This page has been archived and commenting is disabled.
Obama Is Clueless on the Economy
By Dian L. Chu, Economic Forecasts & Opinions
On Labor Day, President Obama announced a new $50-billion infrastructure plan next year as a way of a second stimulus for job creations as well as for the faltering economic recovery. However, the plan is expected to be met with strong opposition in the midst of a mid-term election, while many economists are skeptical as to any swift effect it could have on America's $14.3 trillion economy, as well as the troubling labor market.
So, in light of the fact that the Democrats are losing a bunch of congressional seats, and their majority, this new plan would seem more of a last-ditch effort with little substance.
Clueless on the Economy
So far, the Obama administration has demonstrated very little understanding of the economy, markets, and business. In fact, one could say that the policies the Administration implemented are probably close to the worst medicines to help a sick economy recover from a devastating illness.
Much of the legislation passed by the Administration is essentially anti-business, while painting a negative image of corporations. This is further playing a debilitating role for stalling an economic recovery due to the added uncertainty for businesses--“What is coming at us next, cap and trade, drilling ban?" All this does is further undermining the business confidence that is needed to start hiring again on a large enough scale to really make a dent in the unemployment rate.
Hierarchy of Needs
During the passing of the first $800 billion stimulus plan, many recommended that a larger percentage needed to be allocated to infrastructure projects due to the add-on effect of job creation. But they fell on deaf ears of the Administration and the Democratic Party.
Now all of a sudden, they finally came to realize what’s really important-- having a job and a roof over your head, whereas healthcare and financial reforms are on the next level up the hierarchy of needs. So, here comes a new infrastructure spending plan to create jobs, taking a page from President Roosevelt’s New Deal and China’s infrastructure-focused 2-year, $586 billion stimulus package started in 2008.
No Second Chance
Unfortunately, the Administration basically messed up and squandered away the first stimulus package--the only chance to get it right with a proper infrastructure package and real job creation. Cue to the Greek and European debt crisis, there’s no second chance.
Although President Obama indicated the plan would not add to the budget deficit, senior administration officials suggest it could come from closing tax credits used by oil and gas companies and multi-national corporations. So, it is just robbing Peter to pay Paul—a zero-sum game. And 50 billion dollars?? It is definitely a case of too little and too late.
Debunk the Policy-Induced Recovery
The Administration also has pointed to the fact that when they took office we were losing 750,000 jobs a month, vs. the current loss of 100,000 jobs a month, and things would be much worse without their creative solutions.
Well, the numbers were greatly skewed with companies running scared and cutting costs to the bone in the middle of the financial crisis. However, almost 2 years since the Great Recession, most companies have reached a point where they can no longer cut costs and/or personnel. Moreover, if the economy stabilizes due to an inventory rebuilding cycle, and the world isn`t coming to an end, then there will be a natural reduction in the rate of job loss, which has nothing to do with the Obama Administration`s legislative policies.
So, yes, things are better, attributed partly to the natural business cycle, but also because the worst didn`t come to fruition, the stock market assets needed to be reacquired by fund managers who over liquidated their portfolios. In addition, manufacturing was also boosted by the inventory restocking phase, and even failed stimulus packages would provide some sort of floor for the economy.
Nevertheless, none of this can be taken credit for by the Obama administration. It is a natural law of economics, and relative preparedness. That is, if everyone is prepared for the sky to fall off, and the sun still comes out the next morning, the economy will experience a slight recovery all on its own, relatively speaking. But this is nothing to write home about.
Legislative Wins – Don’t Mean Much
One thing that President Obama and the Democratic Party has accomplished is that they have gotten more legislation through Congress, and passed into law than most administrations ever dream of accomplishing.
However, it is more emblematic of having a complete majority in the legislative branch--Republicans were emasculated due to the economic crash happening during their watch, and a literal blank check of unprecedented nature to just fix things that went wrong.
As we have witnessed in the past two years, achieving a lot of legislative wins has not done a whole lot of good for the nation.
