As 2009 opened, three weeks before Barack Obama took office, the Dow Jones Industrial Average closed at 9034 on January 2, its highest level since the autumn panic. Yesterday the Dow fell another 4.24% to 6763, for an overall decline of 25% in two months and to its lowest level since 1997. The dismaying message here is that President Obama’s policies have become part of the economy’s problem.
Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it’s become clear that Mr. Obama’s policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence — and thus a longer period of recession or subpar growth.
Update: Investor’s Business Daily is not happy either:
Capital, bluntly put, has gone on strike. Those who own wealth are pushing it to the sidelines, as a young and inexperienced president tries to jam through the most sweeping economic changes in over 70 years.
The prospect of these changes becoming law has already radically altered our nation’s economy. Entrepreneurs and CEOs who once created new products, new services, jobs and trillions in wealth for America’s workers and retirees now find themselves vilified and punished for their success.
ABC News reported this week that many upper-income taxpayers already are planning to cut back on work and investments to stay under $250,000 in income ”” the point where Obama’s punitive taxes kick in. No one wins from this, yet Obama seems oblivious.
This isn’t the only warning sign. A new study asserts that some 100,000 highly educated, well-trained Indians now living in the U.S. will return home in the next few years. Ditto China.
Immigrant entrepreneurs are highly sensitive bellwethers of economic and social conditions. They know where the opportunities are ”” and where they aren’t. They’re voting with their feet.
The WSJ is surprisingly generous in not pointing out the “Obama Discount” that drove down stocks in the last half of 2008. The only significant rise in the market was when it appeared that Obama might not win the election – see election day, for example, when there were strong indications that McCain might pull off an upset, the market closed at over 9,300 (which was 1,000 points higher than it had been just 10 days before).
All the market is is a bet on the future and right now, the future under Obama looks very bleak.
Before the comment thread jumps into the same old back and forth, I would like to propose a question. I will base my question on the theological argument, buttressed by millenia of empirical observations, that absent the grace of God and the indwelling of his Spirit in the human heart, all men/women will act in sinful ways that hurt God and His creation.
My question to the blog community: Who causes more harm, the sinful capitalists who try to oppress the masses every chance they get or the sinful power brokers in government capitols who dictate to the governed how they must act and how much of their resources they must give to the government so the government can buy votes to perpetuate …, er, I mean solve society’s ills? What say you fellow bloggers – and please provide carefully reasoned arguments one way or the other?
Both are good assessments of the effect of bills which have been passed and Obama’s budget blueprint for the future. And since, as I understand it, a budget was never finalized last fall, the Democratic administration owns the majority of this fiscal year’s results as well as the next.
Yes, it appears that efforts are well underway to transform this recession into another Great Depression. It might well be a decade before the DOW is allowed to return to its January high. Sigh.
Our only financial security is in the Lord, not banks, not stocks and bonds, not pension funds, and not social security and the government.
AND NOT REAL ESTATE!
I think the Dow has fallen faster against unfulfilled (or perhaps fulfilled) expectations of the new administration, but I think the crash was and is inevitable. There is still much wreckage to come before true repairs to the financial system can be effected.
I think the question really is, Daniel, which is better: capitalism that allows people to move between one ‘class’ and another, or a system of Government run welfare that encourages through entitlements people to stay where they are through ‘redistribution of wealth’.
Capitalist societies have been shown to be the most mobile of all economies for the populace, as well as the most generous in giving to its own and to other nations (exports, foreign aid, disaster relief, etc.)
No system is perfect, and we will see abuses of capitalism, but for the most part, I’ll take a democratic republic with capitalism over government controlled socialism any day.
Daniel, I like your question. What makes the world go are the three motivations ( really one) for Power, Sex, and Money. So there is no difference between the two seeming opposites you offer. Remember, the devil is temporarily in charge.
And having rubbed elbows with a few wealthy “capitalists”; they don’t necessarily try to oppress anyone; they are motivated by short term gains without consideration for the consequences. This is also true of the ” masses”. Another way of stating original sin; Human Nature is Evenly Distributed.
I agree that with your proposition that the Democrats ( not all) are motivated by basically buying votes by making impossible promises. I have to admit that I thought Obama was smart enough to challenge his party on that. After he promised to expand spending, balance the budget, and not raise taxes, I am not sure how smart he is. The only one one those three that will come true is that he will expand spending.
