Conservative Political Commentary

...usually with an attempt at historical and economic context

Tuesday, October 27, 2009

Is Obama President Yet?

Candidate Barack Obama spoke like a man who was very confident about solving America’s economic, social, and foreign policy problems. That’s the impression his silver-tongued oratory was trying to leave, and he succeeded enough to get elected by a majority. His speeches were long on platitudes and short on specifics, but, to many, he looked like the man with some answers, and they bought his message of “hope and change.”

When Does It Become Obama’s Presidency?
What we continue to see too much of is Obama’s willingness to blame all present problems on “the mess we inherited” from the previous administration, and to wish his critics would be silent. After all, they are, according to his statements, the ones who created the mess. To him, apparently, they have no right to criticize, or, for that matter, to even speak. George W. Bush is the great villain who caused all the trouble, the president and his people would have us think, and he is the one they continue to campaign and run against.

(See Jay Leno clip here.)

But Obama’s attempts to blame Bush for his (Obama’s) own situation is becoming tiresome to many of the American people, and possibly wearing thin among his supporters – certainly among many of his former supporters.

Every president inherits a situation of some great difficulty. A man who runs for president must accept this as a challenge. It is the height of bad form to blame your predecessor for everything when you’ve based your campaign on claims to understand and accept the challenges that are being faced, and claimed to have the desire and ability to deal effectively with them. Truman’s oft-quoted advice still stands: “If you can’t stand the heat, stay out of the kitchen.” (Biden explains to George Stephanopoulos how they “misread the economy” in video found here.)

Past Presidents Inherited Troublesome Situations, Too
Franklin D. Roosevelt faced a dire situation in 1933. He didn’t spend his terms of office whining about what a mess Mr. Hoover left him. While (in my opinion) his economic “solutions” prolonged the Depression, he at least took it as his responsibility to deal with it. Did he claim that everyone had “misread the economy”? I don’t think so. Correct me if I’m wrong.

Ronald Reagan inherited quite a mess from Jimmy Carter. But he didn’t repeatedly remind everyone of that fact as a political strategy in his White House. He didn’t waste time and energy blaming others for his troubles. He devoted his efforts to restoring prosperity and winning the Cold War.

Bill Clinton said there couldn’t be a middle-class tax cut because the economy was so much worse than they thought when they came into office. That kind of excuse was lame then, and it’s lame now. Get some competent economic advisers. Still, we didn’t hear Clinton harping on the problems left by the previous administration after he was well into his first term.

Can We Blame Everything on Bush?
Yes, Bush left an economic mess. Liberals would have us believe it was entirely Bush’s fault, when in fact there was plenty of blame to go around, most of which ought to be placed on Democrats. The housing crisis that led to the financial meltdown was anticipated long before it broke open. The warning signs were there. When the Bush Administration tried numerous times to get effective regulation of Fannie Mae and Freddie Mac, they were rebuffed by Congress, who wanted to attack the regulators. How dare they accuse these GSE’s of anything? They were surpassing their goals (after creatively adjusting the books) in providing affordable housing, i.e., buying mortgage loans made by banks under duress to people who were obviously unable to repay them. But the execs, mostly ex-Clinton people, got their huge bonuses. (See video about Congressional hearings here).

Then there’s the deficit. Bush left two wars, as well as “compassionate conservative” programs, such as a Medicare drug benefit, No Child Left Behind, and other costly items. OK. But: “Under President Obama, government will spend more on welfare in a single year than President George W. Bush spent on the war in Iraq during his entire presidency.” [1] Does Bush’s admittedly large deficit justify the astronomical deficits we’re already seeing under Obama, to be followed by even more? How much is too much? We may learn the answer.

Further Reading
I found three good articles on Obama’s insistence on blaming the Bush Administration, one by National Review’s Rich Lowry, one by Peggy Noonan at The Wall Street Journal, and one by William McGurn, also at WSJ. Polls have indicated that many Americans still blame Bush for the continuing economic problems, but they also show Obama’s support, especially among independents, declining. Maybe that reflects some significant reality about a president who obsessively apologizes for America and blames George W. Bush for his own lack of success.

[1] Robert Rector, Katherine Bradley and Rachel Sheffield, “Obama to Spend $10.3 Trillion on Welfare: Uncovering the Full Cost of Means-Tested Welfare or Aid to the Poor,” 09/16/2009, at



A Reason-Based Initiative said...