On Health Care & Financial Reform
I agree that the health care system in the US needs some major overhauling, but was this accomplished with the latest health care legislation? No, I do not believe this to be the case. But one thing I do know is that it is entirely counterproductive to push through a health care reform bill that is going to create more costs for business coming out of a recession.
Adding more costs is bad for business even in a booming economy (that`s why it has been so hard to get passed all these years,) but it is a complete suicide mission during a tentative recovery phase.
I also agree that to some degree there needs to be some regulatory changes to the banking system, and how Wall Street and the SEC operate. But all this financial regulation, post financial crisis, will only cause major disruptions to the financial industry, and hinder any type of job creation, at a time when the industry is still on shaky ground and worried about building up their capital reserves.
And you see what happened to the financial stocks since the passing of the financial regulation bill after investors realize the implications of this policy change. If financial stock prices are going down, then so are the number of financial jobs, in a sector that is one of the major employers in the economy.
Again, an argument may be made for financial reform, but there is a time and place for this type of sweeping legislation, and it is after the economy has recovered, when unemployment is under 6%, and business confidence has returned enough to sustain this type of exhaustive financial overhaul.
Markets and Business Tend to Self-Correct
I actually think legislation to address problems which already occurred is a little backward looking, and gets you all the extra costs, but little, real bang for your buck. Businesses and markets tend to be self-correcting as nothing hurts business and professionals more and changes behavior faster than losing money.
Nobody, be it bank, insurer, mortgage underwriter, or rating agency is going to continue the same business practices such as sub-prime after losing that type of capital during the financial crisis.
Changes in business practices are already taking place without the business-disrupting new regulations. After all, companies are in the business of making money first and foremost, and nothing changes behavior faster than losing 15 billion in a quarter.
Political Irony
The funny thing is that President Obama`s policies were better suited for the good times, as they might have actually tempered some of the growth enthusiasm, and help check and balance some of the insane leverage utilized by businesses during the Bush era.
Nevertheless, when a country is trying to works its way out of a recession, policy makers need to be pro business to foster a strong business climate, instills business certainty and confidence, and leads to large scale job creation. In the end, the last two administrations were better suited for each other`s tenure, and if we could just go back and switch the two, we would be so much better off today.
Dian L. Chu, Sep. 11, 2010
»
- advertisements -
Great article and this on Forbes. We are toast...
I was in the Construction business for many years, been around projects that cost almost as much as this so called 50B Stim Bill.
Bottom line,it's a joke, it's payoff yet once again to his Union Chronies, and special interest groups.
No disrespect to asia, but Obama is far from clueless, he, and his minions are/have been orchestrating this charade since day one.
We are living witnesses to the Deconstruction of America as it's been known for 250yrs.
We have been bled dry, and no amount of Stimulus is going to solve this screwed up disaster.
Decent article, I'll admit. It must be pointed out, before too much abuse is heaped upon the Office, that a President, no matter what his policies, can't do shit without a complicit Congress. That can be fixed, but not until whomever is elected actually listens to the constituents. A large majority of people did not want bailouts, medical care, and other legislation. But our Congress pukes knew "what was good for us". They are not elected to do what lobbyists want. Vote them all out, even if it's not your "party", and put a new crop of suck-ups in there until they understand that a Washington position is not a life-time job. It takes a special kind of narcissist to want to be a politician. Maybe they'll begin to pay attention. NONE of the proposed solutions to the exiting problems will work until the electorate gain control of their "elected representatives". I've been told that I am naive to think such thoughts, but not one has suggested a better place to start changes. Laws are no good without the impetus to enforce them.
We the People Are No More.
+
Fresh breeze of downright plain old common sense.
Thank you.
Yeah, sometimes I get delusional flashes like that. Just as I said, I am naive.
I gave 5 stars for the title alone. Nuff said ;)
Nobody in your list would continue the same business practice, but a gov't agency will:
The FHA Wants to Make Zero-Down Loans. Is This a Good Idea?Nobody . . . we're in a collective private industry rapture of reformation. I see angels flying out the asses of all those sociopathic asses, now that "nobody in your list would continue the same business practice," Rocky! They've learned now, no moral hazzard, no problem.
Try looking at that list again, dude.
