More crappy economic news.
Can we blame Obama for the economy now? Or is it still all Bush’s fault?
(I’m being ironic. I have maintained for decades now that Presidents have far less control over the economy than people want to acknowledge, and that in any case it takes a minimum of a year if not more for anything they do to have any effect that you can really point your finger at. But hey, it’s been six months now, and Obama’s in office, so…)
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It isn’t fair to blame only Obama. This current economic disaster was initially created by the Pelosi-Reid axis in conjunction with the expected election of the Mighty One in June of last year.
It is more accurate to call this the Obama-Pelosi-Reid economy.
And it is doing exactly what people like me predicted when Obama started promising his punitive tax and spend policies in his campaign.
As soon as it became clear that Obama was a sure bet to win the election, businesses immediately started circling the wagons. It’s pretty much that simple.
I don’t know any business men who did that. True, I only know a few…
Dean:
Here is an interesting analysis of the severe discrepancy between the supposed size of the current recession (around 7%) and the severe drop in government revenues (close to 25% since last year) that the government is reporting.
http://newsbusters.org/blogs/tom-blumer/2009/06/30/june-federal-receipts-dive-continues-does-media-near-silence
Draw your own conclusions.
The problem isn’t just existing businesses scaling down operations, but new businesses not starting. In a normal down economy, lots of new businesses start up, because everything related to starting a business is cheaper and easier to find: rents are cheaper, good employees are available and at lower salaries, etc. Also, you get newly unemployed people with a bit of savings trying their hand at their dream.
The problem is everyone expects Obama and our glorious Congress to nail businesses hard with a gazillion new costs, so new business starts are few and far between.
Starting up a new business is a ton of work, and is ultimately a bet on the future. If government makes that bet harder to win, fewer people will play.
CC,
I think you’re a little confused here. I believe you meant to say Messiah One. It was renamed. Though, why you’re brining up the President’s 747 in a discussion of economics is beyond me.
Raised by a Democrat family from New York, who worshipped FDR, one central theme imparted to me on economics was that big business is always out to make a buck, always at the expense of the litle guy.
Today, I still hold a healthy skepticism of the magic of the capitalist system. In theory, it is great. In practice, there is way too much consumerism, hype, planned obsolescence, greed, and gaming of the system. I don’t need a new, fancy, clock radio, I just need mine to work.
But, here’s the problem:
Warts and all, free market job-creation works better than government job-creation.
In fact, if you compare the “warts” of capitalism (mentioned above) with the “warts” of government, you find something disheartening to an FDR Democrat like myself. You find politicians doling out financial favors to their cronies; you see huge-monstrosities like Freddy Mac and Fannae Mae screwing up our entire mortgage market; you see fraud, greed and waste on a massive scale.
Sadly, I’ve come to the conclusion that most Dems have become creatures of government. Obama is a good man, a talented man, an articulate man. But, it is clear that his instinctive response to big problems is to employ large government solutions. This won’t work. Often it makes things worse. Also, it tends to harm a lot of people on the margins, the less educated, the more vulnerable, those who aren’t employed at a nice University, or don’t belong to a Union or don’t have a nice, cushy government job.
Obama should be focusing on one central question: How do I help create jobs in the private sector? A successful answer, if implemented, will lead to a second term. If the question is ignored, I think his glow will greatly wear off.
–HB
It requires a very brave or very foolhardy person to start or expand a business during a period of extreme unpredictability such as we have now. This is the Administration’s greatest mistake: they are fomenting uncertainty.
The tinkering they’re doing with the financial system, the presumption that the financial system will be more tightly regulated in the near future, the incipient “cap and trade” and healthcare reform projects all combine to make the business climate less predictable than at any prior point in my lifetime. I think that many people are waiting to see what comes next.
I see I’m not the only one thinking along these lines.
Dave:
It’s not just that businesses are not hiring. Here is a short list of things businesses, large and small, are doing that are keeping the economy from recovering, and all of them, imho, are due to fears of what the government is doing and is going to do with Obama and the Democrats in charge.