If you can read the day to day journals of the 1933 – 34 period, I think that you, like I, would have a profound sense of repeating history. Um, there is one difference – the proportional government action today is far more aggressive than it was in 1934 – 38. Will we have proportionaly worse results? I try to immagine that it can’t be so….
Don
Daniel,
I would submit that the sinful power brokers in government do more to harm society than the greedy capitalist who oppress people do. This is because the power brokers are far more numerous and have more power than the few capitalist who seek to oppress people.
I’ve known quite a few successful capitalists and none of them try to oppress others. They try to get rich by fulfilling a need that others have. While there are unscrupulous capitalists, they are outnumbered by unscrupulous politicians. At least the capitalists try to create something other than regulations.
YBIC,
Phil Snyder
2. Daniel:
You pose a good question but it misses a point and makes a flawed assumption.
First, we can’t do without either government nor capitalists – they are both necessary evils. We must have both, and one should help restrain the other. In the best of times the best of each restrains the worst in the other. Unfortunately, today the worst in each is reinforcing the worst in the other. The solution is not to dispose of the system but to restore the system. When the nation suffers enough it will grow weary of evil men. Government is the easiest for them to affect.
The other problem with your question leads, or allows, people to to assume that the only influences upon the above system is “power, sex, and money” which is not true for a christian (nor even a poor Atheist). Charity and grace has been shown in our history both in government and in capitalism. A better question might ask just how we christians live in this very fallen world in which we find ourselves. How do we effect government and capitalism within our own sphere of influence?
Don
An interesting question, Daniel, and it gets to the heart of many of the “same old same old” disputes on this blog. Let us assume that all of us want what is best for all people, and favor policies which we think will benefit the most people. I don’t necessarily agree with the blanket statement that capitalists just oppress people any more than I do with the idea that all politicians are corrupt and self-interested. I do favor a — relatively speaking — free-market system rather than a centrally-controlled economy. While some entrepreneurs are indeed greedy and dishonest, many are not, and we do have a legal system which, for the most part, either prevents or punishes really anti-social business behavior, so a free-market system with these legal boundaries allows creativity and incentives to improve. Better ideas and better delivery end up benefiting the customers as well as the entrepreneurs, and while large businesses do develop, they don’t acquire the kind of power that government has. And while many bureaucrats and politicians are people of good will, the concentration of power in the decision-makers at the top allows the possibility for really evil people to control too much. On the whole, given the fallen nature of man, I prefer a system in which power is distributed among a larger number of potential sinners.
The more things change – the more they remain the same:
[blockquote]We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot.
-Treasury Secretary Henry Morgenthau, Jr., testifying before the House Ways and Means Committee in May 1939.[/blockquote]
Let’s see, we are facing a tough economic crisis so what do we do?
Let’s elect the least experienced person in history to run the world’s biggest economy. He gives such great speeches, and has such a nice family, he is surely going to be a great president?
Well done. Of course there are 7,000 earmarks in the budget even though he promised none. Of course he is getting us deeper and deeper in debt. Of course he is trying to promote new spending initiatives while our economic house is burning. Well done, my fellow American voters. Now that the extravagant inauguration parties are over, we are left with a cold, hard reality, that this government is taking a bad economy, and making it worse and worse.
I currently blame Republicans for much of what is now not working in American politics, and I say that as a registered Republican whose first active campaign work was for Goldwater back in ’64.
Democrats are the party of Big Labor and Big Government, and they have been for about three generations, so Carter, Clinton, and Obama are no kind of a surprise.
About 20 years ago, however, the Republicans really shifted towards being a party of big business. Reagan was aggressive in breaking up monopolies, removing regulations that hindered competition, and promoting small business. Since Reagan’s time 100% of the [i]net[/i] job creation in America has been through small and medium businesses.
That, however, did not stop Republican leadership in the last 20 years from becoming enthusiastic supporters of Big Business, which I surmise they believed would make a good counter-weight to Big Labor and Big Government. Some of what we’re seeing today can be traced to that post-Reagan shift, greatly worsened by political negligence and corruption in Washington.
