Tuesday, September 17, 2013

Obama still way out of his depth on the economy

Yesterday, the President marked the five year anniversary of the collapse of Lehman Brothers with a speech about the economy, the state it was in when he took office, what he's accomplished, and what he plans to do in the future. It was, without a doubt, a huge steaming pile of cluelessness.

First, however, let's note that the speech was intended to mark the five year anniversary of the Financial Crisis by equating the beginning of this crisis with Lehman Brothers' declaration of bankruptcy on September 15th, 2008. Supposing this was the beginning of the crisis is itself indicative of a severe lack of understanding on the whys and whatfors behind the Crisis. For Lehman Brothers was in dire straits long before September of 2008. Wall Street and the Feds were fully aware of this, as was anyone else paying attention to the stock market. The collapse of Bear Stearns in March of 2008--because of investments in MBS's and other derivatives--was a far more significant signal, especially since it was preceded by the fall of Northern Rock bank.

Specific people in the Federal Reserve were also keenly aware of what was happening and what was coming long before Lehman Brothers went belly-up. Fannie and Freddie were already under a conservatorship, as well, a move that was seen as almost a given many months earlier. The point here is that the Crisis was underway in full by mid-September of 2008 and government attempts to avert it were not working. This is because the Feds--and other government  people--did not fully understand how their actions (and lack of actions) had precipitated all of this. Pushing the date of the Crisis to mid-September is a transparent attempt to minimize the culpability of Washington, D.C. (and the New York Fed) in creating the Crisis.

And that, in and of itself, represents the key to Obama's ignorance on all things economic--one shared by many others in the Federal Government, it is true--and why his recommended solutions to various problems have been ineffectual at best.

The President's summation of the problems besetting the country and how he's "successfully" tackled them:
By the time I took the oath of office, the economy was shrinking by an annual rate of more than 8 percent. Our businesses were shedding 800,000 jobs each month. It was a perfect storm that would rob millions of Americans of jobs and homes and savings that they had worked a lifetime to build. And it also laid bare the long erosion of a middle class that, for more than a decade, has had to work harder and harder just to keep up.

In fact, most Americans who’ve known economic hardship these past several years, they don’t think about the collapse of Lehman Brothers when they think about the recession. Instead, they recall the day they got the gut punch of a pink slip. Or the day a bank took away their home. The day they got sick but didn’t have health insurance. Or the day they had to sit their daughter or son down and tell him or her that they couldn’t afford to send their child back to college the next semester.

And so those are the stories that guided everything we've done. It’s what in those earliest days of the crisis caused us to act so quickly through the Recovery Act to arrest the downward spiral and put a floor under the fall. We put people to work repairing roads and bridges, to keep teachers in our classrooms, our first responders on the streets. We helped responsible homeowners modify their mortgages so that more of them could keep their homes. We helped jumpstart the flow of credit to help more small businesses keep their doors open. We saved the American auto industry.

And as we worked to stabilize the economy and get it growing and creating jobs again, we also started pushing back against the trends that have been battering the middle class for decades. So we took on a broken health care system. We invested in new American technologies to end our addiction to foreign oil. We put in place tough new rules on big banks -- rules that we need to finalize before the end of the year, by the way, to make sure that the job is done -- and we put in new protections that cracked down on the worst practices of mortgage lenders and credit card companies. We also changed a tax code that was too skewed in favor of the wealthiest Americans. We locked in tax cuts for 98 percent of Americans. We asked those at the top to pay a little bit more.

So if you add it all up, over the last three and a half years, our businesses have added 7.5 million new jobs. The unemployment rate has come down. Our housing market is healing. Our financial system is safer. We sell more goods made in America to the rest of the world than ever before. We generate more renewable energy than ever before. We produce more natural gas than anybody.

Health care costs are growing at the slowest rate in 50 years -- and just two weeks from now, millions of Americans who’ve been locked out of buying health insurance just because they had a preexisting condition, just because they had been sick or they couldn't afford it, they're finally going to have a chance to buy quality, affordable health care on the private marketplace.

And what all this means is we've cleared away the rubble from the financial crisis and we've begun to lay a new foundation for economic growth and prosperity.
In assessing the specifics here, I just have to note Obama's usage of the "perfect storm" metaphor. I hate this metaphor, because people using it misuse it as a matter of course. Like the President. There was no "perfect storm." If there had been, the global economy would have truly collapsed, 1929 style or even worse. As I alluded to above, the Feds--even when they recognized the coming crisis--didn't have a clue how to deal with it, because they were responsible for initiating it.

Regardless, note how Obama clings to the idea that the Recovery Act was a huge success, that it somehow saved the day. This, despite the absolute fact that the Recovery Act never accomplished what it was supposed to accomplish, not even close. And Obama also believes he "saved" the auto industry. Tell that to Ford, who wanted nothing to do with Washington, D.C. He may have "saved" General Motors, but that's not necessarily a good thing. In fact, many would argue--like me--that it would have been much better for the auto industry to allow GM to break up, that this would have spurred true innovation, led to increased productivity, and created more competition.

No, what Obama "saved" were UAW jobs and benefits, along with a top-heavy, poorly run company whose best days were behind it. Maybe GM will keep pushing ahead and succeed, but it will be capable of doing so because of government interference in the market and the special treatment it received from the same. I'm pretty sure this is the definition of "crony capitalism."

Obama is also bragging about the unemployment rate, oblivious to the fact that the rate is down at the expense of people leaving the workforce in droves (a decreasing labor force participation rate), clueless about the fact that job gains are pushing down wages (because they are for part-time and minimal salary work), and ignorant of the fact that these gains are coming from elderly and young workers alone (the two groups with the least bargaining power, when it comes to wages).

And all of this, he sees as the "foundation for economic growth and prosperity." Right.

He also talks about the forces "battering the middle class for decades." As should be obvious with regard to the whys behind the unemployment rate, his policies are those forces. Under this Administration, the real wages of the middle class have decreased more under Obama than under Bush or Clinton. Even if the first year of Obama's first term is ignored, even if we limit the numbers to after the beginning of the recovery, this remains true. As the above piece note, "the Obama years have been brutal on middle class incomes."

There's a reason for all of this, why Obama's policies are making things worse for the middle class: because his policies are creating a larger dependent class, they're shrinking the size of the middle class. His "foundation for economic growth and prosperity" is actually a foundation for modern serfdom, nothing more. And this is because he actually believes it is up to the Federal Government to create jobs, because he just doesn't understand how the economy actually functions, yet operates as if he has absolute control over it, as if he can simply flip a policy switch to achieve a goal.

It's a dangerous delusion, one I call the Great Conceit. And right now, we're stuck with it.

Cheers, all.

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