I mean, hating on the dotgov is one thing, but really.
Thanks, Bob! Just an aside: I didn't write the quote, I didn't make the FHA policy. The only thing I did was put together what seemed to be conflicting situations. I'm not hating on anything, just pointing out the obvious.
Zero down is not a bad lending practice to a well qualified buyer. Problem is that FHA will do it for a 600 credit score working the Wendy's drive-thru. Subprime has it place as well and is a huge money maker if priced correctly. Common sense was definistrated. Therein lies the problem.
Balls to that. The parasitic banking sector needs to be violently downsized.
Infrastructure spending is a huge misallocation of taxpayer money in the age of peak oil:
http://peakcomplexity.blogspot.com/2010/09/our-20th-century-administration.html
Speaking of peak oil,
http://www.thedailybell.com/1362/Peak-Oil-Bites-the-Dust.html
Oil sitting in storage is unrelated to Peak Oil. The US is 40 years post peak as it is.
The comments below were interesting.
http://www.canadafreepress.com/index.php/article/19380
+
PE Memes.
This is right on target. Obama is pursuing "peak experiences" when the economy is in "basic survival" mode.
Obama does not have a clue. His infrastructure proposal is merely a half-hearted attempt to win votes. He truly does not want to improve roads because he believes the elitist crap that we all should ride in trains, beat drums and sing kumbaya. What an idiot!
The longer they wait with the right medicine to cure this economy, the more expensive it will get.
What we need is a stimulus for small businesses to start up. But all we see is that bigger companies are buying up other companies in order to grow. But in this way, they are making it impossible for new companies to compete in a profitable way.
In the past, in the 18th and 19th hundreds there was a law that could the cure for the industry of today. It's called the Guilds law. It was actually a law derived from a 14th century law that protected trades and on which the entire education system was build on.
Let me explain:
The guilds law said that not just anybody could just do any profession they wanted. They needed to study it and be a professional of it before you could start the business.
Part 2: You could not accumulate different trades into 1 business as it would undermine the quality and would be bad for employment.
The first rule has been kept. People need to be educated, and study for a certain diploma that grands them the right to do a certain proffesion.
BUT. Many industries started buying up other industries and tried to create synergies. Not many big industrial groups have been successful in that, but that hasn't stopped them. But it did make it impossible for a small industry that only focused on 1 trade to be financially healthy. Companies just should not be allowed to get to big. And the start-up register that also is still part from the second part of the guild law that says you need to specify your business should not be allowed to be changed in a later phase or have pieces added to it.
It was actually made to protect the business and not just hold them back as many believe. Just ask any notary with sufficient experience and he'll tell you the same.
These are old law. And a law is not something people should take the time to search for loopholes because at the end, this a destructive thinking for the business and the law itself.
We need a system where young people who want to startup a business can be mentored by people that are nearing the retirement age who have experience in the field. This is also old school but I do think it works because in Belgium I've started up a initiative like this that actually works.
1. Young people who want to start a bizz.
2. Mentors with strong experience in the field of the bizz they want to start.
3. Business angels.
We bring those 3 together and coach them to work together.
Asianblues:
You talk of everything that is bad and what Obama does wrong. Anybody can say that. But unless you are able to propose something that could work better is some way: Just shut the fuck up. If you would work for me, you'd be fired in a instance.
"The first rule has been kept. People need to be educated, and study for a certain diploma that grands them the right to do a certain proffesion."
A right?...ahhh yes...the socialist/communist model...and their wages would be controlled by...lemme guess...the state?
What part of Europe did you say you lived in?
"Asianblues:
You talk of everything that is bad and what Obama does wrong. Anybody can say that. But unless you are able to propose something that could work better is some way: Just shut the fuck up. If you would work for me, you'd be fired in a instance."
Well that's pretty self explanatory...vote & speak this way or your fired regardless of how well you do your job. Fantastic.
Got it.
Again I say...every pregnant socialist gives birth to a bouncing baby communist.
By acting like a dumb-ass racist who's clearly never been in Europe you just make a fool of yourself.
You're the prototype of some redneck moron who will never have seen it coming when his lifestyle evaporates.