Even worse, in the last 10 years the Republicans have also now become a party of Big Government. They just wanted it to be “conservative” Big Government, the most pitiable oxymoron of all.
Consequently there are few in Washington able to mount any coherent opposition to the present massive expansion of government in ways guaranteed to show themselves as tragically unsustainable within relatively few years.
Big Government is the greatest internal threat to America’s founding principles and resulting greatness. That threat will persist until government is once again afraid of the people … instead of the other way around.
You know what is really funny? After George W. Bush was elected and the economy struggled along for months & months after he was Pres, all the blame from the right (which included the WSJ, the IBD, just about all the radio & blog commentators, and especially FOX) went back to Bill Clinton and what poor old George “had” to inherit from him. Now, with Obama a mere 5 weeks into his term, it’s all his fault and let’s ignore that all this started during the previous admin. Yeah, I’m not a big fan of most of the stimulus package either, but the ability of the right to point the finger at everyone but themselves is quite impressive.
To me the interesting thing is that the “New Deal” program of the collectivizing left has arrived in power four years earlier than it did in the 1930’s economic scenario. It is as though FDR became president in 1930 rather than ’33. This will be a really frightening opportunity to test the thesis that the New Deal prolonged and amplified the Depression. So far we seem to be getting confirmations of the hypothesis almost weekly.
What a ride we are in for!
Why is Obama listening to these guys?
http://www.cbsnews.com/stories/2009/02/06/politics/100days/economy/main4779506.shtml
Earlier on Friday, President Obama announced a team of outside economic advisers to help boost an economy in a virtual free-fall.
The president signed an executive order creating the Economic Recovery Advisory Board, headed by former Federal Reserve Chairman Paul Volcker.
In a statement, the White House said the board will offer independent advice in regular briefings to the president, vice president and their economic team.
The White House said the board’s initial focus will be programs to “jump-start economic growth.”
Mr. Obama has already tapped Volcker, a top Obama adviser, as the leader of the high-profile panel of advisers. Members will include former Securities and Exchange Commission Chairman William Donaldson, TIAA-CREF President-CEO Roger Ferguson and Harvard University professor Martin Feldstein, who wrote a Wall Street Journal op-ed piece last year titled “John McCain Has a Tax Plan To Create Jobs.”
Obama friend and campaign finance chairwoman Penny Pritzker also is on the board, as are two labor officials – Anna Burger of Service Employees International Union and Richard Trumka of the AFL-CIO.
Also named to the 15-member board:
John Doerr, Partner, Kleiner, Perkins, Caufield & Byers
Mark T. Gallogly, Founder & Managing Partner, Centerbridge Partners L.P.
Jeffrey R. Immelt, CEO, General Electric Co.
Monica C. Lozano, Publisher & Chief Executive Officer, La Opinion
Jim Owens, Chairman & CEO, Caterpillar Inc.
Charles E. Phillips, Jr., President, Oracle Corporation
David F. Swensen, CIO, Yale University
Laura D’Andrea Tyson, Dean, Haas School of Business at the University of California at Berkeley
Robert Wolf, Chairman & CEO, UBS Group Americas
#9 Dongander; At the cost of revealing my age; I grew up in the 1930’s and I think the only thing that got us moving and producing then was the onset of WWII. If there is any truth in my statement does this mean WWIII might be in the future???
Mike L, #16, one big difference is that the federal budget runs October-Sept., and the first eight months of Bush’s term were indeed on the Clinton budget. This doesn’t seem to be the case here; Obama has taken the opportunity to make big changes right off the bat. Also, if you remember the turmoil, Bush didn’t even get his Cabinet appointments approved for weeks. He could hardly be said to have taken the reins of government since the transition was chaotic because of the election uproar and delay. Obama has been essentially presidential since November, the Bush administration having been very cooperative according to what I’ve read. These drastic changes in the new budget, plus the huge spending commitments already passed into law, change the situation on the ground. No waiting for the next fiscal year.
Daniel,
I find your question a bit loaded. After all, the road to economic hell is probably a three-legged stool. You have identified two of them, the rapacious capitalists and the rapacious politicians, but have left out the third leg, those among the ‘masses’ (your word) who have created an enormous burden for all through their idleness and profligancy and unbounded proliferation. I would merely rephrase your question: which of the THREE do the more harm?
