John on March 3, 2009 at 8:27 pm
Today Obama had a press conference at which he said the following:
Here’s what the Wall Street Journal had to say about these “gyrations” today:
So what has happened in the last two months? The economy has received no great new outside shock. Exchange rates and other prices have been stable, and there are no security crises of note. The reality of a sharp recession has been known and built into stock prices since last year’s fourth quarter.
What is new is the unveiling of Mr. Obama’s agenda and his approach to governance. Every new President has a finite stock of capital — financial and political — to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his “stimulus” spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest…
The market has notably plunged since Mr. Obama introduced his budget last week, and that should be no surprise. The document was a declaration of hostility toward capitalists across the economy. Health-care stocks have dived on fears of new government mandates and price controls. Private lenders to students have been told they’re no longer wanted. Anyone who uses carbon energy has been warned to expect a huge tax increase from cap and trade. And every risk-taker and investor now knows that another tax increase will slam the economy in 2011, unless Mr. Obama lets Speaker Nancy Pelosi impose one even earlier.
But we’re just getting started really. Remember last summer when gas was over $3 a gallon? Remember what a drain that was on the family budget? Soon we may be paying comprable prices for electricty thanks to Obama’s “Cap and Trade” energy policy:
And as with gas hikes, it’s not just gas that goes up. Everything that need electricty for its production, packaging or distribution will in turn become more expensive — all to prevent a one degree rise in temperature over the next century. Brilliant!
I think the Wall Street Journal is too optimistic. There’s no recovery in our near future. Another three months worth of “gyrations” like these and we’ll be deep into a recession for most of Obama’s term.
Update: Today’s WSJ has an analysis by Robert Barro which says there is a 20% chance we’ll enter a depression. Read the whole thing for his well documented historical insight. Here’s his closing:
Given our situation, it is right that radical government policies should be considered if they promise to lower the probability and likely size of a depression. However, many governmental actions — including several pursued by Franklin Roosevelt during the Great Depression — can make things worse.
I wish I could be confident that the array of U.S. policies already in place and those likely forthcoming will be helpful. But I think it more likely that the economy will eventually recover despite these policies, rather than because of them.