At the Economist magazine they have a poll to vote on if its readers think that America is better off than we were four years ago.
The results when I looked were: 59% to 41% saying that we are better off now. I can't imagine that this is the case.
Let's look at the article arguing that case:
(My comments are in bold.)
Barak Obama's End-of-term report
NOT since 1933 had an American president taken the oath of office in
an economic climate as grim as it was when Barack Obama put his left
hand on the Bible in January 2009. The banking system was near collapse,
two big car manufacturers were sliding towards bankruptcy; and
employment, the housing market and output were spiralling down.
First things first: Its all Bush's fault.
Hemmed in by political constraints, presidents typically have only
the slightest influence over the American economy. Mr Obama, like
Franklin Roosevelt in 1933 and Ronald Reagan in 1981, would be an
exception. Not only would his decisions be crucial to the recovery, but
he also had a chance to shape the economy that emerged. As one adviser
said, the crisis should not be allowed to go to waste.
If we are questioning his presidential success why would we even want
to consider his having no political constraints?
Even if you like
Obama, would you have wanted George W. Bush to not have political
We have the task defined: "shape the economy"
Did Mr Obama blow it? Nearly four years later, voters seem to think
so: approval of his economic management is near rock-bottom, the
single-biggest obstacle to his re-election. This, however, is not a fair
judgment on Mr Obama’s record, which must consider not just the results
but the decisions he took, the alternatives on offer and the obstacles
in his way. Seen in that light, the report card is better. His handling
of the crisis and recession were impressive. Unfortunately, his efforts
to reshape the economy have often misfired. And America’s public
finances are in a dire state.
Yeah, he looks great when you consider the fact that America still exists.
So, we're just going to look at the economic crises presented to the President, and ignore others, like the BP Oil Spill.
definition of crisis: "An unstable condition, as in political, social, or economic affairs, involving an impending abrupt or decisive change."
Just so we're clear the "crisis" is said to have started in either 2007 0r 2008. When Obama was elected, in the fall of 2008, the "crisis" was already underway. What did he do to handle the "crisis"?
Did it, for example, reduce unemployment? (chart found here.)
Very impressive indeed. Had we ignored the stimulus idea, by the president's own numbers, we would have been about 2.3% better off. (And that doesn't count the under-employed and those who've given up looking for work.)
Seven weeks before Mr Obama defeated John McCain in November 2008,
Lehman Brothers collapsed. AIG was bailed out shortly afterwards. The
rescues of Bank of America and Citigroup lay ahead. In the final quarter
of 2008, GDP shrank at an annualised rate of 9%, the worst in nearly 50
Bad stuff happened.
Even before Mr Obama took office, therefore, there was a risk that
investor confidence would vanish in the face of a messy transition to an
untested president. The political vacuum between FDR’s victory in 1932
and his inauguration the next year made those months among the worst of
Mr Obama did what he could to ease those fears. As candidate and
senator, he had backed the unpopular Troubled Asset Relief Program
(TARP) cobbled together by Henry Paulson, George Bush’s treasury
secretary. After the election he selected Tim Geithner, who had been
instrumental to the Bush administration’s response to the crisis, as his
own treasury secretary. The rest of his economic team—Larry Summers,
who had been Bill Clinton’s treasury secretary; Peter Orszag, a fiscally
conservative director of the Congressional Budget Office (CBO); and
Christina Romer, a highly regarded macroeconomist—were similarly
If TARP was so unpopular, why then, did it pass the senate, the house, and the president, and become a law.
Note: "unpopular" = bipartisan bill favored by a majority of congress
Geithner was also famous for not paying his taxes.
But what were the results?
Resolving a systemic financial crisis requires recapitalising weak
financial institutions and moving their bad loans from the private to
the public sector. Under Mr Bush, the government injected cash into the
banks. But doubts about lenders’ ability to survive a worsening
recession persisted. Mr Obama faced calls to nationalise the weakened
banks and force them to lend, or to let them fail. Mr Summers and Mr
Geithner reckoned either step would shatter confidence in the financial
system, and instead hit upon a series of “stress tests” to determine
which banks had enough capital. Those that failed could either raise
more capital privately or get it from TARP.
See, Obama is a good guy, he didn't socialize the banks when, who exactly?, was calling for just that.
These two guys know more about banking than do professional bankers, so we should all do what they say.
