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Closing arguments – Why I Continue to Support Barack Obama, Economy

I continue to be amazed at how some Americans will believe just about anything. Barack Obama was born in Kenya. Barack Obama was born in Indonesia. Barack Obama is a Muslim. Barack Obama is a communist. Over the last five years, I have heard it all. I’m sure somewhere I read that Barack Obama is really a space alien from the planet Alpha Centurai.

President Barack Obama has led the country in truly trying times. It’s only been over the last 15 years or so in which our political discourse has deteriorated so much that it doesn’t matter what you say or how you say it. Fierce opposition will arise. Take, for example, a truly simple problem – the collapse of Chrysler and GM. This should have been an easy bipartisan fix. Sure, there are some folks on Capitol Hill who are the ultimate idealists and believe that government intervention is never the right answer. But there only a few of those true ideologues. There are some these idealists on both sides of the aisle. President Bush started the process of helping the auto industry by giving them a bridge loan until the new administration could take office. Barack Obama took this initiative and ran with it. Almost instantaneously Republicans were against it. From a truly economic standpoint, the collapse of GM and Chrysler would’ve been catastrophic to an ailing American economy. Instead of Americans being able to rally around one of our signature industries, this quickly dissolved into a huge fight. Suddenly we had the great big, huge government takeover of an industry. Barack Obama was painted by his opponents as a Marxist or a socialist because he did the sensible thing. GM, Chrysler and Ford are now back on the right track. Their loans are paid back. They’re more competitive than ever. Millions of Americans now have jobs because our government stepped up and stood up for the American people.

When Barack Obama took office our economy was shedding over 700,000 jobs per month. It was the worst economic nosedive since the Great Depression. For many Americans, the Great Recession came out of the blue. Most of us were unaware that our economic boom in 2005 and 2006 was standing on a very precarious foundation. The housing market collapsed. Millions were laid off. Great Wall Street firms were folding like a deck of cheap cards. First Bear Stearns. Then Lehman Brothers. Merrill Lynch, a household name, was pulled from the brink of extinction by Bank of America. The stock market was tanking. It was ugly. It’s only with 20/20 hindsight that can we step back and look at how close we came to a real, honest to goodness depression. In my opinion, we were this close to unemployment rates of 15%, 18% or even 20%.

Barack Obama decided we needed an economic stimulus. Many economists were talking about a stimulus that was somewhere in the neighborhood of 10% of GDP. That would’ve been $1.5 trillion. Christine Romer, chairman of the President’s Council of Economic Advisers, had $1.2 trillion as her starting point. By the time the plan bounced around the administration and before it got to Capitol Hill, the plan was trimmed to $800 billion. This price tag was simply too much for many conservatives in Congress. They went crazy. There’s no other way to describe their response. In order to win bipartisan support, the president and his advisers removed some of the stimulative projects and inserted tax cuts. They continued to insert tax cuts until they were able to get enough Republicans on board to pass the stimulus package. Let’s remember that not all government spending is going to stimulate the economy in the same way. In spite of the wrangling, the administration was able to get an economic stimulus passed. It wasn’t the best package, but it appeared to be enough to stop the economic free fall that we were in.

Over the last two years, our economy has been the little engine that could. Slowly but surely gaining momentum. Wages remain stagnant but we’ve seen an economy that has gained private sector jobs for 31 straight months. We’ve seen an economy that has gained over 100,000 jobs per month for the last eight months. Things are getting better. Consumer confidence is up. Home prices have stabilized and they are beginning to rise. New-home construction is improving. Things are getting better.

The reason I voted for Barack Obama (I voted early) is that, he has guided our economy from the depths of despair to today when all Americans can see that things are getting better.

By |2012-11-04T21:42:08-04:00November 3rd, 2012|Congress, Economy, Elections, Party Politics|Comments Off on Closing arguments – Why I Continue to Support Barack Obama, Economy

Clueless at the Fed

Transcripts from the Fed meetings in 2006 have been released. Wow. These guys were completely clueless. One would have figured that the folks at the Fed would have been worried about our economy in 2006. This was just before the bottom fell out of the housing market. There was no talk about the housing market possibly pulling our whole economy into the toilet. There was talk about inflation being a problem. There was way too much talk about the greatness of Alan Greenspan who had announced that he was stepping down. I find all of this very illuminating. We tend to think of economists as having some insight into the mysteries of our economy and the market. I thought that with just a few months before the largest collapse of our economy since the Great Depression that someone in the room at one of these meetings would have been sounding the alarm. Nope.

Transcripts can be found here.

From NYT:

Some officials, including Susan Bies, a Fed governor, suggested that a housing downturn actually could bolster the economy by redirecting money to other kinds of investments.

And there was general acclaim for Alan Greenspan, who stepped down as chairman at the beginning of the year, for presiding over one of the longest economic expansions in the nation’s history. Mr. Geithner suggested that Mr. Greenspan’s greatness still was not fully appreciated, an opinion now held by a much smaller number of people.

Meanwhile, by the end of 2006, the economy already was shrinking by at least one important measure, total income. And by the end of the next year, the Fed had started its desperate struggle to prevent the collapse of the financial system and to avert the onset of what could have been the nation’s first full-fledged depression in about 70 years.

By |2012-01-13T01:55:56-04:00January 13th, 2012|Economy|Comments Off on Clueless at the Fed

Hedge fund manager craziness

From Baseline Scenario:

Hedge fund managers may be good at investing money. (Or they may just be the beneficiaries of luck, like successful stock mutual fund managers.) But that doesn’t mean they can think clearly.

Andrew Ross Sorkin comments on the letter by fund manager Daniel Loeb, a former Democratic fundraiser, criticizing the supposed anti-business policies of the Obama administration. The letter includes blather like this:

“As every student of American history knows, this country’s core founding principles included nonpunitive taxation, constitutionally guaranteed protections against persecution of the minority and an inexorable right of self-determination.”

Who, in making a list of America’s founding principles, would put “nonpunitive taxation” first? Oh, right. A hedge fund manager.

More seriously, there is this:

“Many people see the collapse of the subprime markets, along with the failure and subsequent rescue of many banks, as failures of capitalism rather than a result of a vile stew of inept management, unaccountable boards of directors and overmatched regulators not just asleep, but comatose, at the proverbial switch.”

This is just sloppy thinking. I’ve written more than most people about “inept management, unaccountable boards of directors, and overmatched regulators.” I’ve criticized the Obama administration in many more words than Daniel Loeb. But putting the blame on certain categories of people does not somehow absolve “capitalism.” Our capitalist system–which until recently we considered the best, most pure version in the world–allowed incompetent people to become executives (and to run hedge funds), allowed incompetent people to become directors and to avoid any responsibility for their actions, and allowed companies to swamp regulators with battalions of high-priced lawyers and lobbyists.

This is a basic category error. Capitalism is an economic system; managers, directors, and regulators are people. They are not mutually exclusive. If you want to say that capitalism necessarily means universally good managers, responsible directors, and effective regulators, then that’s an argument you have to make (and good luck making it).

Just because you make a lot of money doesn’t mean you know what you’re talking about. Unfortunately, in this country if you make a lot of money, a lot of people listen to you.

(Here’s the full letter. Along the way, Loeb says that the current decline in confidence and economic activity is due to the SEC’s lawsuit against Goldman.)

By |2010-09-06T07:06:13-04:00September 6th, 2010|Business, Economy|Comments Off on Hedge fund manager craziness
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