Posted on 09/20/2010 10:09:04 AM PDT by SeekAndFind
It is a ritual as predictable as the tides. With every election, we descend into sound-bite economics. Rhetorical claims grow more partisan and self-serving. We are now deep in this process. President Obama's policies either averted another Great Depression -- or have crippled the recovery. These debates confirm the dreary state of economic discourse. The right rejects the idea that sometimes government must rescue the economy from panic; the left sees salvation only in ever-larger government. The first is an invitation to anarchy; the second threatens long-term economic growth through higher taxes, regulations or budget deficits.
When Obama took office in early 2009, the economy and financial markets were in virtual free-fall. By summer, they were not. Only a rabid partisan can think that Obama's policies had nothing to do with the reversal. His forcefulness helped calmed the prevailing hysteria.
True, many recovery policies came from the Federal Reserve, and others -- notably, the unpopular Troubled Assets Relief Program (TARP) -- began under the Bush administration. Obama's contributions included the "stimulus program," a rescue of the auto industry and a "stress test" for 19 large banks. The stress test explored whether banks needed big infusions of capital. Most didn't.
The process was messy, and, although many details can be questioned, the overall impact was huge. Without government's aggressive response, gross domestic product would have dropped 12 percent instead of 4 percent and 16.6 million jobs would have been lost instead of 8.4 million, estimate economists Alan Blinder of Princeton and Mark Zandi of Moody's Analytics. Unemployment would have hit 16 percent. These numbers, too, can be disputed (they seem high to me), but the direction is certainly correct.
Up to a point, blaming Obama for the sluggish recovery is also unfair.
(Excerpt) Read more at realclearmarkets.com ...
to mention a government that becomes more and more authoritarian.
“The right rejects the idea that sometimes government must rescue the economy from panic”
Huh? It was Bush that saved liquidity. It was Obama that bought his friends auto companies and made sure that financial companies will hire more “minorities”. Samuelson is a joke.
RE: It was Bush that saved liquidity
What is this quotation Dubya made regarding abandoning free market principles to save the free market?
“What is this quotation Dubya made regarding abandoning free market principles to save the free market?”
Did you notice I did not say any particular company? TARP was about liquidity - what followed was about buying votes for Dems. There is a difference. Further, I did not state what the cause of the liquidity crunch was - absence of underwriting standards causing a real estate bubble (see Clinton Greespan) and too great an expansion of credit (see Paulson and Bush) built on shaking foundation (see above real estate bubble).
There are many FReepers who believe that Uncle Sam should not even use taxpayer money to attempt to rescue any financial firm or car company from their dire straights.
Hence, the Citigroups, the AIGs, the Goldmans, the Bear Sterns, etc. of the world should have all gone the way of Lehman. The argument was, had the government not stepped in, their unprofitable divisions would die and their profitable divisions would either continue or be taken over by stronger firms.
They point to the pieces of Lehman Brothers ( a giant firm the government did not bail out ) that were picked up by profitable banks like Barclays.
In other words, Bush’s TARP was uncessary. The markets would have healed itself.
Robert Samuelson, in this article, begs to disagree of course ( so does Larry Kudlow ).
Note, these two are not Obama fans and in the above article, Samuelson sharply critiques what Obama did since he was elected.
However, he still argues that the original TARP was necessary to prevent a complete, systemic collapse.
Evidently, you seem to agree with them...
“However, he still argues that the original TARP was necessary to prevent a complete, systemic collapse.
Evidently, you seem to agree with them...”
Sadly yes. Deflation is a real downer - see Germany in the 30s. The Fed and WH do have a requirement to act, since we a country went off the gold standard. If you wish to return to the gold standard, then the Feds are not necessary. Our money is based on “faith and confidence in GDP” not on anything real. Lose faith and confidence and see what happens. The decision to use home equity to reinflate the dot.com bust was Clinton and Greenspan. The decision to waive basic underwriting standards for home mortgages was Clinton buying off the CBC after signing Welfare reform. Bush, Paulson and all of the finance gurus thought they could expand credit. Bad decision given the underlying weakness in the rallies fundamentals (home equity).
I agree with a lot of what Samuelson says here.
Even when the government does what’s right, it takes five times longer and costs 10 times what it should!
RE: Even when the government does what’s right, it takes five times longer and costs 10 times what it should!
So, was the original TARP the right thing to do? Or should the government simply have left the financial firms to go under?
If it was the right thing to do and there was no other alternative, then IT HAD TO BE DONE, even if we concede that it would be inefficient and costly...
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