I could perhaps concede that the political effectiveness of a POTUS blaming his predecessor can not last indefinitely. At some point the American people will regard this as "Obama's Economy." But of course, I disagree with you that the Democrats and government interference are primarily responsible for this economic mess we're in. I certainly don't think that Obama is displaying classlessness in pointing out that he's being blamed for problems out of his control, certainly Dick Cheney's attacks on Obama are more illustrative of "the height of bad form."

But if you don't mind I'm going to put aside the main point of this post and ask you something I'm curious about. You have mentioned a few times on this blog that you regard FDR as "anti-freedom" and his policies as ineffective in combatting the Great Depression.

From the time of FDR until Reagan we had fairly tight regulation of the financial sector. Taxes on the highest income bracket were much higher during that period than they are today. And yet, we didn't have any economic downturns on the scale of the one that we are seeing today.

Even if you are skeptical of the claim that the New Deal brought America out of the Great Depression, I'm sure you concede that WW2 helped America economically. And why is this? Because the war effort was essentially large-scale fiscal stimulus.

My reading of history is that economic inequality leads to economic crises which can be combatted by fiscal stimulus. After fixing the economy we can maintain a more just, efficient one by keeping in place downward redistributive policies and regulation of the financial sector. Where am I wrong?

Obama inherited not only an economy that generated decreasing government revenue, but one in which the top 1% of wage earners controlled more wealth than the bottom 95%. You're a minister in a religion founded on the teachings of a man who spoke out against maltreatment of the poor and less unfortunate. So how do you justify this?

Eddie said...

I am planning a short series of blog articles on the economic policies of the government and the Fed in which I want to address the questions you raise. They are good points that deserve to be answered. I can’t really begin to do that here, but I will say that I am convinced that the Great Depression was caused essentially by mismanagement by the Fed, and prolonged by government actions caused by a fundamental misunderstanding of the problem. I believe FDR was a great man who gave America a great, but often very misguided, effort in trying to deal with the Depression, then had the task of leading America through World War II to victory, which, of course, he did successfully.

America was on the gold standard when FDR came into office. The start of the Depression brought gold into the US, as Milton Friedman explains, but the Fed did not allow the money supply to grow accordingly. It shrunk by one-third. The government had the idea that the Depression was caused by deflated prices, but in fact, deflated prices were caused by the Fed’s mishandling of the money supply. The government set out on a series of ill-advised programs that tried to get prices up by creating artificial shortages, etc. FDR took the US off the gold standard. Meanwhile, Keynesian theory tried to explain the Depression and how to avoid such things in the future, and governments loved it because it encouraged deficit spending.

FDR did manage to put some people to work through efforts like the WPA, etc., but the overall program could not bring America out of the Depression. WW2 did that. Now off the gold standard, the money supply was allowed to grow. While the war was a fiscal stimulus, it involved a great part of the economy, so that virtually all sectors got an economic boost because the war production program was structured to affect many private-sector industries, unlike the current stimulus, which is basically a pork-barrel spending program and doesn’t do nearly enough to stimulate the private sector. Also, it is simply the wrong approach because it results in huge deficits that eventually threaten our currency by creating more debt than the government can readily place or repay. Of his deficits, FDR said, “We only owe it to ourselves,” but even if that was the case then, it isn’t now.

Eddie said...

Continued ..
Even though the government virtually took control over private business in a corporatist type relationship, the urgency of the World War II effort demanded a level of efficiency which normally wouldn’t have been there. And the profit motive was much in effect. Of course, FDR left the country under a lot more government control than before, and a lot more than was needed.

Anyway, those are some of the ideas I plan to develop. They aren’t new, they just are not what government generally prefers. They like Keynes better than Friedman, Hayek, Mises, etc. I am not in favor of redistribution of wealth such as Obama wants. I consider it unjust and unconstitutional. People at all levels always fare better in a free-market capitalist economy than in a central-planning or “progressive,” let alone socialist, economy. Left to minimal government manipulation, the market is self-correcting. The poorest nations are those with the most government controls. Government should focus on preventing and punishing fraud and abuse and enforcing private property and contract rights, not micro-managing private businesses or people’s everyday lives.

A Reason-Based Initiative said...

