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The Economy Snapshot – August

August 13, 2010

And Obama knows what about business?

Obama is proof positive that you don’t elect a community organizer to be President. This is the largest boondoggle in history. Obama and his band of thieves want to use government to effect social reforms. He doesn’t care about the the economy. All he cares about is getting enough slush fund money to the unions, growing government and constitutional encroachment.

Stupid is no excuse for advancing socialism against the liberties the citizens of this great country have fought and died for. Even the extreme, radical, left-wing, liberal media can’t hide Obama’s dog and pony show act anymore. Vehicle sales: weak. Employment: weak. Manufacturing output: weak. Construction, home sales, business confidence: weak, weak, weak. Real unemployment is 18-20%.

This is not a business cycle caused recession. This is a bursting credit-bubble recession. Trying to re-inflate a credit bubble with more borrowed “stimulus” or ‘printed’ money is basic economic insanity destine for major failure. A debt problem isn’t fixed with more debt. Yet that’s what the geniuses in Obama’s government are hell bent on doing. Banks are too nervous to lend money to us or each other. Where they will lend, they charge higher rates of interest to cover their risk. In the real world, that means more expensive mortgages, and in the worst cases, repossession and bankruptcy of businesses. We are seeing this happen now.

Reagan’s economic recovery program took 17 months. It took from the time Congress passed his tax cuts, in August 1981, until the recession he inherited finally ended in January 1983. Reagan faced obstacles that Obama did not. The House he had to work with was controlled by Democrats in both chambers. More ominously, inflation was running at double-digit rates, and it took nearly a year for the Federal Reserve to squeeze those pressures out of the system.

Tax cuts were a part of Reagan’s effort to cut the size and scope of government to fight economic stagnation. In addition to tax cuts, Reagan reduced domestic discretionary spending and streamlined regulations to make them less of a burden on businesses seeking to create jobs. He believed that government should give individuals and businesses the proper incentives to grow and expand and not inhibit the private sector with high taxes and cumbersome regulations.

Regardless, in the end, Reagan’s program worked. The turnaround began 17 months later.

Fast-forward to today. The Obama administration says that government-directed investment, via huge spending increases, can revive the economy. It’s now stimulus plus 17. Is there a turnaround in sight? Apparently not. Obama’s own budget estimates, released mid July, project trillion-dollar deficits, anemic economic growth coming out of a recession and hi-unemployment into 2011 and 2012. You have to go back to the 1930’s to find a period in which unemployment has been so high for so long.

Obama has said he is doing all he can to revive the economy. Actually, he’s doing too much. The economic uncertainty that his “historic” health care and budget bills have created is doing more to hold back economic growth than anything else. Companies are hoarding cash rather than invest in Obama’s uncertain economic climate. As a result, the recovery is anemic by historic standards.

You cannot boost the economy by confiscating the money from the productive sectors of the economy and handing it out to the unproductive sectors…Consumers are worried about losing their jobs and are having their incomes squeezed; consumer confidence is way down. That makes businesses anxious about investing. There is no doubt that the credit crunch has exacerbated a downturn in the housing market and the broader economy. The deteriorating economic outlook has undermined business confidence.

With credit creation stalled, banks not lending, small businesses not growing or hiring; consumer confidence stalled; the economy can’t produce new jobs; this is an obvious recipe for a stagnant economy for the next three or more years. Obama’s fiscal policies are misguided and he is now monetizing our debt (printing more money)… This is gonna get bumpy and it will stay bumpy for years to come. He is on the wrong path. Obama’s policies are a recipe for disaster.

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