Obamanomics Comes a Cropper

The news of late hasn't been good for the President Obama's policies, as I have pointed out in my last several posts. The bad news keeps coming. While the President's general approval rating is in negative territory, his public approval on the economy is rather worse. Pollster.com has a 60% disapproval vs. 35% approval of Obama's economic performance average across all the polls Pollster monitors.

While such polls are thought to register how prospective voters feel rather than what they think, they have good reason to think that Obamanomics has come a cropper. Consider the infamous $800 billion stimulus bill. The Administration claims it kept us from falling into a second recession or maybe even a depression. No one really believes that. What the Congressional Budget Office believes is that the stimulus bill is, on balance, a bad thing for the economy. From Powerline:

On Tuesday, Doug Elmendorf, head of the Congressional Budget Office, testified before the Senate Budget Committee. Ranking Republican Jeff Sessions recalled the CBO's projection, made around the time the stimulus bill was enacted, that the measure would have a negative long-term impact on economic growth. Elmendorf confirmed that this is still the view of the CBO.

Over ten years the stimulus bill will retard economic growth, according to the CBO. The CBO is the only standard we currently have.

Next consider Obama's bailout of the auto companies. A lot of us thought that this was really a bailout of the auto unions, but never mind that. In the case of General Motors, the balance sheet looks rather grim. From Shikha Dalmia, at Reason:

The Treasury Department yesterday revised its loss estimate for the Government Motors bailout from $14.33 billion to $23.6 billion, thanks to the company's sinking stock price. GM's Sept. 30 closing price, on which the new estimate is based, was $20.18, about $13 less than its December IPO price and $35 less than what is needed for taxpayers to break even.

The $23.6 billion represents a 25 percent loss on the feds $60 billion direct "investment" in GM. But that's not all that taxpayers are on the hook for. As I explained previously, Uncle Sam's special GM bankruptcy package allowed the company to write off $45 billion in previous losses going forward. This could work out to as much as $15 billion in tax savings that GM wouldn't have had had it gone through a normal bankruptcy. Why? Because after bankruptcy, the tax liabilities of companies increase since they have no more losses to write off.

This means that the total hit to taxpayers, who still own about a quarter of the company, could add up to $38.6 billion. That's even more that the $34 billion on the outside I had predicted in May.

It looks as though the government isn't any better at venture capitalism in the auto industry than it is in the energy sector. It also seems to have the same instinct to protect the well-heeled at the expense of the taxpayers.

Perhaps the good news is that the President isn't even trying to make policy anymore. He has been traveling a lot lately. In his campaign trips about the U.S. he kept urging Congress to pass a jobs bill that couldn't pass the Senate, where his party has a majority. What he didn't do was get on the phone or meet with Congressional leaders to try to bring them behind his proposal.

Now that the Supercommittee is approaching a deadline for recommending deficit reduction, the President has said he will veto any attempt to evade the "draconian" cuts in the budget that will occur if the Supercommittee fails. Has the President been in contact with the Supercommittee members? Has he tried to use his influence to encourage a deal? Well…no. From the Politico:

As the clock counts down to the deadline for the Supercommittee to come to a deficit-reduction agreement, President Barack Obama hasn't been in touch with congressional leaders in recent days, the White House said here Saturday.

"The president's obviously been engaged in numerous bilateral and group meetings here. He has not made any other calls to leaders of Congress," press secretary Jay Carney said at a briefing for traveling reporters.

Barack Obama has pretty much given up policy making for campaigning, which is the only thing he has ever been really good at. That, and world traveling. I applaud the President's decision to travel to Burma, with this qualification: he should not go there unless he can personally meet with Aung San Suu Kyi (gassho). I assume that that has been arranged.

It is sensible that he is doing the Chief of State thing and ignoring the Chief Executive and Chief Legislator thing. He has done enough damage for one presidential term.