Another poster scoffed yesterday at the idea of fleeing capital, asking “Where will they go?” Well, here, for starters:
[blockquote]This isn’t the only warning sign. A new study asserts that some 100,000 highly educated, well-trained Indians now living in the U.S. will return home in the next few years. Ditto China.[/blockquote]
No one smart enough to make a lot of money in America is going to be stupid enough to sit still for the Obamanauts’ plundering of same.
Not at all why you say this. Except in times of “irrational exuberance” or “irrational despair” the market is a fair pricing of the underlying value of a company. And based on that, the fact is that MANY stocks are STILL overpriced. What we experienced was a period of froth on froth on froth and now the froth is falling back and settling to where it SHOULD be. Just like housing. I bought my house for $600,000, but the insurance company will only pay $250,000 if it burns down. That’s because that’s what it would cost to build it again. And trust me, if my house went on the market for $250,000 (which you might argue is the “fair” price — plus let’s say another 100K for the land, so let’s say $350k) it would be snapped up tomorrow. My neighbor just sold his house for $550 k. Sure, when we bought our houses we all thought we’d be selling them for $800k, but that’s not reality.
And why was that? How does a war generate prosperity? Because of massive unprecedented government spending that dwarfed anything done by Roosevelt in the preceding decade. So…should we get out of this recession/depression by starting WWIII or could we find something more productive to spend the money on??
[blockquote]Katherine wrote:
Mike L, #16, one big difference is that the federal budget runs October-Sept., and the first eight months of Bush’s term were indeed on the Clinton budget. This doesn’t seem to be the case here; Obama has taken the opportunity to make big changes right off the bat. Also, if you remember the turmoil, Bush didn’t even get his Cabinet appointments approved for weeks. He could hardly be said to have taken the reins of government since the transition was chaotic because of the election uproar and delay. Obama has been essentially presidential since November, the Bush administration having been very cooperative according to what I’ve read. These drastic changes in the new budget, plus the huge spending commitments already passed into law, change the situation on the ground. No waiting for the next fiscal year. [/blockquote]
Oh, I see. So if we use your timeline, Bush gets a pass for almost a year for all the problems he got left with (and those “problems” are highly debatable) vs Obama who gets all of 4 months to fix what’s been brewing over several years. I mean obviously, it’s all Obama’s fault the market has finally come to the realization that the mess is huge and until the banks actually start opening up credit with all those funds the Bush administration gave them things are going to be bad for a while. I mean really, why can’t Obama wave that magic wand & just make it all go away? Of course if Obama actually steps in to the banks and forces them to take action, he’ll just get more howling from the right about “destroying capitalism” and “socializing America”, now won’t he?
Both sides spin; everything positive is because of our policies; everything negative is because of the previous administration. There is always a long term economic cycle underway; decisions made are like turning the wheel of an oil tanker; no immediate results; once it starts turning it is hard to straighten it out.
That being said, I can see how the markets could be reacting to the fact that there is going to be very little additional revenue from “the rich” because the number of people with incomes above $250,000 is plunging. Expanded spending, lower taxes, and a balanced budget; not going to happen.
These are ridiculous articles.
Why would obama’s policies be more important than the fact that GM had a 57% drop in orders last month? Might that not have SOMETHING to do with the drop? Or that Americans are saving, rather than spending, at a greater rate than in years?
The dow is a short term indicator of the investor’s mental health. Alas, it is manic depressive, and an unreliable indicator of long-term health.
The price of a stock reflects the aggregate assessment of the market of future profitability of the underlying business. What we are seeing is the big institutional investors having no confidence in the growth of the market. What is needed is to NOT give money directly to the banks. They cannot be trusted. What is needed is a two-fold strike to stimulate the housing and US automobile industries. First, we have excess inventory in the housing market. What is needed is to put construction workers back to work on infrastructure projects: roads, bridges, schools, airports. The contracts to do this must employ certified out-of-work construction workers who are drawing unemployment until the excess housing inventory is absorbed. Second, give a significant rebate, like 30-40%, to purchasers of a new US made automobile or truck. Do not give any money to the banks or automobile dealers. They cannot be trusted. Let a person make the best deal they can, then provide proof of purchase and the government gives a rebate directly to the buyer. It would be conditional on keeping the vehicle for a period of time. Yes, we need to work out the details, but DO NOT give money directly to the banks or to the automobile industry.