The first reaction was one of dismay—stocks tanked. Pundits predicted
Mr Geithner would soon be gone. But the tests proved tough and
transparent enough to persuade investors that the banking system had
nothing nasty left to hide. Banks were forced to raise hundreds of
billions of dollars of equity. Bank-capital ratios now exceed pre-crisis
levels and most of their TARP money has been repaid at a profit to the
government. Europe’s stress tests were laxer, and some banks that passed
have subsequently had to be bailed out.
The banks did what they were told, and we all lived happily ever after.
See folks, the solution to our all of problems is to let the experts in Washington tell us what to do.
Let's check those numbers:
Total disbursement: $603.8B
Total returned: $319.1B
Total net to date: -$197.6B
Note: "most repaid" = 197.6 billion dollars outstanding
General Motors and Chrysler presented a different challenge.
Ordinarily a failing manufacturer would shed debts and slim down under
court-supervised bankruptcy. But in 2009 no lender would provide the
huge “debtor-in-possession” financing that a reorganisation of the two
would require. Bankruptcy meant liquidation. That would have wiped out
local economies and suppliers just as the banks were being rescued. On
the other hand, simply bailing-out badly run companies would have been
Rather than let the companies liquidize, and have those companies' assets move to more productive places (the ones who could afford those assets). The government decided what was best.
Even though it sounds unpleasant, some of the old must die in order to make room for the new. If this were not the case then every thing that has ever lived would still be alive today. (It would be cool to see a dinosaur, though.)
Part of the glory of capitalism is the movement of resources from unproductive places of action to the places that better utilize those resources.
If GM and Chrysler had gone away other companies would have the opportunity of a lifetime. The ability to buy, very cheaply, all of the stuff necessary to build cars. We'll never know what new cars would have emerged. The government wanted the old an inefficient to survive at the expense of any number of new companies, and the taxpayers.
Mr Obama’s solution was to force both carmakers into bankruptcy
protection, then provide the financing necessary to reorganise, on
condition that both eliminated unneeded capacity and workers. Both
companies emerged from bankruptcy within a few months. Chrysler, now
part of Italy’s Fiat, is again profitable, as is GM, which returned to
the stockmarket in 2010. Nonetheless, the government will probably lose
money on these two rescues.
No mention of the government's nationalization of two large companies?
The government lost money, and rather than give (potentially) more competent people the option to buy cheap car manufacturing assets, the government decided what was best.
If you do something that the government deems "bad" what's to prevent them from telling you what you must do? The precedent was set long before this example.
Mr Obama’s attempts to fix the housing market were less successful. By
early 2009 9% of residential mortgages, worth nearly $900 billion, were
delinquent. The traditional playbook called for the government to buy
and then write down the bad loans, cleansing the banking system and
enabling it to lend again. But when the Treasury studied such proposals,
it found there was no ready mechanism to extract dud loans from
securitised pools. An alternative was to pay banks to write down the
loans to levels homeowners could handle. But the risk then was “you
either overpaid the banks…doing a backdoor bail-out without enough
protection for taxpayers, or paid too little and banks would not be
willing to do it,” recalls Michael Barr, who worked on those efforts and
now teaches at the University of Michigan.
Note: "traditional playbook" = government decides what is best, and what's best is more government
The people spending their careers working in banks couldn't figure a way out, and, big surprise, government bureaucrats couldn't either.
Instead, lenders were prodded to reduce payments on mortgages with
subsidies and loan guarantees. Even Fannie Mae and Freddie Mac, though
now explicitly owned by the government, resisted taking part. As of
April, only 2.3m mortgages had been modified or refinanced under the
administration’s programmes, compared with a target of 7m-9m. Had Mr
Obama ploughed more money into writing down principal at the start, the
results might have been worth the political risk. “They were prudent,”
says Phillip Swagel, an economist who tackled similar questions under Mr
Paulson. “In retrospect, I bet they wish they had been imprudent, spent
a lot of money, and actually solved the problem.”
Note: "prodded" = if you don't government goons will drag you to jail
Two of the country's biggest lenders were nationalized and it only gets a mention in passing? What's to prevent the government from nationalizing your business?
"If you failed your employees would be out of a job. You need to step aside and we'll run your companies for you."
The only thing stopping them from doing this to you is that you're not big enough for the government to notice you, unless of course, you run afoul of one of our 300,000 pages of rules and regulations telling you what you can do, can't do, and how much of it you can do. If you're in the news for potentially putting employees out of work the government may decide that its best to nationalize you.