Comments

[Donald Pay]

Better read the long history of CBO testimony on the stimulus, rather than just cutting and pasting from the echo chamber, which tends to repeat snippets of information without any context. The idea of a stimulus, of course, is to increase near term economic activity. It has worked to lift the economy in the near term. If you or any other conservative out there thought a "stimulus" was meant to lift the economy in 2019, your are far dumber than I give you credit for.

[A.I.]

You might also note that President Obama (has a nice ring to it, no?) is sending Secretary of State Clinton to Myanmar. I've seen no report that he plans to personally visit there.

[Ken Blanchard]

Donald: did it? When much of the spending didn't come on line for years after the bill was passed? You are not dumb, Donald. You just can't allow yourself to think outside of a handful of slogans. I can. To a large degree, President Obama's policies are extensions of Bush policies. We have a pretty good idea how they turned out.

A.I.: I stand corrected. He is much too busy campaigning.

[Stan Gibilisco]

Ken, I disagree with you on some fine points here.

You say, "Consider the infamous $800 billion stimulus bill. The Administration claims it kept us from falling into a second recession or maybe even a depression. No one really believes that."

Well, I do believe it. I'd rather call it a "tranquilizer" though, not a "stimulus." I think it saved us from a mass panic. I'd compare it to a person who comes into the hospital with dangerous delirium tremens. They'll give him something like Librium to keep him from tearing himself to pieces from the inside out (and please trust me, I know exactly what I'm talking about). Massive doses, in fact -- enough to put him into a coma, most likely, were his nerve endings not so totally shot, his synapses raging like a Texas thunderstorm. However, once the tempest has passed, you don't keep the guy on the Librium. The guy is an addict, and now that he's out of acute withdrawal, he needs a different plan for his long-term survival.

That's where Obamanomics and the Democrats in general seem to be experiencing the disconnect. They think that because the initial "tranquilizer" prevented a catastrophe, more "tranquilizers" now will make things better than they are. Just as long-term Librium use will not cure the addict but actually make him worse, long-term "stimulus" will, I suspect, make the economy worse.

I think Obama did well to bail out the auto companies, too, for the same reason. But again, now that the core of the storm has passed, we can start getting back to the economic policies that made this country great (before the previous administration damaged the brand).

As for his "jobs bill," why don't the Republicans just give it to him? It'd be a calculated risk, because if it worked, Obama's numbers would improve (but so would the welfare of an awful lot of people). However, I think that "jobs bill" is a stunt, a ploy, and if the Republicans had the fortitude and courage to call him on it, it would fall flat. Then Obama would own one great big chunk of failure, and the election would take care of the rest.

One final note: I have to commend Barack Obama on his approach to international issues. I think he really gets it, maybe better than any President in recent memory. He knows how to fight the "new wars." You do brain surgery with a scalpel, not with a hatchet. Good show!

I'm not going to vote for him next November, though.

[Donald Pay]

If you reviewed the history of CBO testimony then you know that they predicted that the stimulus bill would have a stimulative effect on the economy. The CBO also has stated in testimony that, in fact, the stimulus bill did have a stimulative effect on the economy, yet you claim that "No one really believes that." So, the CBO is nobody?

You go on to claim, "What the Congressional Budget Office believes is that the stimulus bill is, on balance, a bad thing for the economy." That is no what they have said.

You seem to want to be taking your points right off the echo chamber and not really doing any research at all.

[Jon S.]

Donald,

What evidence do you have that the economy was "stimulated" by the stimulus bill? We know that unemployment, for example, is worse with the stimulus package than the Obama administration said it would be without the stimulus. And the economy continues to add jobs at a glacial pace. The debt and deficit to GDP ratio is the worst since WWII. From June 2009 to June 2011 median household income fell by 6.7%, a steeper decline than in the Great Depression. Here is the Christian Science Monitor: “The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the U.S. government began recording it five decades ago.” Home values have declined by a third over the last five years and home ownership is at its lowest ebb since 1965. Anecdotally, I note the fear in my students that when they graduate college there will be no jobs for them. That's my evidence that the stimulus package in particular, and the Obama team in general, failed. What is your evidence that the stimulus package stimulated, other than posing the non-falsifiable claim that "it could be worse"?