America got great because of certain Europeans who migrated to America and made something great out of it. There will always have been idiots like you, but you won't see those in any history books.
You are just born in a place that once had great man. Don't get confused by thinking you're one of them. You're the kind every single one of them ignored.
ps: If you still don't get it: I CALL YOU A IDIOT.
So I guess your point (besides the one on your head) is if you are not born in Belgium (a founding member of the your a peon union) your an idiot, dumb ass, racist, redneck, moron because one may have come from Brazil or Vietnam to become an American?
You couldn't have self identified as a more boorish, xenophobic, euro centric, twit than that, thanks for making my point...LOL.
A business mentor: http://www.score.org/index.html
A new business making what or providing what services? I think we have enough Vietnamese Nail Parlors. Is there a good or service not yet being satisfied?
sudden debt,
In order create a fix, it does help to identify the obviously broken dimwitted policies. Certainly, spending billions to resurface roads that are not being used because noone is driving to work anymore is not a good spend of my money. There are plenty of excellent solutions. A payroll tax holiday would be a good start. Problem there is that there wouldn't be payola associated with it. Investment tax credits-limited payola. Small business lending program-limited payola. Repeal unemployment extensions-negative payola. I could go on and on. Bottom line-when your entire economic recovery plan is one big "Chicago style" payola you do not need a phd to contemplate its success rate.
I think the T-word needs to be said. Tarrifs. We cannot pay $30/hr and compete with those who pay $3/hour.
Tarrifs have never worked.
Of course they have. Who told you they've never worked? I would take a good look at what book they were selling if I were you. They worked right here in the US. I remember my third grade teacher explaining them to my class during social studies. (In the 50s we studied such esoteric things in public school.) She said they taxed imported goods to bring the price up to equivalent goods manufactured domestically so that they would not unfairly compete with what was made here. The US had tarrifs for most of its existence and this made perfect sense, unless of course you are a robber baron out to increase your piece of the pie by cutting out labor. Through tarrifs, a Xenith television set was not substantially more expensive than a Japanese model, and was of better quality and was easier to have serviced. People were more likely to buy the Xenith, thus supporting the manufacturer and the jobs of other US citizens. All the fights labor fought over the years will now have to be fought again.
Gee, there's a new one. Tarrifs.
Smoot–Hawley Tariff ActThats an easy preventative fix before you're in the mess in the first place. Now, not so much.
Now, we can't even make half this shit anymore, and even if we could we couldn't afford it. We took advantage of that cheap labor to hide inflation, buy yachts for execs, and free up other money to spend on our fucking ridiculously large government. It wasn't just borrowing that fueled our standard of living increases for the last few decades.
If anyone knows an easy, bloodless way to ditch 3/4 of the government, 3/4 of our useless laws, and convince people to accept a sharp drop in their standard of living... I'm all ears. Just slapping some taxes on isn't going to cut it.
I'm one of those "young people" who could start a business. I don't want a damn thing to do with it, nor does anyone else my age I know. Fuck working 10x as hard, with 10x the exposure to laws you've never even heard of, for a minimal increase in income. If I could get the money to start a small business I'd move to another country and start a hot dog stand instead.
The fix is a devalued dollar. When Chinese workers make $3000 a year and U.S. workers make $30,000 a year, as a ballpark average, hiring U.S. workers makes no economic sense. Globalization has commoditized human labor.
To your last point, I have a hard time justifying work as it is, because for however many US$ I sell my life for, Bernanke can create that money in a couple keystrokes. I am trading my life for a product with zero production cost, and it depresses me. Right now I consider that Chinese workers make ~2 oz of gold per year, while the average American (who still has a job) makes ~20 oz a year, so as long as I can convert my income into gold I will work, for the time being.
