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Obama's Financial Plan: Trickle-Up Poverty

Discussion in 'BBS Hangout: Debate & Discussion' started by El_Conquistador, Mar 3, 2009.

  1. El_Conquistador

    El_Conquistador King of the D&D, The Legend, #1 Ranking
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    Do you think doubling the budget deficit is wise? How about raising taxes on capital investments during a financial crisis? Do you think directing money to social programs, instead of public works projects, provides stimulus? Do you appreciate the new carbon tax on your energy usage? How about the fact that our GDP would have to grow an extra 8% to make up for Obama's new spending packages?

    There is a reason why Wall Street has dropped its collective britches and taken a steaming dump all over Obama's fiscal policies -- it's because they are designed to reward his constituencies and do nothing for the overall health of the economy. It's TRICKLE-UP POVERTY and it's wrongheaded.

    ===========================================
    www.wsj.com
    The Obama Economy
    As the Dow keeps dropping, the President is running out of people to blame

    As 2009 opened, three weeks before Barack Obama took office, the Dow Jones Industrial Average closed at 9034 on January 2, its highest level since the autumn panic. Yesterday the Dow fell another 4.24% to 6763, for an overall decline of 25% in two months and to its lowest level since 1997. The dismaying message here is that President Obama's policies have become part of the economy's problem.

    Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it's become clear that Mr. Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence -- and thus a longer period of recession or subpar growth.

    The Democrats who now run Washington don't want to hear this, because they benefit from blaming all bad economic news on President Bush. And Mr. Obama has inherited an unusual recession deepened by credit problems, both of which will take time to climb out of. But it's also true that the economy has fallen far enough, and long enough, that much of the excess that led to recession is being worked off. Already 15 months old, the current recession will soon match the average length -- and average job loss -- of the last three postwar downturns. What goes down will come up -- unless destructive policies interfere with the sources of potential recovery.

    And those sources have been forming for some time. The price of oil and other commodities have fallen by two-thirds since their 2008 summer peak, which has the effect of a major tax cut. The world is awash in liquidity, thanks to monetary ease by the Federal Reserve and other central banks. Monetary policy operates with a lag, but last year's easing will eventually stir economic activity.

    Housing prices have fallen 27% from their Case-Shiller peak, or some two-thirds of the way back to their historical trend. While still high, credit spreads are far from their peaks during the panic, and corporate borrowers are again able to tap the credit markets. As equities were signaling with their late 2008 rally and January top, growth should under normal circumstances begin to appear in the second half of this year.

    So what has happened in the last two months? The economy has received no great new outside shock. Exchange rates and other prices have been stable, and there are no security crises of note. The reality of a sharp recession has been known and built into stock prices since last year's fourth quarter.

    What is new is the unveiling of Mr. Obama's agenda and his approach to governance. Every new President has a finite stock of capital -- financial and political -- to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his "stimulus" spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest.

    His Treasury has been making a similar mistake with its financial bailout plans. The banking system needs to work through its losses, and one necessary use of public capital is to assist in burning down those bad assets as fast as possible. Yet most of Team Obama's ministrations so far have gone toward triage and life support, rather than repair and recovery.

    AIG yesterday received its fourth "rescue," including $70 billion in Troubled Asset Relief Program cash, without any clear business direction. (See here.) Citigroup's restructuring last week added not a dollar of new capital, and also no clear direction. Perhaps the imminent Treasury "stress tests" will clear the decks, but until they do the banks are all living in fear of becoming the next AIG. All of this squanders public money that could better go toward burning down bank debt.

    The market has notably plunged since Mr. Obama introduced his budget last week, and that should be no surprise. The document was a declaration of hostility toward capitalists across the economy. Health-care stocks have dived on fears of new government mandates and price controls. Private lenders to students have been told they're no longer wanted. Anyone who uses carbon energy has been warned to expect a huge tax increase from cap and trade. And every risk-taker and investor now knows that another tax increase will slam the economy in 2011, unless Mr. Obama lets Speaker Nancy Pelosi impose one even earlier.

    Meanwhile, Congress demands more bank lending even as it assails lenders and threatens to let judges rewrite mortgage contracts. The powers in Congress -- unrebuked by Mr. Obama -- are ridiculing and punishing the very capitalists who are essential to a sustainable recovery. The result has been a capital strike, and the return of the fear from last year that we could face a far deeper downturn. This is no way to nurture a wounded economy back to health.

