"Obamanomics"
The freefall in the U.S. economy that begin in August 2007 is now stabilizing. The disruption in the housing market that ignited a wildfire in the credit markets is no longer a crisis situation as home sales, housing starts, and permit activity increases from improved affordability. Equity markets are rebounding, credit is loosening, banks are raising capital to pay back taxpayers, and economists are expecting the recession to be over in the fall. In fact, recent reports are showing that weekly jobless claims are now rising at a slower pace than most economists estimated. Consumers are cautiously returning to retail outlets to take advantage of once in a lifetime deals. The media and most pundits are obsessed with the discussion of "green shoots" that are now appearing from a scorched Wall Street. Some will argue that President Obama's ambitious domestic agenda of reinvesting in the country through government spending along with a multitude of reforms are having a positive influence on the economy.
Will government spending lead to a recovery?
Unquestionably, stimulus spending will create short-term benefits, but Obama’s war on American capitalism will not lead to a full economic recovery. The rise in job losses is not over and the unemployment rate could reach 10% by the end of the year. The slack in the jobs market will cause wage growth to remain stagnate. Rising unemployment, slow to no wage growth, and consumers willingness to save over spend will combine to keep consumption down and the economy in the doldrums. Undoubtedly, fiscal and monetary stimulus is creating a recovery, but not one that is sustainable.
Americans blame George Bush for creating the current recession, but it is now coming to an end. The new recession will be triggered by massive deficits and rising inflation from new government spending. The cost to taxpayers for the $700 billion TARP has now risen from $186 billion to $368 billion, compound that spending with an aggressive stimulus bill that will cost taxpayers an additional $300 billion, and U.S. borrowing will reach $3 trillion to $4 trillion over the next two years, which outpaces the $1 trillion a year average of the last three years. On the campaign trail, Obama rightfully criticized the $2.3 trillion added to the national debt under Bush as "deficits as far as the eye can see", but Obama’s budget of $3.6 trillion will add $9.3 trillion in debt over the next 10 years. Obama will be forced to print more money – triggering higher inflation, let interest rates soar, or raise taxes, all of which will kill the recovery.
Full economic recovery is contingent upon healthy companies that are willing to invest in our country to expand their businesses along with a stable and confident workforce. Consumers are becoming wise to what is occurring in the U.S. under the Obama Administration and they are deleveraging. In other words, consumers are no longer consuming, but they are paying down debt and increasing household savings. Eventually, that could lead to a sustainable recovery, but hyper inflation caused by too much fiscal and monetary stimulus will challenge consumers and derail any improvements in the economy.
Change is coming…
Candidate Obama promised sweeping reforms if elected and President Obama is delivering on that promise. His ambitious agenda include reforms to the federal budget, tax code, healthcare, and the environment. However, when examining Obama’s legislative proposals, there are many inconsistencies.
For example, Candidate Obama promised to "take a scalpel to the federal budget", but President Obama outlined 121 cuts worth only $17 billion or less than 1% of his bloated budget request. Mr. Obama needs to sharpen his scalpel. Recently, Obama proposed that Congress reinstitute "Pay Go" provisions, which requires Congress to cut certain areas of the budget to offset new spending. However, he wants Congress to implement the rules after passage of his budget that is full of goodies.
Candidate Obama assured no new taxes for the middle class; however, he signed legislation that raised the cigarette tax to pay for SCHIP or also known as the state children’s health insurance plan. In addition, he proposed new taxes on unhealthy foods, sodas, and beer, not to mention, Obama’s plan to reduce greenhouse gas emissions through a cap and trade system that will drive up the cost for anyone that drives a car, has a job, or turns on a light. I suppose the middle class do not eat, drink, smoke, or use electricity!
Candidate Obama criticized "government-run health care" in 2008, but President Obama routinely calls for Congress to create a universal health care system by the end of 2009 with little to no details on how the U.S. will cover the $650 billion price tag over the next 10 years. Currently, the federal and state government controls about 60% of the health care economy. Surely, if the government were experts at administering a health care system, then Medicare, Medicaid, and other federal health programs would be far more effective.
Bush increased the proportion of American families that pay no federal income tax from 33% to 38%; Obama will raise it to 44% while proposing that the richest 2% will pay for his bucket of reforms. Most wealthy Americans have lost 40% of their net worth as the recession has now slowed the growing inequality that was fueled by capital gains, bonuses, and Wall Street profits.
The wealthy will not be able to shoulder the bills of Uncle Sam, which will leave this country farther in debt and with higher taxes on the middle class. Obama should explain to Americans that his ambitious social agenda will cost real money and they should be prepared to pay for it.
Has Obama failed?
Not by his own perception because he never wanted to stimulate the economy, but instead his goal was to expand the spending and size of government. Before Obama, government spending accounted for 35% of GDP, but after stimulus spending and universal health care, the government’s proportion will be around 45% of GDP. Income generated from public sector employment is up from $1.16 trillion in January when Obama took office and government social spending and public sector jobs now account for 26% of U.S. personal income.
"Obamanomics" or better known as "socialism" will not create a sustainable recovery. Remember the words of President Reagan – "The nine most terrifying words in the English language are: I’m from the government and I’m here to help." Obama should do what he will not do – cut government spending by cancelling the rest of the stimulus outlays, abandon the idea of universal health care, and reform the overly burdensome tax code to stimulate business investment and wage growth.
Categories: Politics, Business, Economy
Tags: algenon cash barack obama healthcare reform algenoncash democrats ken canion economy jobs
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Mr. Cash,
I enjoyed this article and your insight. Thoughtful and full of information that make you wonder about the fate of this country.
