The Great Financial Meltdown of '08

[TracyCoxx]

November 5th, 2008

Originally Posted by CNN

Obama rides economy to White House
3 out of 5 voters say it's their top concern, as the country faces the worst crisis since the Great Depression.

Bounce from economy

The faltering economy is thought to have given a boost to the Democratic contender Obama.

Just a few weeks ago the race was nearly even. But as the economic outlook worsened, the polls began shifting in Obama's favor.

So the economy tanked right before the election handing the presidency to Obama. He promoted himself as the guy to fix the economy.

Now almost 4 years later here's where we are:
* Economic growth is 1.9%
* Worker productivity?the amount of goods andservices produced in an hour of work in the nonfarm business economy is down .9%
* Unemployment remains at 8.2% (when those who have stopped looking for work are factored in it's more like 15%)
* African American unemployment remains well above average: 14.4%
* Household income continues to drop.
* Income inequality is on the rise
* Poverty continues to rise: at 15.1% it's the highest since 1993
* Employer sponsored benefits dissapear
* Total family wealth is down $10.9 trillion
* 1 in 8 home mortgages are still delinquent or in foreclosure

So how has Obama done? And more importantly, have we done anything to prevent another financial meltdown like in 2008?

[smc]

Two questions are posed by the OP. The first is:

Originally Posted by TracyCoxx

So how has Obama done?

The second:

Originally Posted by TracyCoxx

And more importantly, have we done anything to prevent another financial meltdown like in 2008?

No honest answer can be given by anyone without first acknowledging that presidents, on their own, cannot direct the economy to the degree necessary to halt a recession. The U.S. system is not set up for presidents to rule by fiat. So, how Obama has done has to be answered in terms of what he has proposed to do, not what he has necessarily been able to bring to pass.

This would be the same for ANY president, of any party, unless the United States fundamentally changed how law and policy is enacted.

So, to answer how Obama has done: in general, the trend toward a worse recession that could have turned into a depression was halted. Obama ensured that the wealthiest Americans, who he and all politicians of the Democratic and Republican parties ultimately serve, were protected from complete meltdown. His Justice Department took a not-unexpected (by me) pass on prosecuting the people who put the country in this position as they played "casino" with the economy.

Obama failed to take advantage of his majority in Congress to push through a much larger stimulus that would have reduced unemployment.

All in all, I think Obama failed. A Republican would have failed, too, and the only difference might have been whether we were mired in recession rather than in a full-blown depression.

I think the cartoon below, involving fire, sums up the Obama approach. It is the same approach McCain would have taken.

The way in which the the second question is posed is rather shocking. I am not sure who TracyCoxx means by "we." Given the OP's history on this site, it is difficult to wrap my brain around the possibility that TracyCoxx means the U.S. government, which implies an acknowledgment that Congressional action, for instance, is about governing and not some zero-sum game.

Nevertheless, I will answer, and the answer is NO. The U.S. has done little to ensure there will not be another meltdown. To do so requires a massive stimulus, government creation of public works jobs, and massive regulation of the financial sector to ensure that the criminals who run the banks cannot get away with their casino games again. Obama will not do that, nor will Congress. Those criminals own the government.

[ila]

Originally Posted by smc

...No honest answer can be given by anyone without first acknowledging that presidents, on their own, cannot direct the economy to the degree necessary to halt a recession. The U.S. system is not set up for presidents to rule by fiat. So, how Obama has done has to be answered in terms of what he has proposed to do, not what he has necessarily been able to bring to pass.

This would be the same for ANY president, of any party, unless the United States fundamentally changed how law and policy is enacted...

And yet after having watched several elections in the US (as an interested bystander) each person running for the US presidency has said that he is the one that will fix the economy.

[smc]

Originally Posted by ila

And yet after having watched several elections in the US (as an interested bystander) each person running for the US presidency has said that he is the one that will fix the economy.

Making promises that are IMPOSSIBLE or nearly impossible for a candidate to fulfill are part and parcel of every presidential campaign, regardless of candidate and regardless of party. For instance, during the Republican presidential primaries this year Michele Bachmann promised to return gasoline prices to the $2/gallon level. However, a president has nearly zero power to affect gasoline prices beyond getting a repeal of the 18.4 cent/gallon federal gas tax. OPEC and the market "set" gas prices through their control of the price of oil. Newt Gingrich promised to build a thriving human colony on the moon.

[ila]

Originally Posted by smc

Making promises that are IMPOSSIBLE or nearly impossible for a candidate to fulfill are part and parcel of every presidential campaign, regardless of candidate and regardless of party. For instance, during the Republican presidential primaries this year Michele Bachmann promised to return gasoline prices to the $2/gallon level. However, a president has nearly zero power to affect gasoline prices beyond getting a repeal of the 18.4 cent/gallon federal gas tax. OPEC and the market "set" gas prices through their control of the price of oil. Newt Gingrich promised to build a thriving human colony on the moon.

I stand corrected on my pronouns. I had forgotten about Michele Bachmann (although technically she was running for her party's nomination and never made it as far as running for president).

[GRH]

SMC makes a valid point about the overall impotence of any president (regarding economic momentum), and I would extend such impotence to more than just the presidency. There are a concert of factors at play that affect the economy, and only some of them are directly influenced by the government.

Even among the governmental players, there is often gridlock and dysfunction that prevent more coordinated action. The president may propose an economic vision, but it is ultimately up to Congress to pass laws. The Fed may loosen or tighten monetary policy, but the actions taken on behalf of monetary policy should ideally be coordinated with fiscal policy (a responsibility of Congress). You have the regulators, the lawmakers, the Fed, and then a host of factors outside of our control-- i.e. the actions of the ECB and other foreign central banks, trade policy, etc. Arguably, a huge amount of economic uncertainty, slowed domestic growth, and stalled out unemployment figures are being driven by the European debt crisis-- something that American politicians are unable to directly influence.

I've LONG maintained this view, and am not suddenly espousing it as a defense of the Obama administration. I've felt that Presidents-- both Republican and Democrat-- take more than their fair share of credit and blame when the economy is both good and bad. Granted, the President is the most visible symbol of our government, and perhaps such a figurehead makes a more convenient scapegoat than say, the Federal Reserve Chairman, etc. I realize the purpose of the opening post wasn't to provoke educated discussion (or to talk about how deleveraging recessions have historically been long and required many years to reach full recovery)-- but I figured that I would reply with a more nuanced response than simply pointing out that the aforementioned economic facts exist all the while the Bush tax cuts for the wealthiest 1% have been preserved. 8% unemployment while the wealthy have historically low tax rates...Evidence that the "job creators" are hard at work reinvesting their tax savings in building America!