Right Thinking From The Left Coast
Reality is merely an illusion, albeit a very persistent one. - Albert Einstein

Wednesday, September 22, 2010

It Was Fixed When I Got Here

"It would have been worse!”

This is the constant clarion call of Obama’s remaining defenders.  When it comes to the economy, they look at steady unemployment, sluggish growth, a poor business environment, ongoing foreclosures, etc. and tell us that’s it’s only this good because of the stimulus and Obama’s other economic policies.  Had the stimulus not been passed, we would have plunged into the deepest depression since the Great One.  It would have been complete economic meltdown.

This is nonsense, of course.  Matt Welch takes apart America’s favorite blogger/obstetrician on this subject in a must-read post.  But you don’t need to listen to libertarian bloggers.  Just take a gander at the infamous graph the administration showed of how unemployment would play out with and without the stimulus.  The “do nothing” projection showed higher unemployment but no meltdown.  This puts the Administration in the position of saying they saved us from a Depression they didn’t see coming.

Really, they’re one step away from claiming the stimulus saved us from the Boogeyman.

But John Merline points out something even more damning in recent economic data, specifically a re-evaluation of the economic numbers that shows we were technically out of recession last June.

You’d think the news that the Great Recession is officially over would be something to cheer about. On Monday, the National Bureau of Economic Research—the official recession scorekeeper—said the downturn that began in December 2007 ended way back in June 2009.

Anyone feel like celebrating?

The news is particularly unhelpful to the Obama administration right now.

First, it undermines the case for the economic stimulus. President Barack Obama has often claimed that the $800-plus billion stimulus package helped prevent the recession from becoming another Great Depression.

The trouble is that we now know the recession ended just as the stimulus money started to get spent. According to the White House’s own 100-day stimulus report, issued at the end of May 2009, only $45.6 billion in spending and tax relief had gone out the door by then. In other words, less than 6 percent of the stimulus money [Hal—about 1% of what Paul Krugman thinks we should have spent] was in the economy as the recession ended, making its role in stopping the downward spiral somewhat murky.

This news also makes it harder for Obama to blame President Bush for the nation’s current economic troubles.

Obama rightly notes that he was handed a terrible economy. But now we learn that the recession he inherited was just five months away from being over when he took office. So while Obama doesn’t own the recession in any way, shape or form, he certainly owns the recovery, which is now well into its 15th month.

I think that’s a motto for the GOP: Obama may not own the recession, but he certainly owns the “recovery”.

Merline goes on to compare the Reagan recovery to the Obama “recovery”.  This is, in my opinion, a bit unfair.  Even if Obama were following good economic policies, this recovery would be weaker.  Reagan inherited a worse situation, but one with more obvious solutions.  Industries were more regulated, the tax code was a nightmare, the marginal tax rate was 70% and price controls were in place.  All of these were imminently fixable.  Reagan also had more room to maneuver as we had less debt, a younger population and less fiscal pressure from Social Security/Medicare.  Finally, as Merline notes, the causes of the Reagan Recession and the Bush Recession were different.  The former was a hangover after a decade of Keynesian economic mismanagement; the latter was a result of an asset bubble combined with a decade of well, quasi-Keynesian economic mismanagement in the form of demand-side tax cuts and increased regulation.  No matter what economic policies we choose, there’s a surplus of housing a crushing burden of inflated mortgage debt to work through.  It’s going to take time for the ship to right itself.

But the point remains.  We broke the bank on the premise that a stimulus would create an economic recovery and ... it didn’t.  And the more data we get, the more and more damning the picture gets.

(Although stand by for Obama’s defenders to claim we would have a double-dip recession-depression plus an invasion by Martians had it not been for his “economic plan”.  At this point, defending his economic record is a matter of religious faith, not analysis.)

Posted by Hal_10000 on 09/22/10 at 04:01 PM in Politics   Law, & Economics  • (0) TrackbacksPermalink
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