- Matt
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Give a brother a chance. If the GOP spent half as much time developing a solid recovery plan as you all spend bashing our President, your boy McCain would be in the White House. Obamanomics is better than Reaganomics any day. Trickle down economics didn't work. It just made the rich extremely greedy. Greed almost made our economy collapse. President Obama can't solve all the problems. We are going to have to figure out how to solve many of our own. If you've got a better plan, run for office...
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It seems to me that if the economy is going to improve and small businesses are to grow, we have to fix healthcare. Healthcare is one of the factors that brought down GM. I have friends that live in Canada, UK, Sweden, etc., and they LOVE their healthcare. If the economy goes "south" they will not lose their homes or their health. That is important to these people. It is not important to them or to me, to make millions of dollars that I can never spend just to feel rich. That concept needs to be rethought as well. There is no correlation between the super rich and happiness, but there is a correlation to health and home to happiness.
Obama is helping us to rethink our priorities...he's not in the business of taking over our lives and doesn't want to run the coporations that do take over our lives.
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Once again, you continue to spout off the same trash that comes from the Republican talking heads! President Bush was responsible for the recession and the stimulus spending that has been done is necessary. If there are no consumers to spend and the government doesn't stimulate, guess what, we get into real deep trouble. And, if you think President Obama can get the country out of a recession that was years in the making with multiple errors in judgment in less than 6 months, I want some of what you're smoking. If you had listened to Tom Dennard a little more closely yesterday, you may have learned a few things.
The country has to move in a new direction and the same old thinking of giving tax breaks to the wealthy and large corporations will not get us out of our economic doldrums. "Voo doo economics" has not worked for any of the Republican administrations that tried it and I don't know why people keep thinking that the wealthy and large corporations will trickle down their windfall starting now. All that will happen is they will continue to hoard their cash. That won't do anybody any good.
It would also be nice if people would quit trying to scare everyone by saying the Obama administration is out to take over the country. They are doing everything they can to recuperate from the mess that was handed them and, if that's what everyone wants to call socialism, I'm all for socialism. I do think, though, that everyone who keeps calling this socialism ought to refresh themselves on the "isms".
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I agree 100% with Gary Piatt's position. You can call it whatever you want of Obama's current path. The old way wasn't working for America and nearly destroyed it. Trickle down economics just means people below get pissed on.
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Personally i think investing in the citizens of our country, infrastructure and health care is exactly what we need to do as a nation. In terms of health care, only those who face the prospect of losing everything due to a life threatening illness and the enormous expense of our broken health care system coupled with the inadequacies and tendency toward denial of our nations insurance providers can truly understand WHY we need to FIX health care. The private sector is failing miserably at doing so - so please do not tell me that government isn't the answer because neither is the private sector when profits are the driving force of how we care for the sick in our communities. I suggest that perhaps you try writing a NON-BIASED, NON- POLITICAL, NON-Partisan expression of how you feel about THIS BILL and gross expenditure of our tax dollars if you truly want to discuss WASTED tax payer dollars.
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The Bill that i was referring to which i notice was NOT posted was the COST of the IRAQ war. My point being lets as a nation focus our investments on taking care of our own communities. I think that if we want to disect where we might spend our tax dollars we should also disect where we have wasted our tax dollars. The Iraq war is perfect example of where misguided leadership spends my taxes. Somehow - this comparisative analysis never seems to come up but i think it gives insight into how the government could better invest our money.
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Great job on this e mail blast. Looks good and the information is solid. I appreciate what you do for the community. Thanks for keeping me in your circle.
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I'm so pleased to be receiving your emails on these important issues. I agree with everything you talk about and find it so very interesting. I hope lots of people are listening to you!!! Keep on telling it like it is!
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Thank you Algenon for being willing to say what needs to be said. We cannot continue to have the top 2% of wage earners pay for the cost of the federal government. The fact that under President Bush, those Americans who PAY NO TAXES increased to 38% is enough. Why do the other 62% of us have to pay for all the welfare that they receive. Why would I encourage my kids to get jobs that pay their expenses only to see them send more and more of their money to Washington to pay for more and more people who live off the federal teat?
I own a small business. It is successful, and has been for 13 years. I don't make money hand over fist - what I make I reinvest in the company and the employees I have. Currently I don't make my employees pay ANY portion of the healthcare insurance that I provide them. But the burdens that Washington keeps piling on me as a small business owner to care for others is making business ownership less and less enjoyable.
The people who talk about those in Canada liking their healthcare (Judy) obviously don't pay attention to the hords of people crossing the border to get care in America so they don't have to wait years for surgery!
To say that the policies of Bush were responsible for the recession (Gary) are made by those who don't know what started the housing bubble. The Clinton policies and the Democratic legislature that forced the American Reinvestment Act allowing people who shouldn't have been given housing loans to get them cause the housing bubble that cause the crash. Had Fannie and Freddie been required to follow loan limit regulations, there would have been no "hot air" to fill the bubble!
Congratulations Algenon - Keep it up!
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Kathie,
Not to be nitpicky but, the American Reinvestment Act is a 2009 Act that is trying to clean up the mess we're in. What you are most likely referring to is the Community Reinvestment Act that was enacted in 1977 (a little before Bill Clinton) that required banks to loan in areas where they were collecting deposits. It wasn't very much enforced but President Clinton did start requiring banks to actually lend in the areas rather than just market and make attempts to loan in the areas. However, the lenders who are most responsible for the housing crisis were not even regulated by CRA i.e. mortgage lenders such as Countrywide who was one of the main culprits. So to blame it on Bill Clinton is silly. The reason it happened is because there was not enough regulation in the mortgage industry. There was plenty of oversight in the banks portfolios and the banks themselves did not have significant problems. The institutions that had and continue to have the problems are because of the mortgage companies they own (or owned in many cases now) which, again, were not regulated by CRA.
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