    Listening to Mr. Obama and his chief of staff, Rahm Emanuel, on the weekend, we couldn't help but wonder if they appreciate any of this. They seem preoccupied with going to the barricades against Republicans who wield little power, or picking a fight with Rush Limbaugh, as if this is the kind of economic leadership Americans want.

    Perhaps they're reading the polls and figure they have two or three years before voters stop blaming Republicans and Mr. Bush for the economy. Even if that's right in the long run, in the meantime their assault on business and investors is delaying a recovery and ensuring that the expansion will be weaker than it should be when it finally does arrive.
     
  2. pgabriel

    pgabriel Educated Negro

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    yes, the drop on wall street has nothing to do with the revelation that the GDP declined 6.2% on an anualized basis in the last quarter of 008 and that AIG is still burning through cash along with GM

    Forget that Jan was one of the largest job loss months on record, its obama who scared people into not spending our way out of this.

    and lastly, i love the assertion that investors aren't buying into the market of a fear of taxes on making money. i guess they'll put their money into real estate. LOLz
     
  3. SWTsig

    SWTsig Member

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    t_j is still posting?

    neat
     
  4. okierock

    okierock Member

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    Yeah, Obama's spending and taxes probably had nothing to do with the markets... the Wall Street Journal doesn't have a clue.
     
  5. pgabriel

    pgabriel Educated Negro

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    or maybe wall street doesn't react to that. and for the record, the almighty wall street journal isn't always right.
     
  6. stanleykurtz

    stanleykurtz Member

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  7. mc mark

    mc mark Member

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    Especially since the evil Darth Murdock bought it.

    no agenda at all....
     
  8. FranchiseBlade

    Supporting Member

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    TJ I followed your link to the WSJ homepage. I didn't see the article there. I noticed the author isn't in your original post.
     
  9. Major

    Major Member

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    The bigger question is why this thread has any responses? It's time to just stop.
     
  10. stanleykurtz

    stanleykurtz Member

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    The article is dead on. The markets don't like Obama's policies- that is crystal clear.

    Obama is just making things worse.
     
  11. pgabriel

    pgabriel Educated Negro

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    the market doesn't like the economy, that's crystal clear and if obama or bush (to be fair) had let the banks fail, they really wouldn't like it.
     
  12. surrender

    surrender Member

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    Obama is to blame for AIG's $62B loss, lol
     
  13. Major

    Major Member

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    Nonsense. The market has been falling for 1.5 years now. The market is simply responding negatively to anything. For the simplest evidence of this - it responds negatively to the possibility of banks failing, and then it responds negatively when the government doesn't allow them to fail.

    The market is simply falling because it's overvalued based on S&P earnings and is panicky and still uncertain of the future. Specific stocks (for example, health care) fell due to Obama policies. But the market has bigger things in mind.
     
  14. okierock

    okierock Member

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    The market will lead the economy out of this recession eventually.
     
  15. CrazyDave

    CrazyDave Member

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    trying to blame the guy who just got into office for the economic situation here, and globally, is laughable, and characteristic of those who would use party lines to create fear and doubt at our country's expense to further their own political gain.

    Let it go. He's the president. Hoping the country does worse now that he's in power so that your favorite team regains some artificial sense of respect is not the answer to our problems.

    Can't we all just get along?
     
  16. Deckard

    Deckard Blade Runner
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    Everyone is looking for the bottom. Those I know playing are making their money shorting the market. Very soon, buying an index fund(s) is going to make some folks extremely happy about 10 years from now. That's what I'm looking at doing. We're not at the bottom. Not yet.
     
  17. okierock

    okierock Member

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    Here is the definition of partisan politics.

    "Shut up and let us have our way you partisan anti-Americans"
     
  18. Bandwagoner

    Bandwagoner Member

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    the awesome part is no matter what Obama does from here on out, his stimulus will kick-in hard around 2011 and the economy will have the arrow pointing up at that point. So even if we are technically down once people see the numbers heading back up and the job market growing, they will vote to keep in the incumbent.
     
  19. CrazyDave

    CrazyDave Member

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    And when the guy in the stands orders a heineken and gets a budweiser? That's on him, man. That's on him, too.
     
  20. B-Bob

    B-Bob "94-year-old self-described dreamer"

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    It's in the Opinion section, of all things, and has no attribution. Mr. Murdoch can type! (or dictate)
     

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