Do I really need to provide references for all the times the Republicans and other conservatives have prophesied that Obama's economic plans would wreck the economy? I think the greater challenge would be to find a conservative who didn't make such a claim!
A quick check of the Dow Jones Industrial Average shows the DJIA has risen 27% since March. That's not bad. And as tax lawyer and bond broker Hale Steward points out, since their March lows, the Standard and Poor's index has risen about 40% and the NASDAQ has risen about 50%! He points out that these would normally be indicators of a bull market, but cautions that such is not the case, that growth will be sluggish for some time to come.
But that brings us back to the question - where's the economic train wreck that the conservatives claimed would be the sure result of Obama's economic policies? Um...it ain't there.
In every recession (or Depression) since 1900, America's economy has only recovered after significant injections of government funds...and the current recession is no different. The best example (especially for the history-challenged) is the Great Depression. In FDR's first hundred days, he subsidized price supports for farmers; took America off the gold standard; instituted Social Security (which pays for itself), the Civilian Conservation Corps (whose works can still be seen today), and the Tennessee Valley Authority (which continues to provide tens of thousands of jobs even today), and the Federal Deposit Insurance Corporation (which has provided banking stability for generations).
One of the most important acts FDR passed in his first hundred days was the Glass-Steagal Act, which created a firewall between investment banking and commercial banking. FDR's reasoning was, "There must be a strict supervision of all banking and credits and investments. There must be an end to speculation with other people's money." Somehow the conservatives think that it's wrong to have strict supervision over those bankers who hold the life savings of millions of American citizens. That's why they (with Clinton's support) repealed the Glass-Steagal Act in 1999, and look where it got us! The investment firms ran wild for several years, and then their house of cards began tumbling down in a way it never did when they were regulated under Glass-Steagal.
Article comments
— go to most recent comments1 - Clavos
Um, Glenn:
The stock market has recovered less than half of what it lost during the months following the election.
Of course Bam hasn't wrecked the economy yet; he hasn't hit his stride in spending yet, either. Wait until that mountain of debt he proposes becomes actual reality.
2 - Glenn Contrarian
Um, Clavos -
I notice you didn't include the fact that, in the months following the election, BUSH was still the president...and that the current levels of the indexes are above where they were when Obama took office.
It's good to listen to conservatives like you...but one must also be careful to listen to what conservatives don't say as well.
3 - Clavos
Who was President when it fell wasn't my point, Glenn, but it fell on the news of the election results more than anything.
My point was in response to yours:
where's the economic train wreck that the conservatives claimed would be the sure result of Obama's economic policies? Um...it ain't there.
It "ain't" not there, either, Glenn. In fact, as unemployment continues to skyrocket, and foreclosures continue to pile up, the train may not be wrecked yet, but it's definitely not under control, and is still headed that way.
4 - Dave Nalle
Nice to see someone else laying themselves wide open for being accused of being a polyanna about the economy.
And before the PaulTards get here I'm going to say one word to you, Glenn. Hyperinflation.
Is your wheelbarrow greased up and ready?
Dave
5 - Glenn Contrarian
Dave -
I take it you've got your own wheelbarrow out to catch pieces of the sky as it falls.
Your liberty was in far greater danger under the prospect of a 'permanent Republican majority' than it ever was with Democrats.
We dodged an economic bullet this time - but the bullet was deregulation. The gun was cocked and loaded by "The government IS the problem" Reagan, and fired in 1999 with the repeal of the Glass-Steagal Act (by a Republican Congress and fiscally-conservative Clinton).
Maybe you feel comfortable with banks being able to gamble your life savings, but I don't.
6 - Ruvy
Glenn,
Nice article, nice stats, and all. As Dave pointed out, you forgot one word - "hyper-inflation". Get your wheelbarrow out. Actually, you forgot two more words - "debtor nation".
When Roosevelt pumped a fortune into the economy, the USA was a creditor nation. It remained one until Reagan's first term. That debtor nation status casts a whole different shadow on what an American administration can or cannot do to recover its economy. Once foreigners get their fingers into America's pie, it's a lot trickier, and what Obama appears to prefer is to print money. And printing money with absolutely no backing (in fact negative backing) will bring you hyper-inflation. From the looks of thing, it wil bring us all hyper-inflation.
Yes, Reagan's deregulation and the Glass-Steagal Act of 1999 contibuted heavily to the problems we face, and George Bush's spending sprees did as well. But now Obama is handing out the cash like a drunk on a spending spree. Have some patience, Glenn. He will manage to wreck the economy.