Textbook economics dictates that when conventional monetary policy is
impotent, only fiscal policy can pull the economy out of a slump. For
the first time since the 1930s, America was facing just those
circumstances in December 2008. The Federal Reserve cut short-term
interest rates to zero that month and experimented with the
unconventional, buying bonds with newly printed money. The case for
fiscal stimulus was therefore good.
FYI: Interest rates of 0% mean that it is unwise to save your money. You are better off spending it now rather than watching it lose value. This is not good for the long term economy, or our personal assets. With years of 0% interest rates we are going to get yet another generation of people who haven't saved for their retirement and "need" to have it subsidized by the government.
Sluggish growth since 2009 has fed opposing assessments of the $800
billion American Recovery and Reinvestment Act. Conservatives say
stimulus does not work, or that Mr Obama’s was badly designed. Most
impartial work suggests they are wrong. Daniel Wilson of the Federal
Reserve Bank of San Francisco inferred the stimulus’s effect through an
analysis of state-level employment data. He concluded that stimulus
spending created or saved 3.4m jobs, close to the CBO’s estimate (see
See, the unemployment numbers sound better when we add a bunch of points to our projections (which we projected after the fact).
Now I've lost interest in this article.
Vote for Obama! He could have been worse!
Charges that the plan was made up of ineffective pork are also
unfair. Roughly a third of the money went on tax cuts or credits. Most
of the spending took the form of direct transfers to individuals, such
as for food stamps and unemployment insurance, or to states and local
governments, for things like Medicaid.
Liberals make the opposite case: the stimulus was too small. Ms Romer
originally proposed a package of $1.8 trillion, according to an account
by Noam Scheiber in his book, “The Escape Artists”. Told that was
impractical, she revised it down to $1.2 trillion. Mr Obama eventually
asked for, and got, around $800 billion. Some critics note that this was
too small relative to a projected $2 trillion shortfall in economic
activity in 2009 and 2010. But it was far more than Congress had ever
approved before. Despite the Republican takeover of the House of
Representatives in 2010, Mr Obama eventually got nearly $600 billion of
further stimulus, including a two-year payroll-tax cut.
If stimulus worked, why has the recovery remained so sluggish? GDP
has grown by just 2.2%, on average, since the recession ended in
mid-2009, one of the slowest recoveries on record. For one thing, the
economy hit air-pockets in the form of higher oil prices, caused partly
by the Arab spring, and the European debt crisis. Moreover, from the
fourth quarter of 2009, state and local belt-tightening more than
neutralised the federal stimulus, according to Goldman Sachs (see chart
Note the source of for this chart: Goldman Sachs. Who were Obama's biggest campaign donors you [should] ask? Wouldn't it be surprising if Obama's second biggest campaign contributor should publish data that supports him?
Perhaps the simplest explanation is that recoveries from financial
crises are normally weak. Mr Obama was guilty of hubris in thinking this
one would be different. He also created expectations that, once his
team gave up radical intervention in the mortgage market, he could not
An economy in his own image
From his earliest days on the campaign trail, Mr Obama made it clear
he wanted to do more than just restore growth: he dreamed of remaking
the American economy. Its best and brightest would devote themselves to
clean energy, not financial speculation. Reinvigorated public investment
in education and infrastructure would revitalise manufacturing, boost
middle-class incomes and meet the competitive challenge from China.
Once in office, Mr Obama devoted himself to that agenda, in the
process displaying a fondness for industrial policy. “When we first
started talking about the Recovery Act in December of 2008, the earliest
discussions were about clean energy: smart grid, wind, solar, advanced
batteries,” says Jared Bernstein, then an economic adviser to Joe Biden,
the vice-president-elect. Some advisers, like Mr Summers, were uneasy
with industrial policy. Others, like Mr Bernstein, argued that orthodox
economics allowed for government intervention in early-stage technology.
Mr Obama’s personal priorities carried the day. The stimulus
allocated some $90 billion to green projects, including $8 billion for
high-speed rail. Some of this has clearly been wasted, but perhaps not
as much as critics think. Less than 2% of the Department of Energy’s
controversial green-energy loans, such as those to Solyndra, a
now-bankrupt solar-panel maker, have gone bad.
