Obamanomics vs. Reaganomics [Reader Post]


Last week, for the first time in history, US debt was cut to below AAA. That wasn’t supposed to happen. For months we saw President Obama and the media pillorying conservatives for inviting Armageddon by opposing the lifting of the debt ceiling without substantive cuts in government spending. When the “Hobbits,” as the Wall Street Journal dubbed them, were undone by the squishy wing of the GOP and we had our “grand compromise,” that was supposed to avoid a downgrade.

Just as many of the Hobbits had suggested, the grand compromise did nothing to allay fears about Uncle Sam’s finances and lo and behold four days after the deal was signed Standard and Poors reacted as any respectable rating agency would and downgraded our debt. (Perhaps they were trying to repair a reputation left in tatters after the debacles of Fannie Mae and Freddie Mac.) Now the country finds itself in the same position it might have otherwise except that now we have an ineffective debt deal that will not only allow spending to grow, but will allow taxes to rise.

In what one wishes was a man bites dog moment, but isn’t, Investor’s Business Daily reports that the Obama Justice Department is forcing banks to make mortgage loans to minorities with poor credit, no job and in some cases allow them to count unemployment and welfare as income upon which to base those loans. One might charitably ask if Eric Holder has been asleep for most of the last decade. What else would explain his wanting to double down on the exact problem that caused the current financial meltdown in the first place?

Keeping with the banking theme for just a moment, there are times when something happens that simply leaves you shaking your head. The way things work in a normal universe, banks earn money by paying depositors and then in turn lending out those same funds at higher rates to borrowers. Today however, in the Bizarro world of Obamonomics, banks are actually charging big customers for the privilege of holding their deposits. Apparently, the current economic prospects in the United States are so bleak that hundreds of billions of dollars are piling up in bank vaults across the country because so little investment / borrowing demand exists. And there we are almost at the heart of Obamanomics: When government makes it more appealing to pay your bank to hold on to your money than actually invest in businesses that could potentially create profits… and jobs. The only missing piece is when the government relieves you of the burden of paying those fees by simply taking your money.

In the event that one might want disagree with the Obamanomics labeling of this economy, let’s take a look at the last time we were in this situation, back in the early 80’s. During the first thirty months of the Reagan administration, unemployment went from 7.5% to 9.4%. During the first thirty months of the Obama administration the rate went from 7.5% to today’s 9.1%. At first glance President Obama seems to measure up pretty well to the Gipper. Not so much… Ronald Reagan came to office with interest rates sitting at 20%. Thirty months later they were still at 9.5%. Barack Obama has had a slightly different playing field, enjoying almost 0% rates since he took office. At the same time, while Reagan ran deficits of 3.5% and 4.7% of GDP during his first two years, Obama has run deficits in excess of 10% of GDP for both of his first two years. Then of course there is inflation. When Reagan took over inflation was sitting at 12% and thirty months later it had dropped to 3%. Obama on the other hand took office with an inflation rate hovering around zero and today it approaches 4%.

Democrats are fond of saying that George Bush left Barack Obama with the worst economy since the Great Depression. Anyone who lived through (or read about) 20% prime mortgage interest rates or had to wait hours to fill up their tanks knows that that statement is a lie. In reality, when faced with a much more challenging environment Ronald Reagan cut taxes, trimmed the nanny state (to the degree he was able – remember he wanted to get rid of the Departments of Education and Energy but his Democrat Congress would have none of that…) and was able to set the foundation for an economic juggernaut, all while never running a deficit in excess of 6.5% of GDP… and while winning the Cold War at the same time. Barack Obama on the other hand, with a staggeringly accommodating interest rate environment and no inflation has managed to bring the economy to a virtual halt by destroying the incentive for investment. Between the massive increase in government regulation and spending as well as the takeover of whole industries, Barack Obama has dealt a body blow to the free market system in this country. All while running staggeringly high deficits and a feckless foreign policy to boot.

Reaganomics was initially coined as a term of derision by the left. Years later, after Reagan brought the country out of the dark and set the foundation for a dynamic and robust economy, the term Reaganomics became a symbol of success. My guess is that thirty years from now when historians look back on the four years of the Obama administration the term Obamanomics will still be wearing its well deserved patina of dysfunction and failure.