[Ken Blanchard]

Stan: you have a gift for metaphor, but I think that your metaphor works in my favor. A tranquilizer was the last thing that the economy needed in 2009. There may have been some risk of panic in financial markets during the banking crisis, and for that reason alone there is a case to be made for the bank bailouts. The other case is that the bank bailouts were paid back.

I don't think that the stimulus bill addressed any public panic and I am sure that it didn't reassure anyone. If anything, it helped trigger the public reaction that was expressed in the rise of the Tea Party movement. The justification for the stimulus was the Keynesian or quasi-Keynesian idea that government had to inject "demand" into the economy. I think it is very dubious to claim that it accomplished any such thing, and so the long term cost is a cost without any useful benefit and we are paying that cost now.

The auto bailout was a case of rewarding failure. It only delayed the day of reckoning and so extended the pain. It was a very bad idea.

As for giving the President his jobs bill, that goes against the only viable strategy now, which is to put our fiscal house in order and stop shelling out billions to no apparent purpose.

[Donald Pay]

KB,

I don't feel the need to do the research for you that you should have done for yourself before you made such completely false statements on your blog, but I will provide you with a link to the very agency you claim to have received your information from.

http://www.cbo.gov/publications/collections/collections.cfm?collect=12

You will note several reports (generally done in quarters) which report on the economic affects of the stimulus. Within these reports are all the statistics that prove your statements are complete fabrications.

Let me quote from the April-June 2011 report release in August 2011:

"The effects of ARRA on output peaked in the first half
of 2010 and have since diminished, CBO estimates.
The effects of ARRA on employment and unemployment
are estimated to lag slightly behind the effects on output;
CBO estimates that the employment effects began to
wane at the end of 2010 and continued to do so in the
second quarter of 2011. Still, CBO estimates that, compared
with what would have occurred otherwise, ARRA
will raise real GDP in 2012 by between 0.3 percent
and 0.8 percent and will increase the number of people
employed in 2012 by between 0.4 million and
1.1 million."

[Jimi]

"It has worked to lift the economy in the near term"

Hehe!

[Jimi]

Stan,

The jobs bill is a tax increase and an expansion of government. Republicans have taken a pledge to not raise taxes. $50 Billion of infrastructure spending...with no plan...$10 Billion for the a new Infrastructure Bank...all paid for with a tax increase on everyone with a gross income of $1,000,000.

It is a joke....just political theater. Expecting the Republican to pass it in an attempt to also use it as a political weapon is a bad strategy....it's letting the pig pull you into the mud.

[Donald Pay]

Jimi,

KB stated a falsehood, and I replied with a direct counter to that, citing the very agency he claimed to use as a source (but I suspect he just made it up or copied and pasted from the rightwing echochamber). Now you come along, like a 9-year-old, with a giggle as fake as KB's "source." I wish you conservatives would grow up.

[Donald Pay]

"Chief Legislator thing?" Need a 9th grade civics class, KB?

[Ken Blanchard]

Donald: one of us does. The President's role as "chief legislator" is part of any basic lecture on the Presidency. His veto power, his state of the union message, and his power to call Congress into emergency session are all part of that role. I am happy to bring you up to speed.

As for the stimulus bill, the CBO estimates that it supported a lot of jobs. It did. How's that working out? The jobs created by the stimulus depended on borrowing from future economic growth. That might work out to a plus if the effect really stimulated growth. Did it? Perhaps you can persuade the Administration to declare "Mission Accomplished"! At any rate, now we have to pay the bill. That was my point.

[A.I.]

We do have to pay the bill KB. And, thanks to the so-called stimulus and a lot of other actions taken by government the the Federal Reserve, we still have and economy to pay it with.

