Obama's economic failure
As Jay Leno put it, “Economists say we’re heading for a fiscal cliff and we elected a guy whose campaign slogan is ‘Forward!’” Barack Obama: the Thelma and Louise President
For a man famed for his rhetoric the tweet was simplicity itself: “Four more years”. Indeed, I thought, four more years of high unemployment and economic stagnation.
For the second time Barack Obama had beaten an opponent who understood more about economics than he did. In 2008 John McCain admitted he didn’t “really understand economics” yet in June that year he said,
“We are borrowing from foreign lenders to buy oil from foreign producers. In the world’s capital markets, often we are even borrowing Saudi money for Saudi oil. For them, the happy result is that they are both supplier and creditor to the most productive economy on earth. For us, the result is both dependency and debt. Over time, in interest payments, we lose trillions of dollars that could have been better invested in American enterprises. And we lose value in the dollar itself, as our debt portfolio undermines confidence in the American economy”
Intuitively, McCain had grasped that America could not keep swapping devalued dollars for foreign goods and services.
Obama, meanwhile, gave a speech saying
“I’m not talking about a budget deficit. I’m not talking about a trade deficit. I’m not talking about a deficit of good ideas or new plans. I’m talking about a moral deficit. I’m talking about an empathy deficit”
So Obama had named five deficits, only three of which were real, and he was going to talk about the two that weren’t. This was typical of the sort of
overripe guff soaring rhetoric which enraptures Obama’s supporters. It makes you feel good as long as you don’t try to figure out what it means.
And again, this year, Mitt Romney gave a speech saying
“I met with (former head of Goldman Sachs and the New York Federal Reserve John Whitehead), and he said as soon as the Fed stops buying all the debt that we’re issuing—which they’ve been doing, the Fed’s buying like three-quarters of the debt that America issues. He said, once that’s over, he said we’re going to have a failed Treasury auction, interest rates are going to have to go up. We’re living in this borrowed fantasy world, where the government keeps on borrowing money. You know, we borrow this extra trillion a year, we wonder who’s loaning us the trillion? The Chinese aren’t loaning us anymore. The Russians aren’t loaning it to us anymore. So who’s giving us the trillion? And the answer is we’re just making it up. The Federal Reserve is just taking it and saying, “Here, we’re giving it.” It’s just made up money, and this does not augur well for our economic future.”
Romney was dead right about the parlous state of US finances but, in the same speech, he made his remark about ‘the 47 percent’ and this was drowned out.
Obama, meanwhile, released an ad saying
“Now Governor Romney believes that with even bigger tax cuts for the wealthy, and fewer regulations on Wall Street, all of us will prosper. In other words, he’d double down on the same trickle-down policies that led to the crisis in the first place”
Obama thinks this despite the fact that Bush’s deficits were driven by spending increases and not tax rises. There is no mention of loose Federal Reserve monetary policy. There is no mention of political action which pushed banks to lend to marginal borrowers.
Obama’s faulty prognosis follows from his faulty diagnosis. America, he believes, can tax and spend its way back to prosperity.
Well, he tried the spending. In February 2009 the $831 billion American Recovery and Reinvestment Act came before Congress. If the ARRA was passed, President Obama promised, unemployment would peak at 8 percent in late 2009 and would fall to a little over 5.1 percent by October 2012. He painted a doomsday scenario if the ARRA wasn’t passed; unemployment would peak at 9 percent in 2009 and by October 2012 would still be at 5.5 percent.
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