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You can’t call them feckless, that’s outrageous…
The Obama administration is NOT feckless…clearly they’ve been fecking with everything in the economy and foreign policy to the extent that they’ve fecked the recovery, they’ve fecked afghanistan, they’ve fecked our children’s future and our grandchildrens… they’ve thoroughly fecked Israel and the Arab Spring, they’ve fecked Libya, and they’ve fecked almost all of our allies at least twice.
And they’re not through fecking everything yet.

Great essay, Vince.

Yes, unfortunately I’m old enough to remember the gas lines and 20% mortgage rates. My solution? I built my own home paycheck to paycheck with no mortgage and added a second gas tank to my pickup that I could fill up on odd-numbered days…or was it even? Adapt and overcome.

Another little discussed consequence of those days was that many wives had to enter the job market to make ends meet. It was the end of the single-family wage earner. I’ve always thought that was just a government scheme to get more FICA taxes coming in.

I could have told you two years ago this was the direction we were heading. Obama fancies himself the new FDR, and if you look at how FDR handled the Great Depression, is was a dismal performance. Like Obama, FDR practiced class warfare, thought that pouring more and more money into the system, driving up the national debt, would be the ticket to the end of the Depression. And like Obama, FDR appointed far left thinking class warfare warriors to his cabinet and powerful agencies that were members of the Socialist Party of American or supported Stalinism. Rex Tugwell was called “Rex, the Red.”

After six years of continuing to spend billions on “work” projects, killing 6,000 hogs to increase the price of pork for farmers, which did not work, regulations that were counter productive and often having one agency counter the regulations of another agency with more regulations, in 1941, when we were building a war machine and providing arms, ships, tanks, etc. to Great Britain, the unemployment rate remained at over 9%. In 1938, Henry Morganthau told the Congress that the FDR administrtion and “spent and spent” and to no avail.

Is this the beginning of the end? I don’t know. I think it is the beginning of the beginning. Nothing is learned by those in the Obama administration who think university degrees trump common sense. Remember, TARP was written by Patrick Kennedy, with the help of Timothy Geithner, then head of the New York Fed. Now those very banks who were “too big to fail” run the risk of failing. Citibank, J P Morgan-Chase, Bank of America, all took hits that they may not be able to recoup.

Things are not going to get better for a long time. Perhaps not in my lifetime. We have borrowed our children and grandchildren’s future and it is rapidly going down the drain. Keynes doesn’t work. Hayak and Hazlitt does.

Before the downgrade by Standard & Poor’s Obama surrogate, Barney Frank, came on Fox News and started the 1st of the Obama soundbites:
Ratings organizations are irrelevant and so are their ratings.
Ignore them.
See the video here.

Later Obama surrogates at Treasury came out saying there was a $2 Trillion mistake that meant the downgrade was a mistake.
But S&P noted that error (YES, they admitted they made the error) was irrelevant to their ultimate conclusion to downgrade the US.

Now Obama has come out today and what does he say?
Obama said that the United States still has top-notch credit despite a downgrade from Standard & Poor’s!
He offered no specifics….again.

He still wants to SPEND more.
More unemployment weeks.
Perhaps someone needs to show Obama this graph which proves his extending unemployment will never help get people back to work.
(Of course, Obama already knows that. He just wants people to be getting a bit of OBAMA MONEY right up until the election.)

Things are bad, and will not improve until we have a legislature which comprehends the fact that money does not grow on printing presses. To borrow money (I am not speaking of a Government here), one must have sufficient assets and evidence of ability to repay. Otherwise one gets no loan. This excludes, of course, the many homes which were purchased without inquiry, because to inquire into the ability to repay was RACIST.
And the bad loans which resulted from the penalties which accrued to banks which asked questions blew up the housing market. Gresham’s law at work, folks.
Any individual or business spending more than it takes in goes bankrupt.
Bankruptcy faces the United States. There is no way to use a Stimulus or Print More Money to get out of this hole. We cannot afford the Welfare State which the Democrats have deemed ESSENTIAL to our Nation. Without Social Security, Medicare, Medicaid, Food Stamps, AFDC, Subsidized Housing, and all the other benefits, we will cease to exist. Huh?
How did we survive from 1789 to 1933 without all of those Government programs?
How did old folks live? How did we get medicine? How did we eat? Gee, we must not have existed.
Fact: we cannot afford the massive Government welfare spending.
No computation will make taxes removed from the 48% who pay them cover the requirements of the 52% who pay no taxes. It doesn’t work.
So, cheer up. Things will get worse.
Much worse.