clueless by design. The perfect tool for the TBTF
Three sub-species of parasite:
The Useful Idiot (UI) - Obama
The Well Connected Moron (WCM) - GW Bush
The psychopathic manipulator (PsM) - Cheney
Its like I tell my GF's friends, who tend to be hot abusive power players stuck in a cycle of short term relationships; there are only three types of guys who will put up with your bullshit attitude:
1) The desperados, who know that you are a dumb bitch but are so desperate for a hot lay that they will put up with your abuse even though they know its wrong. (WCM - Those who play the game)
2) The loosers, who dont know that you are abusive and just cant imagine being treated well by a woman, they belive what you do is ok and believe that they love you. (UI - Those that are played by the game)
3) The players, who will tell you whatever you want to hear, manipulate your feelings and put up with your BS until they lay you, then theyll do the same thing to your friends and laugh their asses off at you while they post nude pics of you on your own FaceBook. (PsM - Those that own the game)
And your continued demanding BS will mean that you reject anyone who simultaneously has a spine and gives a shit about you beyond getting you into bed.
Its like if a politician told the US Taxpayer the truth, they would never get elected.
So stop complaining and change your attitude American Taxpayer, because you are the hot mean girl in this system and you are being played, soon to be dumped for China.
Yes!
We need to be able to resurrect enough of America to be independent of the system... and there are many forces aligned against that.
It should be assumed that he is a muslim manchurian communist mulatto who relishes destroying America on behalf of the internationalist communists who infest the media, courts, and schools. The more I read about Hitler, his monetary policy, and how he revilatized germany, the more I realize that he was right.
I'll bet you were getting some wood describing Obama's "philosophy".
You are one sick dude. But you're OUR sick dude.
+1
Hitler was a psychotic fascist. Is that your prescription for what ails us?
Teleprompter on the left side, teleprompter on the right side. Look to the left, look to the right; like a bobblehead doll. Pretend not to read. Who's in charge of Mr. Hussein Al-Obamahim's teleprompter content? That's what I want to know.
His water dog, Bo.
"In fact, one could say that the policies the Administration implemented are probably close to the worst medicines to help a sick economy recover from a devastating illness."
Just like a modern day bloodletting!
Leeches are next...that should be entertaining.
Good God! Thought that's what's been draining me dry all along! Banksters, Health Care Complex, Detroit, Unions, Public Employees, War (operations and Materials Suppliers/Manufacturers) whoever else feeds at the Gubamint Trough, courtesy of Politicians.
And now, Leaches of the Natural Kind? Was that in the Health Care (Medical Insurance Revenue Enhancement Act of 2010) Bill, too?
Yes, page one thousand nine hundred seventy five, section eight, subsection two, preventative care...it clearly states a leech a day keeps the doctor away ;-)
Blackadder: 'The Leech Quack'
http://www.youtube.com/watch?v=Ez3BFGXR02A
Did they really "mess up" the first stimulus or was it intentional theft from the middle class?
Will the $50B infrastructure bill put American Citizens back to work using American steel and American concrete? No, the money will be sent overseas for Chinese steel or sent home by illegals from their savings.
So this stimulus n+1 will also, in retrospect, seem to have been a "mess up".
"Obama Is Clueless on the Economy" is the wrong approach to the question I think. The author is assuming that the current adm is trying to revive the economy. In actuality, they are trying to sink it to force us to accept the new currency the IMF is cooking, the Bancor!
I think a lot of the confusion here as to the administrations motives and competence stems from an almost completely dissimilar set of goals between your typical ZH commenter (or man on the street, for that matter) and those calling the shots.
They don't think they need to care about reality - they're only concerned with watching polls and planning what they want the public to see as their policy platform, and figuring out how to retain power.
A question more important than "did the first stimulus go as planned", is "when will the bunker mentality get out of hand"? They're betting they can play make believe indefinitely, and it's not going to work.
"They're betting they can play make believe indefinitely, and it's not going to work."
Correct...no it's not.
Clearly this calls for another academic appointment to the cabinet in order to sort it all out.
The smart money's on Harvard, but really anyone from the NE will do ;-)
Chicago. You are getting the stench right but not the smell. It smells like Chicago.
Certainly not intentional to steal from the middle class. That is giving them way too much credit. They have no idea what they are doing. Throw enough sxxt at the wall and some of it may stick. Two thirds of congress isn't even aware of a 3.8% federal sales tax on all real estate sales starting in 2013 from the death care reform act.