At What Point Is Obama’s Economic Policies Considered A Failure?
Before I get into this, realize I’m focusing on Obama because he is the current President. I think many of Bush’s economic policies were also terrible, but he is no longer the President. The question is the policies that Obama has supported, enacted and will continue to support moving forward – at what point do we do a 180 degree turn? at what point are these thrown away and considered to be nonsense? Let’s explore this.
Although some of us have been doubting the “recovery” for months, interestingly, the mainstream media is starting to pick up the chatter of a “double-dip” recession. Whether you call it a double-dip or a prolonged recession, it doesn’t matter, the simple fact is that the economy is still crappy. Now as more and more continue to embrace that the recession is still very much here and alive, it’s important to remember what we’ve done in order to get out of the recession – that is, what has failed to get us out of the recession.
The stimulus act in early 2009 was nearly a trillion in government spending, some in the form of tax cuts, some in the form of infrastructure spending, some in the form of politician pet projects. Remember, we don’t have a balanced budget, so this entire sum that was spent to stimulate a recovery was borrowed (or printed) money. The debt remains, does the impact?
We may lose a few here when we start talking about monetization and Fed purchases, but the Fed has completely backstopped the housing market by buying over a trillion dollars in mortgage backed securities. What this means is they basically create money out of thin air and buy mortgages (filling the void left by the collapsed private market). This has served to push & keep mortgage rates very, very low. This is essentially printing money and is purely inflationary. Printing money will always have negative consequences even if the visible effects are delayed for a few years.
Where We Are Today
These initiatives and others have helped the stock market jump higher from 2009 lows. It will be interesting to watch if stocks fall in the near future or maintain these gains. Corporate profits have been fairly good since corporations cut so many costs (employees), so stocks and corporate profits have rebounded. To maintain stocks and corporate profits, however, the real economy will need to rebound and this has yet to happen.
For the real economy to rebound, we need a significant increase in economic productivity which will drive real, sustainable job creation. Census jobs are not this. The only growing sectors (government, education, health care) are not the sectors that will drive real economic growth – health care can possibly drive growth in products that are manufcatured, but much of this is services.
We need manufacturing, technology, energy innovation and increased productivity. We need to export things and in order to stimulate exports, the strategy needs to be more than just a weakened currency. We need quality products to be manufactured in America that the rest of the world will want.
The reality is that all of the trillions of dollars spent have been badly, badly misallocated and each one of these dollars is one that we don’t have. So as our fiscal situation has deteriorated mightily, our real economic situation has not improved. Maybe stocks and even employment have been buoyed in the short run, but this will not last if it is dependent on government money.
A Failed Approach
Obama and the progressive leaders who believe the government can fix the economy are severely mistaken. Inflation, stimulus, and government growth does not replace real economic growth. It never has and never will.
The mistake of the average, economically-ignorant American is that they believed Obama was truly an alternative to George Bush. The reality is that economically, they are one of the same – Obama may just push the pedal to the metal more than Bush did. The policies are the same – government can fix the economy.
With that said, Obama’s policies will undoubtedly be recognized as a failure. I know this because I know for a fact that these policies will not result in a real, sustainable economic recovery. People are waking up to that fact right now, but it will be an absolute agreed-upon point very soon. Maybe it’s when unemployment goes over 11%, maybe it’s when the Dow hits 7,000, maybe it’s when gold hits $8,000. It really doesn’t matter.
Now here is where it gets tricky. Remember, the average, economically-ignorant American I referenced above? He will be mistaken again if he thinks going back to the mainstream Republican is the correct alternative to Obama’s failed policies. Like I mentioned, the policies are of the same blood, just different on the surface. The reality is that there is no easy fix, but rather there will be pain to accept no matter what approach we take.
I recommend the approach where at least we can control the pain somewhat and we can prevent further pain down the road. This means stopping government intervention and stop the accumulation of debt. I’m very skeptical that anyone will take the lead in this regard. Yes, we will probably embrace some level of austerity, but cutting pork-barrel spending is a drop in the bucket. Real reforms are necessary in defense spending, social security, medicare, etc. Entire departments of the government need to be eliminated (the Dep’t of Energy was created decades ago to find alternatives to get us off foreign oil — I’d say they failed and should be eliminated).
One thing is for certain for the near future. Change is coming. Change did not come in 2008 as many hoped. Change is coming because at some point nobody will be able to stop it. It can be forced upon us or we can accept it. Change will be painful for many, but thus is the path we took years ago. It’s time to face it. The first step in facing it is admitting Obama’s policies are wrong, Bush’s policies were wrong, and the Wall St. / Fed / Washington D.C. oligarchy is finished.
Are you ready?