The ultimate irony Mathman is that the only ”safe” place to park cash right now is either in gold, banks or Treasuries!
GLOBAL MARKETS-Investors flee stocks for bonds on US downgrade

Investors took shelter in the asset that was downgraded —
choosing U.S. government bonds for their liquidity and
perceived high quality.

So, ironically, the US is getting flush with infusions of cash in exchange for pieces of printed paper.
Well, they are trading one printed piece of paper for a different one.
It sure is ironic.

Very nice OP, Vince.

You summed it all up nicely with this passage:

And there we are almost at the heart of Obamanomics: When government makes it more appealing to pay your bank to hold on to your money than actually invest in businesses that could potentially create profits… and jobs.

That really says so much about the economic environment the Obama administration has given us.

Telling how example #1 of this screed says without saying “Your tax dollars pay for a Puerto Rican’s mortgage!” That’s an easy scare for Fox News mouthbreathers. Tea Party–not racist! Just likes to bring the issue up a lot.

And the article also fails to explicate exactly how, again, the Republican policies that crashed the economy will uncrash it.

@Greggie: Mouthbreathers?

What about the tone of civility that your messiah, I mean hero preached about?

I guess that is to be applied to the right, but not to the left, correct?

Now please answer this question –

What Republican policies exactly crashed the economy?

Be specific and it would be nice if you could link your sources.

I refer you to the Republican policies in place after 8 years of Republican “leadership.”

Nobody I know confuses Mr. Obama with a messiah, nor ever has. “Mouthbreather” is charitable–quit complaining.

@anticsrocks, #9:

Posts #8 and #10 are from some different “Greggie”.

@Greggie: Our resident troll rears his ugly head.

You have no problem denigrating an entire segment of your fellow citizens? Really? And you think that helps get your point, however idiotic it may be, across?

As for Obama being compared to the Messiah, well you must have missed this one:

“I mean in a way Obama’s standing above the country, above – above the world, he’s sort of God.” – Newsweek’s Evan Thomas on MSNBC

Or this one:

A beam of morning light shown [sic] through the stained-glass windows and illuminated the president-elect’s face. Several of the clergy and choir on the altar who also saw it marveled afterward about the presence of the Divine.

Or this one:

The day after Barack Obama was elected president, Larry Younginer knelt in front of the congregants at his suburban Atlanta church and offered a prayer of thanks.

“Lord, we have again come to you in prayer, and you have heard our cries from heaven, and you have sent us again from the state called Illinois, a man called Barack to heal our land,” said Younginer, a 62-year-old retired information systems worker at Coca Cola in Atlanta.

No, nobody confuses him with the Messiah…

You said you refer to certain policies under GOP leadership.

Okay, name one.

Cite a source.

I dare you.

anticsrocks, resident FA Greg is correct. There is a second “Greg” here… but apparently doing a heckuva imitation. LOL

I neglected to link my sources on post #12.

Is Barack Obama the Messiah?

@MataHarley: Thanks Mata. You are correct, he sure fooled me.

@Greg: I apologize Greg, to the real, resident Greg. And just for the record, I really don’t know if your head is ugly, I should not have said that.

To the imposter, my challenge still stands.

If you have the guts, but since you are hiding behind someone else’s name, I sincerely doubt it.


Hmm. That is interesting. I’d been under the assumption that Greg had undergone some kind of weird psychotic transformation, given that “his” posts seemed to be getting closer and closer to something one might see over at HuffPo or DailyKos. Is there any way of a forced differentiation between the two?

Yes, make the new Greg wear an armband………no wait. Never mind, that wouldn’t work, he would just take it off before he started typing!

Darn the luck… 🙁

anticsrocks, hi,
make them choose a number in LATIN number after their name, and watch how they multiply the X
the more we will get to NOVEMBER 2012

@johngalt and @anticsrocks, I think the question to redundent name registration with WordPress is a question for Curt, of FA founding father. Dunno…

In the meantime, I guess you can always ask the “greg” in question which entity he is. While they share a similiar political leaning, the style between the two is somewhat different. Personally, I think our resident lib/prog Greg is more eloquent.