The First 200 Days of Obamanomics Have Been an Economic Success 36 comments
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Friday marks 200 days in office for President Obama. “How has he done?” asks Fortune.
The first thing to say is that Barack Obama took over the presidency at an extremely difficult time. A variety of analogies suggest themselves: He is Harry Houdini who has been thrown in the river, in a straitjacket, with chains wrapped around him. Or he has taken over as the captain of a ship with a rotting hull, while the ship is under attack in a hurricane. To capture the state of the economy, perhaps the best metaphor is that Obama took over as pilot of an airplane in the middle of a steep dive. For a president precedent, he is Lincoln, who takes office as the South secedes. Or he is Roosevelt, who takes office at the depth of the Great Depression.
In any case, in light of the difficult circumstances, I think Obama has done amazingly well.
The financial markets were in free-fall six months ago. Bank spreads were at historic highs (a good indicator of just how outside-the-box this financial crisis was). GDP contracted at an annual rate of about 6 % in the last quarter of 2008 and the first quarter of this year.
Since then, the airplane has begun to level off. Those bank spreads are down to more normal levels. GDP declined at an annual rate of “only” 1% according to last Friday’s advance estimate; if I had to guess, we could see a bottom in the second half of the year. I give a lot of credit to the fiscal stimulus, to the monetary stimulus, and to the financial repair measures, as messy as those inevitably were.
People are angry about the big bonuses that are still being paid to those in the financial sector who got us into this problem. Entirely understandable. But don’t forget that, from the beginning, the goal was to prevent a depression in the general economy. That has been accomplished. You don’t punish someone who has been smoking in bed by allowing the resultant fire to burn down the block. The Administration and the Fed always admitted freely that helping some undeserving financiers would be an undesirable but necessary side effect of the rescue plan. And do you remember all the pundits who warned that the rescue could not work unless the banks were temporarily nationalized? Or all the cynics who dismissed claims that the Treasury would recoup a share of the budget costs as firms like Goldman Sachs repaid their loans with interest? Are readers no longer interested in what were red-hot controversies just a few months ago?
I think, overall, our new President has gotten far more things right than wrong. He has bravely proposed things that most sensible economists — whether Republican or Democrat — have long favored. Proposing is not always the same as enacting. There is the matter of Congress. But he has tried to get them passed, and has tried to do it in a bipartisan way. (That bipartisanship constraint is one of the Houdini chains.)
Washington has always been stymied by the political constraints of what can pass Congress. Often presidents figure that special interest groups will block sensible reforms, so why waste political capital trying? But an example, which I find extremely encouraging, including from a symbolic point, is that (with the help of Defense Secretary Robert Gates) he fought to eliminate spending on the F22 fighter. The F22 is probably the most egregious example in the defense budget of spending on hugely expensive weapons systems that the Pentagon doesn’t want because they are not useful for today’s national security needs. To my surprise, Obama actually prevailed on this.
I can also name two areas where he proposed very sensible legislation that a heavy majority of economists of both parties would support, and yet where he lost in Congress (at least so far). One is cutting agricultural subsidies to agribusiness and rich farmers. Another is auctioning off most of the greenhouse gas emission permits in any plan like the Waxman-Markey Bill, rather than giving them away to industry. (Obama’s proposal was to use the proceeds of the auctions to reduce the marginal tax rate on low-income workers, to “Make Work Pay,” which would have been an excellent use of the funds.)
But the fact that he is trying, and that he is winning some of the battles, is important. Look at how much waste is in the defense budget. He’s willing to fight the fight. It is tremendously important that the public take notice of these details. There are always particular interest groups that stand to lose from any given reform; if the general public pays no attention to the details and does not support the President on them, it means special interests will triumph over the general good as so often in the past.
The big picture is that, at the time he took office in January, there was a danger that this could be not only the worst of the post-war recessions, but as bad as Japan in the 1990s. I think we have now avoided that. We have learned from mistakes in the past, particularly the mistakes of the Depression – those made by the Federal Reserve, Hoover, and also Roosevelt. Obama has the advantage of the lessons of the 1930s to learn from. But he has the disadvantage of having inherited an exploding path of debt (unnecessarily incurred by this predecessors). The debt is the rotting hull of the ship of state.
