies will do it for us.

So now what's the answer to "meaningful" job creation? Well, across the board stiff tariffs on all imported goods and services sure seems to me to be a pretty good start.

One has to look no further than the Smoot-Hawley Tariff Act of 1930 to take some cues. Much to his credit, President Hoover signed on to that bill, and protection soon became the norm. Bravo!

To nudge itself once again on a solid footing, this nation urgently needs to employ a strictly regulated and protected economy along with heavily unionized industries.

The alternative to all of this would of course be: "MORE OF THE SAME". Don't you think that we had enough of that already?


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