Amidst word that the US economy declined at a worse than expected 6.1% in the first quarter, President Obama said "We've got a lot of work to do because on our first day in office, we found challenges of unprecedented size and scope". No kidding. The question many have been asking for awhile now is this- when does the "Obama" economy- as opposed to the "Bush" economy- start?
I would argue that the "Obama" economy started during the campaigns in 2006. Amidst strong economic growth, the seeds of this downturn were sown by Senator Obama, in step with his allies, as the next few years brought:
1. Increased Fed short rates (inverting the yield curve, and since reversed) to deal with what Democrats were calling "top-heavy" growth between 2003-2007;
2. Prospects for higher capital gains and other taxes, which were forward discounted into asset values;
3. Increased minimum wage, and prospects for higher labor costs as more power was to be handed over to unions;
4. Prospects for higher energy costs as cap and trade and energy tax schemes were unveiled;
5. Attacks on "big business" and "corporations" for their foreign business dealings, with prospects for more regulation and higher taxes;
6. Talk of "change" in tax codes and government regulations. This can be (and was) also translated into "risk".
Confidence was gradually (if you consider a year gradually) eroded in what had been a booming global economy, and now we're told that much of what we were spending our money on- bigger houses, newer cars, entertainment, foreign manufacturing plants- was "nonsustainable". So what- we should have been spending that money on rainwater barrels, wind turbines, and childcare/healthcare for the 40% of babies currently being born to unwed mothers?
It used to be honorable to invest in a foreign manufacturing or other business, spreading American capitalism, until folks like Senator Obama started to label this "exploitation", "mercantilism", and "tax dodging". Now, as global economic activity continues to decline, America's role in its recovery will be in question until we remember what we used to be good at, before the "Obama" economy.
Disclosure: No positions