7 - Dave Nalle
Glenn, the mistakes of one administration don't excuse the mistakes of another, especially not when they are largely the same mistakes.
The problem with deregulating the banks was that they took the concept too literally. There was a genuine need to let banks have more flexibility to try different business models, but just ignoring them and letting them do anything at all was obviously not a great idea.
Yet I also have to point out that banking deregulation has very little to do with the current crisis, because derivatives were not regulated under glass-steagal either, so they never got deregulated.
Dave
8 - Glenn Contrarian
Dave - I'll give you credit for pointing out that derivatives were not regulated, but you're forgetting that much of this crisis had to do with the idea of 'shared risk', most of which came from a real-estate bubble.
That, and remember the downfall of Washington Mutual? Even Bank of America had to dip into the TARP funds.
The main cause wasn't derivatives. They played a large role, but not compared to the meltdown of the housing market.
9 - Glenn Contrarian
Ruvy -
I didn't 'forget' hyper-inflation. The lessons of the Weimar Republic and modern-day Zimbabwe are too deeply etched into the memories of economists and government functionaries. I really do not think that's much of a concern. Hyper-inflation is now used much more as a boogey-man to scare people into thinking that the sky is falling.
If you want to worry about economics, worry about the transition of America from a manufacturing economy to a service economy. That's where unregulated free trade is forcing us to go.
10 - Clavos
I really do not think that's much of a concern. Hyper-inflation is now used much more as a boogey-man to scare people into thinking that the sky is falling.
By definition, inflation is too much money chasing too few goods and services.
Only six months into its hopefully short tenure, the Obama administration Treasury has already printed more than a trillion new dollars, and will inevitably need to print trillions more to cover its profligate spending plans.
The result will be, as Dave and Ruvy note, not merely inflation, but hyperinflation.
11 - Doug Hunter
I'm of the general opinion that politics and the economy are not nearly as closely connected as most people would like to believe in the short term. I think it is more reasonable to look at the whole of social, cultural, and political changes at timeframes of closer to a generation to get any meaningful data on what might be working or not. Short term fluctuations are the products of chaos coupled with some weird mass psychological phenomenon. If everyone thinks the economy is bad then it is and vice versa.
There is a large correlation between economic downturns and the government feeling it is appropriate to spend and regulate more. Unfortunately, in the real world there are no control groups or any real way to know what would have happened differently so we can never say definitively if our actions had any effect at all. My gut feeling is that business would cycle back up in a recession on it's own without government intervention.
12 - Glenn Contrarian
So Dave, Ruvy, and Clavos have all predicted hyperinflation.
Two years hence, I can hear it now: "The only reason why Obama didn't cause America to descend into hyperinflation is because the Republicans talked (or forced) sense into his head!"
In other words, yet another off-the-cuff prediction with a ready-made excuse for why it didn't come true.
13 - Glenn Contrarian
Doug -
My gut feeling is that business would cycle back up in a recession on it's own without government intervention.
As I pointed out in my article, ALL recoveries from recession/Depression in America since 1900 have come with economic 'stimulus packages' (usually by a different name). AND as I pointed out, the only modern example of a country trying to get out of a recession by not regulating its economy (and by austerity measures) was Japan...which is how they wound up with their economic 'Lost Decade' from which they still haven't truly recovered.
You can ignore history if you want...but it's still history.
14 - Clavos
So Dave, Ruvy, and Clavos have all predicted hyperinflation.
IF Obama is allowed to continue to spend like a madman. It does appear, however, that the American people are starting to put the brakes on him, as they begin to let their disapproval be known of the disastrous "health care plans" he and the dems have come up with .
15 - Glenn Contrarian
Clavos -
Never mind that his 'public choice' option would increase competition in the marketplace, hm?
I thought conservatives LIKED competition! After all, when was the last time a conservative came out against Wal-Mart?
Not only that, but ever since Reagan claimed that government IS the problem, well, we all know how terribly, terribly inefficient the government is in every little thing it does...which begs the question - if the government is SO terrible and inefficient, and since NO ONE is forced to keep the government plan, what exactly do you have to worry about? I thought conservatives LIKED having the freedom to choose!
Right now, my oldest son (who continues to suffer the effects of rheumatic fever) and my brother (who had a serious knee injury back in '68) both cannot get a good health care plan. With Obama's plan, yes, they can!
But if I listen to you, it's my patriotic duty to oppose any affordable opportunity to get health insurance for my oldest son and my brother. I understand your frustration with Medicare...but what coverage your wife DID get from Medicare is still 100% more than the health coverage my oldest son and my brother have, here in the richest country in the world....