President Obama and his team of geniuses are winging it, as sure as God made little green apples. Let’s not forget, Harvard Law Review notwithstanding, Obama is a South-Chicago-machine-politician – social worker; his qualifications for the Presidency have always been pretty nearly non-existent, and he was elected primarily not because he was Obama, but because he was “not-Bush.” And he was elected by a generation of the young, who have little experience living in this world, making a living, and actually having to worry about budgets, 401K’s, and etc. And now. . . . we pay the price for our corporate negligence. God save the Republic, please.
28. jkc1945 wrote:
“Obama is a South-Chicago-machine-politician – social worker;”
^^^^^^^^
A salient factoid, thank you.
It is some kind of a mass psychosis to elect such a person and expect him to exibit character.
Don
19. Harvey:
WWIII to get us out of this? There are reasons why I doubt that it would work this time – though some fool might try it.
Don
#28 and #29 demonstrate a fair amount of ignorance about Chicago democratic politics.
The community organizers arose to battle the Chicago Machine. At times they were incorporated. Obama went to Chicago because of a man, Harold Washington, who was elected Mayor in spite of the Machine. Harold Washington was so hated by the Chicago Machine, that the Republican almost won.
JKC1945: Obama may not have had much experience, but he did, single handedly, bring down the most powerful democratic machine- the Clintons. And his approval ratings are sky high.
And after 4 years he will have had more presidential experience than anyone else running against him.
31. John Wilkins:
“The community organizers arose to battle the Chicago Machine.”
John, I don’t know about that. I have to check the time-line. But Obama uses the same tactics as machine politics (his house and Mrs. Obama’s employment, etc.). Add to that his many contradictory statements. Add to that his “CRISIS”mongering.
I’m not pursuaded.
Don
To paraphrase Tolkien and others:
What we really want is to be perfectly governed, yet perfectly free. What we really want is a benign dictator, a GOOD KING. Fortunately, we do have one in our heavenly father. But in the meantime, in this broken world, where no person can be a truly good king, we have to settle for a democracy.
hippocamper, I will be happy to settle for a “democracy” after the current administration and congress finish socializing the nation. Sadly, we will likely lose what democracy we ever had. And the republic, which is the really central part of what the US has been since the founders laid it out, may well go away. I would suggest that we will live to rue the day we elected the social worker from the Chicago south side. We should have known better.
#34 – the democracy voted for Obama, and he’s doing nothing different than what he said he was. As far as the republic going away, it’s Bush who seemed interested in a dictatorship. Obama is far more transparent in comparison.
except for the fact that the Bush-hating media did all they could to ‘hide’ Obama’s past and voting record:
Whenever someone –usually on the talk-radio circuit — brought up his ‘questionable associations’, the media brushed it aside. Whenever someone brought up his fascination with radical politics, and his parallels with known socialist writings, it was brushed aside. When his spotless ‘present’ voting record was brought up, it was brushed aside. All that mattered was that he talked ‘presidential’ and inspired ‘hope’ and ‘change’, and his speeches caused ‘little thrills to run up the legs’ of newscasters.
Now that he is President, all of a sudden there is a flurry of questions and statements of ‘we don’t know anything about this man or where he comes from’.
Well, all I can say is “we told you so, and you ignored our warnings”, now the entire country has to suffer for the actions of 52% of Americans who chose to vote for him.
Give me Bush’s leadership any day.
John Wilkins, please! I agree – Pres. Obama is doing nothing different than what he said he would do – anyone who voted for him thinking he would operate differently just didn’t do their homework. But Bush interested in a “dictatorship”?? Really – do you honestly have to be so obviously partisan? (that was rhetorical, by the way)
When a President is inaugurated and makes no dramatic changes to previous policies in his first few months, it is reasonable to say that his first few months are the continuation of the the last administration’s effects.
When a President is inaugurated and within thirty days signs a massive new spending bill containing drastic policy changes and then proposes a huge new budget which also makes major changes in the business and social environment, then it’s reasonable to say the new President owns the reaction.