Regarding February’s stimulus package, some commentators said it was too small, some said it was too large. In truth, it was both. It was too small by itself to return us to full employment, to knock out the recession. In order to bring us back to full employment, we would need a boost to spending several times as big. And yet, at the same time, it was too large to guarantee that we avoid losing the confidence of our international creditors. If they stop buying our bonds, US long-term interest rates could rise sharply. (China — the largest holder of US Treasury securities — has already begun to ask questions about the value of US debt.) But Obama struck an appropriate balance between these two competing concerns.
If I had to find one mistake that the White House has made, the initial economic forecasts were too optimistic, at least with respect to the unemployment rate. It was an honest mistake, but a mistake nonetheless… not just with respect to the economics: politically, Obama would have been better to recognize the severity of the recession from day one.
Regarding the health plan, we as yet have no idea what the outcome will be. The big question, of course, is how to pay for getting everybody insured. Instead of proposing an income surcharge on the wealthy, I would have preferred eliminating non-taxability of employer-provided health benefits— that’s what McCain was for in the campaign, and most economists as well. The non-taxability could have been retained for workers in lower income brackets if the White House felt this was essential. You can call this a second mistake. But, since Fortune asked my opinion of how much the President has done right versus wrong, I score it as 98 to 2. In eight years of the Predecessor, I could only find two things that he did right.
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You do realize that if you stand still others will pass you by no matter how slow they move?
This plane "Disappears" to our own tech if it turns off its tracking beacon. If we can not track it, Who Can?
I would say that is worth twice as much as we paid for it; not to mention the other benefits.
Short Sighted Solutions Stymie Sovereignty.
How can you say that he is a "Success" if he chooses not to read the bills he signs into law? Where Is The Representation In this Action?
Do Not Be So Easily Led By Smooth Words And A Charismatic Demeanor.
The President And Congress Are A "Proxy" For "Those That Have Made The Purchase" Many Years Ago.
"or the right of the people peaceably to assemble, and to petition the government for a redress of grievances."
Refusing entry to town hall meetings and refusing to listen to the grievances of the people is essentially taking away their 1st amendment. Calling the citizens MOBs and asking them to report their neighbors speech and emails is an intimidating attempt at taking the 1ST amendment away.
For a president to sanction or do this is unforgivable.
When the people can not use their first amendment they will turn and reach for the 2nd amendment.
BO is playing a very dangerous game right now.
Even if I did believe this foolishness that there was economic success (I don't) , I would not give up my rights for the money.
Only a soul would sell their freedom.
"Only a fool would sell their soul for freedom."
The word "toady" comes to mind.
Or, sycophant.
Is ass kisser too harsh?
A socialists state with a worthless dollar and mountains of debt.
real cap ex and real jobs come from small business, and small business creation depends upon freedom from taxes and regulation, as has been re-proven the last 10 years. how much more failed stimulus PROOF do you need than bush's failed middle class tax cuts? you demand siders have a perception that is grounded in nothing but theory, you embarrass yourselves
PS - I don't know why, but my use of the word 'cahoots' was quite pleasing to me… I suppose it reminds me of those wonderful days back when I was a child watching Westerns on TV - back in the days when you could identify the good and bad guys by the color of their hat. I remember wondering why the bad guys did not just adopt wearing white hats so no one would know they were bad. Given what we are dealing with today, I guess a lot of my contemporaries had the same thought….
If you have read this far, I hope you still have some patience remaining. I just wonder whatever happened to civil discourse. You were quite civil in presenting your arguments - many commenters were not. Too bad, because some of them may have had something valuable to offer in debate, but it is difficult to separate that from the invective.
