This is Now Obama’s Recession
- 8 March 2009 by Author 0 Comments
This is Now Obama’s Recession
By Richard Larsen
Published – Idaho State Journal, 03/08/2009
President Obama now owns this dire economy. He can no longer claim that he inherited the current malaise from George W. Bush.
Last fall with the failure of Lehman Brothers and other financial institutions, the problems with subprime mortgages and their “infection” of securitized mortgage-backed investments, mostly affected the banking and housing sectors of the economy. There was certainly the risk that it could spread to other segments of the economy, but with the right policy moves, that’s where it could have stopped. Obama and his party have ensured that it spread to all segments of the economy.
Financial markets are primarily forward looking and are one of the leading economic indicators used by the government. They appreciate in anticipation of improvement in the broad economy, corporate profits, and improving systemic risk indicators. Yet all they have done since Obama was elected is go down. And every time he opens his mouth to explain an $800 billion stimulus bill, or a $1.7 trillion budget, or a mortgage rescue plan, it goes down even more. Every time he denounces “predatory lenders” for making the loans Congress encouraged them to make, underwritten and guaranteed by Congress’ own social-engineering mortgage piggy banks, Fannie Mae and Freddie Mac, the markets go down. Every time he castigates “Wall Street greed” for packaging and securitizing those mortgages, the markets decline further. In short, Obama now owns this bad economy, and much of it is of his making.
The financial markets obviously knew what to expect from an Obama administration. The day after the election the Dow Jones Industrial Average tanked over 300 points. That was not a good omen.
Displaying an obvious inability to switch from campaign mode to governing mode, Obama has continued to verbally hammer the economy. In December, while Congressional leaders were crafting his massive “stimulus” package, Obama declared, “In short, a bad situation could become dramatically worse.” At George Mason University, he declared, “The recession could linger for years” unless Congress approves his stimulus bill. In the same speech, he said, “I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible.” The week Congress voted on his “stimulus” bill he said it would be “catastrophic” if it didn’t pass. Obama could now write a new book, and he could title it, “The Politics of Fear.” The subtitle could be something like, “How to Make Political “Hay” by Scaring the Hell out of the American People.”
Stock indexes are down roughly 30% since Obama’s election. And he still seems to have no grasp of the role he plays in creating a positive economy. His fiscal policies will ensure nominal, if any, GDP growth in future years. And until he learns that part of his role is to be the economy’s head cheerleader, it will continue to tank every time he disparages the economy.
Financial markets are significantly affected by psychological factors. They reflect the collective level of faith and confidence in the markets they represent. Confidence moves markets higher, whereas fear-mongering (as Obama is engaging in) and insecurity will force it down.
Obama has had unmistakable political victories. Every one of his recommendations have been rubber-stamped by an all-too-willing Congress that knows no taxation restraint, and has never met a lavish spending bill that it doesn’t like. Yet his political victories are failures for America. Not just for our economic prospects, but for the hammering he has personally done to the savings and retirement accounts of millions of Americans who count on market stability for current and future income.
Financial markets will eventually stabilize and begin to creep back up. But it will be in spite of, not because of, his fiscal policies and unmitigated disastrous spending binges. It will be because the American people still work, produce, provide service and do much good on a global scale. And the companies that they work for will strive to be even more productive even though the President’s proposed tax increases will penalize them for their success.
The American economy is struggling, and the President is doing nothing to positively address it. Calling my Tahoe a Hummer doesn’t make it any more so than calling a massive spending bill an economic “stimulus.” But as his chief of staff has said, “Never let a serious crisis go to waste.” And they’re not. They will apparently use their fear tactics to create as much government as they possibly can. “This crisis provides the opportunity for us to do things that you could not do before,” Rahm Emanuel elaborated.
Mr. President, this is no longer George Bush’s recession, it is yours. And your fiscal policies and verbal abuse heaped upon segments of our marketplace are ensuring that your presence will be felt long after you’ve left office in about 1415 days. But then, who’s counting?
Richard Larsen is President of Larsen Financial, a brokerage and financial planning firm in Pocatello, and is a graduate of Idaho State University with a BA in Political Science and History and former member of the Idaho State Journal Editorial Board. He can be reached at firstname.lastname@example.org.