You're a smart guy, and when you espouse views consistent with throwback conservatism you're very, very good. After all, conservatism has a very admirable intellectual tradition that I respect. But I honestly think the arguments you're making about FDR and government intervention are specious. The belief that we need to "get government off our backs" so that the private sector can grow and improve the lives of everyone is emotionally appealing and elegant in its simplicity, but it's wrong.

Take your arguments about the gold standard. Countries went off the gold standard in this order: Japan, Britain, Germany, U.S., France. Their industrial outputs subsequently boomed in this order: Japan, Britain, Germany, U.S., France. There is nothing magical about fixed currency.

As far as stimulus goes. The World War 2 effort was around 40% of GDP, probably a little over. Obama's stimulus was much much lower than even 10% of GDEP. I think that the stimulus should have been BIGGER (not 10%, but I think we should have at least kept state funding), but unfortunately centrists demanded a more cautious approach. As a result we're now probably in a jobless recovery. No stimulus/bailouts, no recovery. Bigger stimulus, better recovery.

You would say that we don't have the money to do this, but if you look at what is contributing most to our deficit it isn't Obama's "socialist" policies. It's a decrease in government revenue (thanks in part to unnecessary tax cuts), which we can increase by stimulating the economy. Now, I seriously doubt that Obama's economic advisors hold a Cheney-esque view of deficits (namely, that "deficits don't matter"), but I sure hope they all understand that in times like these it's best to get GDP and employment up and worry about deficits later.

A Reason-Based Initiative said...

I'm still curious about your ideas concerning economic inequality. Does it matter? Perhaps it matters but the government should have no power to reduce inequality. Maybe we should rely on private charity. Either way, I'm interested.

I don't give FDR full credit for bringing America out of the Great Depression. But he was a fantastic leader and did wonders to instill confidence in the American people. Americans were so fed up with their economic situations that they were not only sympathetic towards dictatorial systems of government like fascism and communism, but willing to adopt them. Paradoxically, by resisting this impulse, FDR saved capitalism.

And he saved capitalism by creating institutions necessary for a post-industrial economy. He saved capitalism by structuring it in a way that would ensure that a rising tide would life all boats. The gilded age pretty much lasted all the way up to the Great Depression, when the New Deal created a more democratic economy. In my view, no American president has done more to improve the well-being of the average American worker.

What would you cite as an example of the kind of laissez faire capitalism you advocate? I know what country I would cite as an example of the kind of economic system I favor. America. Or at least, America before the anti-government neocons came onto the scene.

I'm interested in seeing your upcoming blog posts, and I'm sure I'll learn a lot. Perhaps I'll even change my mind on a few things, I've done it before. Not too long ago I was in the anti-tax, "government is the problem, not the solution" crowd. But now I really do think the facts point the other way.

Eddie said...

Thanks for your comments. These articles should be published during the coming week.

Concerning economic inequality, the government should work to help provide equality of opportunity, not equality of outcome. For those who are unable to help themselves, government properly has various programs to assist. Churches and private charities can and should do a great deal of this also.

However, this has been co-opted by government to the extent that churches and charities do less than they should. I don't mind government assisting the needy, but the welfare state programs (Great Society, etc.), for all the billions spent, have not eradicated poverty, nor can they, because generally they have encouraged the breakup of families, and put generations on welfare with little incentive to work.

The way to fight poverty is to get people working. Over the last 50 years or so, the government has succeeded in establishing a permanent welfare-dependent class.

You and I seem to have quite different philosophies of government. I look forward to more discussion.

A Reason-Based Initiative said...

I don't want to belabor the point so this will be my last comment on this post. I do look forward to your upcoming posts though.

1. I think there is decent reason to believe that Great Society programs DID reduce poverty:

2. Our society is expensive to maintain but benefits hundreds of millions of people. Those at the top who have benefitted the most should pay the most to fund it. A man's skill at being a CEO wouldn't benefit him if he lived in the wild in a hunter gatherer society.

3. I'm convinced that without welfare we really would have people starving in the streets. Without government assistance we wouldn't just be in another gilded age, a good chunk of society would be destitute. Economically, welfare-state Americans are much better off than pre-FDR Americans. Would you agree?

4. I can only think of one example of a government free market. The Bush derivatives market. It didn't go so well...

5. Money IS opportunity. Rags to riches stories are as inspiring as they are rare, so we shouldn't allow malnourished, unsheltered children to continue on in their destitute circumstances become of some wish-thinking that says they have just as much opportunity to go to any Ivy League college as the children of unimaginably wealthy parents.