Wisdom - - -
If I skipped your charming use of "crap", I thought I would find something to discuss. But I had problems as follows:
1. You wrote: "the harvard Kennedy kids propped up the economy from 62 until they got booted in 1976". Kennedy was president from 1961-63 and Texan Lyndon Johnson served from1963-68. I assume you counted Johnson as a Harvard Kennedy kid? Nixon and Ford served from 1969-76, and no one ever called them anything associated with Harvard.
2. You wrote "real cap ex and real jobs come from small business, and small business creation depends upon freedom from taxes and regulation, as has been re-proven the last 10 years. how much more failed stimulus PROOF do you need than bush's failed middle class tax cuts? you demand siders have a perception that is grounded in nothing but theory, you embarrass yourselves". What do you mean????
a. The last 10 years were replete with reduced regulation and taxes. Does that prove your starting contention?
b. Do you mean to say Bush's tax cuts were demand side actions? Why were Reagan's tax cuts associated with supply side theory? What am I missing?
c. Do you mean to leave the impression that demand side economics are founded in theory while supply side economics are not?
I think that somewhere you had some good points to debate, but you lost me.
To give Obama credit for the slowing down of the crash in our economy is the same as giving the EMT credit for giving a dying patient a shot of adrenaline.
Only, in this case, the EMT is applying a lethal dose of adrenaline and cancer cells simultaneously.
The adrenaline is massive amounts of fresh cash.
The cancer is the mountain of unpayable bills and unfunded mandates that are being heaped upon us.
If we are lucky enough as a nation to not suffer cardiac arrest from hyperinflation, we will certainly die of cancer soon after.
We are being driven into the ditch on purpose.
The Progressives want America to melt down while they are in charge. When this happens, they will declare martial law and the Csars will take over the country, more than half of them being self admitted Marxists.
The Founding Fathers knew a government can't control the economy without controlling people. And they knew when a government sets out to do that, it must use force and coercion to achieve its purpose. So we have come to a time for choosing.
Public servants say, always with the best of intentions, "What greater service we could render if only we had a little more money and a little more power." But the truth is that outside of its legitimate function, government does nothing as well or as economically as the private sector.
Yet any time you and I question the schemes of the do-gooders, we're denounced as being opposed to their humanitarian goals. It seems impossible to legitimately debate their solutions with the assumption that all of us share the desire to help the less fortunate. They tell us we're always "against," never "for" anything.
We are for a provision that destitution should not follow unemployment by reason of old age, and to that end we have accepted Social Security as a step toward meeting the problem. However, we are against those entrusted with this program when they practice deception regarding its fiscal shortcomings, when they charge that any criticism of the program means that we want to end payments....
We are for aiding our allies by sharing our material blessings with nations which share our fundamental beliefs, but we are against doling out money government to government, creating bureaucracy, if not socialism, all over the world.
-Ronald Reagan
If Obama has done so good in just 200 days (which does not make an economy) maybe he should quit (as in resign) while he is ahead; as the odds might be against this "fabulous performance continuing."
Obama has done little to positively affect the economy. But he has presided over the most active socialist agenda in our history. It took us about 80 years to advance socialism in America 50% of the way until Dec. 2008. Socialism is rapidly advancing the other 50% since Obama became president- assuming he gets "Cap (crap) and trade (tax)", Obama-Care, and illegal alien amnesty. Obama is the most dangerous man to ever become president.
His justification for changing healthcare for 300 million Americans is for 3% (yeah, only about 8 million of the phoney 45 million number) who have problems getting health insurance; and with no savings in cost without rationing and denial of medical care. Obviously, Obama's stated reason for wanting "single payor healthcare" (clearly stated by him in the past and other liberals now) is not to cover the uninsured nor to reduce cost. I would guess it is to get more power and control over the lives of all American citizens by the state. That would fit with the rest of his proven agenda, so far.
The agenda of Obama and the liberals is to convert the USA from a limited government constitutional republic into a social democracy- more socialist than the most socialist nations of Europe. In my opinion, that justifies the labels "traitor" and "un-American."
I hope and pray that the Obama train wreck of the USA can be stopped.