Travel restrictions. I work for a large multi-national corporation. We have been under a “no travel” policy now for almost a year. The policy was put in place in anticipation of hard times, and as hard times have come, they have been extended.
Delaying purchase of hardware/software – For a company our size this is huge. We usually buy computer, network and communications hardware like candy, and upgrade to new software regularly. Not now.
Hiring/Contractor freeze – It’s not just that we aren’t hiring. Usually during a hiring freeze most parts of our business get around that freeze by bringing in contractors. For several months now we have been told to stop bringing in contractors, and to stop extending the ones we have. In some cases we’ve been told to terminate existing contracts.
No raises. For the first time in my corporate career this year I have actually been in a company that mandated ZERO raises. I have heard of other companies which also did not pay out bonuses.
Purchasing restrictions are now in place for virtually everything you want to buy, whether it is a new laptop or just paper for the copier. Normally I would have had my laptop replaced by now, but not this year.
All of this has major impact to the economy if my company isn’t the only one doing it. I know lots of small business people and they may not have company policy, but those I have talked to are taking a similar course. Nobody wants to extend themselves and everyone is trying to avoid spending anything that isn’t necessary.
I spend most of my time in meetings. The number of meetings I’ve been in where people make comments about the coming tax increases, the cost of Cap and Trade legislation and the general discussion about the likelihood of new regulation (we are still reeling from Sarbanes-Oxley) is amazing.
The economy of this nation is under a full-court press. They are being hit by the expectation of higher taxes, higher energy costs, higher regulatory costs and higher costs of goods and services as other companies pass their own costs through to us.
My concern is that we haven’t seen the bottom of this yet. There is still a long way down, and we are still falling.
I agree with Dean in that the president has very little direct control over the economy. And what little control he does have – through domestic policy decisions – takes awhile, sometimes a year or more , to show effects. However, one aspect of the economy that the president does have a direct influence over is the business climate. One of the problems right now is that the Obama administration is fomenting a business climate of uncertainty. This is never good.
The branch of government that does have a direct influence on the economy, via the laws and regulations they pass, is the congress. And this congress has been under the control of the Democrat party since January 2007.
Now, with Al Franken winning his court fight, the Democrats own this government lock, stock, and barrel. Whatever happens in the next few years – good or bad – cannot be laid at the feet of George Bush or the Republican party. It will be all theirs.
I agree with
“Presidents have far less control over the economy than people want to acknowledge,”
BUT Obama has taken more liberties with controlling large sectors of the economy than any Pres since Nixon’s wage & price controls, and he clearly bears responsiblity for the results. The short term results are not too good as the ecomony reacts.
Dean:
If Presidents have that little impact on the economy, what was with all of Obama’s promises during the campaign?
Yeah, I know, a promise from Obama is like sand in an hourglass, but still, clearly people THOUGHT he could have some impact.
I don’t buy the whole argument that a President can’t hurt the economy much in six months. I DO buy the argument that a President can’t HELP the economy much in six months, but, as with many things, it is much easier to destroy than to build, and Obama has embarked on a systematic campaign to destroy this economy.
I’d say he is succeeding.
“Sell on the rumor, buy on the news.”
The President can do a lot to spook markets, companies, managers and investors. He has a lot of power over future regulations, and more importantly the expectation of future regulations and markets. Its name is “Fear, Uncertainty and Doubt”. It affects millions of decisions every day.
His ownership of that power became complete last November. It was influential as far back as June ‘08, or before.
Dish:
I think his power was more than “influence” in June ‘08. Everyone I knew in business was expecting an Obama victory at that time, and most were already talking about new taxes, new regulation and new government programs.
Now, to be fair, not all of them OPPOSED that. Even in business there are a lot more Leftists than is generally supposed. Far FAR more than there are Rightists in academia or media.
I didn’t want to over reach, but that’s about my assessment as well.
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