The bigger problem with this spending is that it went against the
economic tides. Last year Mr Obama boasted that America would soon have
40% of the world’s manufacturing capacity in advanced electric-car
batteries. But with electric cars still a rounding error in total car
sales, that capacity is unneeded. Many battery makers are struggling to
survive. Makers of solar panels face cheap competition from China, while
natural gas from shale rock has undermined the case for electricity
from solar and wind. As for high-speed rail, extensive highways, cheap
air fares and stroppy state and local governments make its viability
dubious. A $3.5 billion federal grant to California may come to nothing
as the estimated cost of that state’s high-speed rail project runs out
Mr Obama has always portrayed himself as a pragmatist, not an
ideologue. “The question we ask today is not whether our government is
too big or too small, but whether it works,” he said in his inaugural
address. In practice, though, he usually chooses bigger government over
Sometimes this is a matter of necessity. The complexity of Mr Obama’s
health-care law was a result of delivering the Democratic dream of
universal health care within the existing private market. The financial
crisis made it necessary to deal with failing financial firms that are
not banks, to rationalise supervisory structures and to regulate
derivatives, all of which the Dodd-Frank Act does.
Unfortunately Dodd-Frank does much more than that. In other areas,
too, Mr Obama’s appointees have proposed or implemented more costly and
intrusive rules than their predecessors on everything from fuel-economy
standards for cars to power plants’ mercury emissions. The
administration says the benefits of these rules far outweigh the costs,
but that case often rests on doubtful assumptions.
If the sheer volume of new rules has alienated business, Mr Obama’s
rhetoric has also given the impression that he comes from a hostile
tribe. This has been self-defeating, more so because his actions in the
past year have suggested a change in direction. The White House has
forced the Environmental Protection Agency to delay a costly and
controversial new ozone standard. Mr Obama is now a cheerleader for
shale gas. His administration has written new rules in favour of the
industry, for example giving well-drillers an extra two years to meet
After initial indifference, Mr Obama has also warmed to trade. He
struck a deal with Republicans to ratify three bilateral trade
agreements, and is pushing the Trans-Pacific Partnership. An early round
of tariffs on tyres proved an isolated provocation in an otherwise
well-managed economic relationship with China.
This pragmatic turn may have come too late for Mr Obama to woo
corporate America. Instead, free-market types worry that without the
restraining influence of officials such as Mr Summers, Cass Sunstein and
Mr Geithner (who is likely to depart at the end of this term), Mr
Obama’s more interventionist disciples will have the run of a
The elephant in the second term
In fact, Mr Obama is likely to move closer to the centre if he wins a
second term. His principal legislative goals—health care and financial
reform—are achieved. The Republicans are almost certain to control at
least one chamber of Congress, precluding big new spending plans,
regardless of the state of the recovery.
That leaves the public finances. There is little to commend in Mr
Obama on that front. True, he inherited the largest budget deficit in
peacetime history, at 10% of GDP. But in 2009 he thought it would fall
to 3% by the coming fiscal year. Instead, it will be 6%, if he gets his
way. Back in 2009, he thought debt would peak at 70% of GDP in 2011. Now
it is projected to reach 79% in 2014 (see chart 3), assuming his
optimistic growth forecast is correct.
This is not quite the indictment it seems: normal standards of fiscal
rectitude have not applied in the past four years. When households,
firms and state and local governments are cutting their debts, the
federal government would have made the recession worse by doing the
Less defensible are the plans for reducing the deficit in the future.
Chained to a silly vow not to raise taxes on 95% of families, Mr
Obama’s plans have relied almost exclusively on taxing rich people and
companies. Efforts to cut spending have fallen mostly on defence and
other discretionary items (meaning those re-authorised each year). He
has yet formally to propose credible plans for reducing growth in
entitlements. His health-care reform did not worsen the deficit. But it
did little about the growth in Medicare, the single-biggest source of
Mr Obama assumed entitlement reform would be part of a grand bargain
in which Republicans also agreed to raise taxes. He miscalculated:
Republicans have not yielded on taxes. But there is a deal to be done if
Mr Obama wins a second term. Given the canyon dividing the two parties,
it might seem more likely that they will both relapse into their usual
mode of mutual recriminations. But both the president and the
Republicans want an alternative to the alarming year-end combination of
expiring tax cuts and sweeping discretionary and defence-spending cuts
known as the “fiscal cliff”.
Last summer Mr Obama and John Boehner, the Speaker of the House of
Representatives, briefly had a deal to raise taxes and cut entitlements.
The bargain failed largely because of political miscalculations by both
men. Mr Obama’s re-election might allow the two to pick up near where
they left off. He still has a chance to improve the worst score on his
report card. Mr Obama should go out and make that case between now and