“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. America has a debt problem and a failure of leadership. Americans deserve better. I, therefore, intend to oppose the effort to increase America’s debt.” – Barack Obama
My Daddy was fond of saying that a president was much like a quarterback, getting way too much credit when things go well and too much blame when things go poorly. I happen to agree, of course – but I agreed with a lot of what my Daddy said, so this is no surprise.
Back in 2009 this nation hit a rather impressive economic slump, from which we have yet to fully recover. The blame for the problem fell with George W. Bush. While I have no shortage of issues with Bush-era policies, I happen to believe Bush should take the blame only from a “buck stops here” standpoint. Federal policies of tacit public backing for Fannie Mae and Freddie Mac, loose money policies at the Federal Reserve, a national debt-rating cabal divorced from performance-based measures, and the ability to bundle junk loans and sell them as quality loans for investment vehicles all combined to turn George W. Bush’s famed “ownership society” into a massive housing bubble. When the bubble burst, the effects were real and far reaching. (And if you’re keeping score, Bush had a Republican House and Senate for six of his eight years and could have made changes.) It wasn’t direct negligence and bad policy on the part of the president per se, but an inability or unwillingness to make the hard changes that were necessary when the sugar high (crack high?) felt so good.
Lots of conservatives took to blaming Obama for the following years of recession saying that his policies didn’t help get us out of the situation. They’re “right” in the sense that Obama’s policies likely didn’t do any good, and probably did some harm. And yet even if my preferred candidate (Ron Paul) had won the 2008 presidential election, the economic hardships would have been the same – or very similar. The reason for this takes us back to John Stuart Mills’ famous dictum: “panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.” The “destruction” of the economy was happening while things were good – while we were grossly mis-allocating resources into a housing sector that couldn’t possibly continue on the same trend (and therefore couldn’t possibly support the insane levels of debt). Even if Ludwig Von Mises had become the “economy czar” we were going to have trouble in 2009 and beyond.
The 2012 election has come and gone and we’re stuck with Obama and his bad policies for four more years – four years that I suspect will have some serious economic fluctuations. Will Obama’s policies be the “cause” of these fluctuations? No more so than Bush’s were. But he has not undertaken to fix fundamental shortcomings within the economy, preferring to have Ben Bernanke “kick the can” down the road through Quantitative Easing, taking bigger and bigger doses to get just a little bit of a “high” and keep from feeling so bad. It will continue to take bigger doses to keep the new coalition intact (see “Non-Workers Unite!“) – bigger doses to keep the bellies fed for the non-workers and also keep the bank accounts padded for the aristocracy. One can’t help but suspect it’s going to come back to bite us in the near future.
My prediction, if you want to call it that, is for a rather significant economic downturn in the near future – probably 2013, though we may see early signs of more pain in the next couple of months. This isn’t me “going out on a limb” – I read more blogs than I write and a fair number of very knowledgeable, well-researched folks are saying the same. The good news for us is that we burned down a lot of the wastefulness in the last recession, so we likely will hold out OK in the next one. But, the “cake is baked” so to speak. Europe has problems that are spinning out of control, and China cannot possibly keep up the current, unsustainable model. (But, after things get bad, they’ll likely get better again, regardless of Obama’s inept policies.)
At that point we will see a test of two opposing trends. The first trend is the one we noted above – presidents take the blame when things go poorly. The second is the drumbeat of acolytes in which this president only gets good marks, never bad, and economic problems are blamed on external forces (e.g. the Japan earthquake). This time around we will all be the “victims” of a euro-zone slowdown (breakup?) and Chinese economic weakness (not to mention conflict in the middle east, should it come).
Because of the propensity of the media to deflect for this president, I shall undertake to act as a counterbalance. Even though I hold that the president’s policies are not solely to blame for bad economic results (or solely to praise for good ones). Those are the breaks.
Thus, we’re entering the next phase of the O-nership society, where the president has to take O-nership of bad economic results.
First up? I suspect Greece and perhaps even Spain have reached the end of the line. The blowup could be spectacular, though I tend to believe (hope) that the professionals in the room can keep the collapse “managed” instead of chaotic. Will it have an impact here in the US? You bet.