As for the partisan talking points you regurgitate with such regularity, this article from the "Economist" sums up the reality of what the situation was in 08 and what was done in response: http://www.economist.com/blogs/freeexchange/2011/08/fiscal-policy

I find the last line of piece particularly appropriate to your and Republican politicization of the situation then and now: "I don't know which tragedy is the more troubling: the failure to see the true scope of the disaster when accurate numbers weren't available, or the failure to see it now that they are."

[Ken Blanchard]

A.I.: we have been running deficits of more than a trillion a year since Obama took office. If spending really stimulates economic growth and job creation, wouldn't it be working by now, sort of? If economies could be saved by government spending, wouldn't Greece be healthy by now? I don't know which tragedy is more troubling, the failure to see what is happening when there is still time to fix it, or the refusal recognize reality when the results are in.

[A.I.]

So we are supposed to trade our current tread-water economic state for pre-1930's economic policies that the oh-so-keen, conservative view of reality demands. And we were supposed to forgo the efforts for the past three years that at least kept us afloat.

Here's the deal KB. You just read an article explaining the realities of the past, yet you continue your membership-in-ill-standing in a group that refuses to recognize that reality. Thus, while exhibiting 20/200 hindsight, you expect me to believe you have a 20/20 view of the present and future. To quote Seth Meyers, REALLY?

[Ken Blanchard]

A.I.: I like your "tread-water" metaphor. I can't help noticing the contradiction in your source's argument. On the one hand, the stimulus bill "kept us afloat". On the other hand, it was way too small to do the trick. I guess two heads are better than one.

I am very skeptical the Titanic could have been saved by taking all the ice aboard the ship, which seems to be your economic theory. Even if the stimulus did some good, and that is a big if, it did only marginal good. Talk of keeping us afloat is sheer delusion. It kept a few paychecks coming, mostly to government workers, but did nothing to simulate overall demand or growth in the private sector. It retarded growth over the mid-term. That is not an impressive policy success.

There was a very good argument for rescuing the banks. Financial system meltdowns are very bad for economies. Besides, the banks made good on the loans. The stimulus and the bank bailout almost certainly prolonged the agony.

One of us is indeed refusing to come to terms with reality. I notice that our deficit spending is enormous by historical standards. Do you really think we should have gone into debt by a lot more? Do the events in Europe make no impression on you at all? REALLY?

[Juan]

In layman's terms, the Stimulus is neeedd for the simple reason that with the failure of the financial system, businesses and consumers were less willing (uncertainty) and less able (banks failures and failure to provide credit) to produce and spend in the economy implying that companies sold less goods and services than usual and so the companies had to lay out workers who in turn bought less and so the cycle goes (and this might just as well have led to a depression). What the stimulus is meant to do, and is doing, is to incite and give businesses and consumers the confidence to keep on producing and spending respectively for the upcoming spending in the economy it is to generate exponentially. Initially by giving tax breaks, benefits, spending to maintain teaching and social services jobs and then spending on stimulus projects contracts given to companies which are then encouraged not to lay off workers. All these with the consequent multiplier effect in the economy. Companies and consumers effectively bought to this idea once the Stimulus bill was enacted and kept on producing and consuming respectively in anticipation that upcoming Stimulus spending will maintain a stable economic environment from which recovery is possible. Hence the reason why the stock market and consumer and business confidence started rising. This effort was accompanied by the bank bailout and efforts to provide credit to consumers and companies. It is effectively because the Stimulus Package is real, a commitment of 789 billion dollars by the US government for real economic projects, that consumers and businesses bought to the scheme and started acting in a positive manner in anticipation of its positive impact in the upcoming months (the Stimulus Package direct impact should enter in full force by the fourth quarter). In fact, many economists have even argued that the amount provided for the Stimulus should have been much more higher. As a final note, I'll argue that irrespective of party creed, it will seem to me that the criticism levied against the Stimulus is much more of a political vogue (and has nothing to do with realistic economics) naefvely taken up by the media which tend to operate on the basis of two sides to any story (not a criticism though). The milestone which any such critical arguments has to overcome is to answer the question: how could a depression be avoided and a recovery started following the failure of the financial system?