16 - Clavos
Never mind that his 'public choice' option would increase competition in the marketplace, hm?
Man, were you born yesterday? What the hell makes you think having government-subsidized insurance constitutes "competing" with private insurers?
But if I listen to you, it's my patriotic duty to...
I've never said anything to you about "patriotic duty." I think patriotism is bullshit mostly flaunted by ignorant rednecks and I would NEVER do ANYTHING for that reason, much less urge someone else to.
17 - Christine
Glenn, just thought I'd mosey on over here to your article--lots of fireworks!
18 - Ribbidy Rob Ribby Rob
Not yet. His health care will though. But don't blame him. He's a rich boy and they don't know.
19 - tyman
If you are going to write about history, you shouldn't rely on high school history books. FDR has a legacy that most people do not understand. His policies will haunt us for a long time. If you study the great depression, you'll see that he raised taxes on everyone and every company which halted spending and the creation of jobs. Social Security is a mess. It does not pay for itself. When it was created, people died at 60, but the genius politicians never decided to adjust for increased life span. The credit is as much politicians who created fannie mae and freddie mac. It's not simple. Bigger government leads to less democracy. More government spending is going to raise the deficit and weaken our stand in the global economy.
20 - Dave Nalle
The main cause wasn't derivatives. They played a large role, but not compared to the meltdown of the housing market.
I'd argue that without the factors of derivatives and government mandated lending to unqualified borrowers the real estate problem would have been very mild and limited to only a few states -- a natural and trivial contraction of the market.
Dave
21 - Glenn Contrarian
tyman -
You should check your own sources, sir, instead of relying on Republican talking points.
The Social Security system does two things right - one, it pays its own way (or at least it did, until Reagan started raiding it for funding), and two, the institution of Social Security numbers and tracking enabled America to have a very good and reliable taxation system - and if you think that's a bad thing, try living in a country where they have no such system...and you'll see imports are taxed disproportionately because that's the only way the government can reliably collect taxes to stay in operation.
The only bad thing about Social Security is how the numbers are leading to ease in identity theft - and no one could have seen that coming. When it comes to increased life span, it doesn't take much to realize that sooner or later the SS age will be increased, just as it has been before. That, sir, is how SS will avoid going broke - indeed, that's the only way it can avoid going broke.
22 - Glenn Contrarian
Dave -
The government did NOT 'mandate' lending to unqualified borrowers. You're apparently referring to the outlawing of 'redlining', which simply took away the lenders' ability to say, "no, we don't do business in that neighborhood"...which meant that many minorities couldn't get home loans.
Of course, if that's not what you're referring to, I'm sure you'll correct me.
When it comes to lending to unqualified borrowers, how about checking in once more to the history of 'subprime mortgages', because those were NOT 'mandated' by government, but pushed by lenders who were riding the wave of a bull market and ignored the growing bubble that wave was built upon.
23 - Glenn Contrarian
Christine - welcome! Git yer gun and start shootin' - but unfortunately, I get the impression you just might start shootin' in my direction....
24 - Glenn Contrarian
Clavos -
So...how do you propose we help the one sixth of ALL Americans who don't have health insurance or can't get health insurance or whose insurance was dropped? AND how about the tens of millions more who are UNDERinsured?
And remember that whatever YOUR plan may be, NO such plan has been offered by the Republicans. If we let the Republicans have their way, then nothing would get done.
America's been having this same argument since FDR (I think TR was the first to propose UHC), and where has this left us? YES, we DO have the very best health care in the world...but one-sixth of our population has NO access to it!
So how are YOUR guys going to help my oldest son and my brother get insurance that they can't get now?
25 - STM
Glenn: "The government did NOT 'mandate' lending to unqualified borrowers".
I reckon it kind of did Glenn (not this administration though), just by virtue of the kind of policies that were in play at the time - by a circuitous route, though, which was not reining in Wall Street, thus allowing for an almost totally unregulated financial sector that, in its attempt to sell more and more credit derivatives (and line its own pockets in the process), meant that more and more subprime loans had to made so they could be parcelled up and sold as "investments".
Washington IMO almost allowed Wall Street to play the corporate equivalent of a giant Ponzi game. I can't believe no one woke up to it before it happened.
America forgot that it became rich by using a wealth of raw materials to make and sell quality stuff to others (a bit like the Poms on the other side of the ditch, who forgot it 50 years earlier), rather than shuffling bits of paper around or clicking mouses in NYC office blocks.
And the result is ...
Well, here we are - in deep strife, or at least deeper than we'd all rather be.