[Mohmed]

he did more in one month in office to detrsoy us than the cost of all the things mentioned (9/11, our wars combined, etc ). As a Constitution Party Member, I'm not bound or endeared to partisan issues; so, here goes the strait economic skinny, Obama 1 month cost = Bush 8 year cost he'll definitely be the most famous Harvard grad of all time. GW Bush certainly was not perfect either, but he wasn't trying to push my country off of a cliff either.As for the all those who want to bring up war cost (both money and American deaths) here is a challenge for you. Go look up (google the department of transportation) how many have died from drunk driving in the US each year (about 42,000 and the costs that go with it) would it shock you to find more of them occur in Democratic districts how about we fix that first over gitmo and Afghanistan. Charity starts at home!It is a shame in his time at the hallowed Harvard Halls, he only "sought out the Marxist professors" (an exerpt from one of his many self narrated bios) he should have sought out the other professors to show what a failure Marxism is and that capitalism only suffers when shackled to Marxist policies. My "hope" is that we'll have more than just "change" in our pockets when his sociological experiment is done. Let it be said Barack Hussein Obama was never "judged by the color of his skin but by the content of his character" and it was found lacking and full of anti-American sentiments (Bill Ayers).I'm sure, he'll make a fine President for the 47 million he seeks to make more dependent on the government. The other 231 million better wake up or you'll be getting table scraps too.Prediction: We'll all be told that we need to elect him again to fix these problems "he was handed" (can you say Community Reinvestment Act of 1977) then we'll need to elect the new, revamped,foreign policy, guru Hillary "Ramrod" Clinton when he cannot pull off the promised miracles in the time alloted. Once, the United States middle class is extinct and we resemble France will the Marxists be happy yes they will, then what? No one to tax at 50%, no money for handouts, no creativity, motivations are gone The solid people of this country will survive, because if there are only going to be two classes then those of you who support left-leaning, Marxist, terd policy can truly hate the rest of us for doing well the gloom, doom, whoa-is-me, you bring is yours to bear and you'll never be happy We will not accept defeat. Enjoy your paltry welfare check or get to work the choice is yours

[Izauradosantos]

For you great students of ecocmoins here is a problem:If you have a present value of $800B, at a 5% avg rate for 30 years, what is the future value of that initial $800B? Answer: $3,457B So,$3.5 with a capital "T" now adjust that figure for stagflation (feel free to use the Carter era figures for 1979-1981) write me when your doneP.S For the knuckle head who wanted to see the numbers for one hundred years out its about $105T at 5%, a very big price for the guy's first month in office scared yet? Here is another one for you how about 10 years at Carter stagflation rate of 12% thats $2.5T, this (plus the crap added to it over the term) will be the bill we had all of our current 8-year old children-your welcome kids. Nothing anyone could say can make partisan zealots deny their made up truths. If you want change get both the Democrats and Republicans out of office no multi-millionaire is going to look out for you. At least the Republicans are truthful when they say they are for big business and capitalism; the Democrats don't even have that to offer. Now we know how Hugo Chavez got his start first instill fear, second close the jails (like Gitmo), free the criminals and terrorists (we'll call this the Bill Ayers Act of 2009), Third blame everything on those who don't agree with you (Rush Limbaugh is one heck of a scapegoat, but he fights back), Fourth welcome those who will take your stolen national treasure and help get you into power (Unions, Acorn, etc..), Fifth, destroy the will of the middle class yep seems we're right on track, Saul Alinsky is beaming with pride! All in one month, very efficient B-HO now lets get rid of term limits (thanks William J.C for that idea) don't forget to send Hugo a conrats, he did away with term limits today in Venezuela-I'm sure we can get this all done in the 1st 100 days if we try Come on Nancy, Hillary and Harry you can do it show those pesky middle class folks, the foundation of America who is boss.