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Monday, March 2, 2009

Proof Obama's Fear Mongering Hurts The Economy

Obama's fear mongering is well documented. Crisis, catastrophe, "since the Great Depression" and similar terminology are part of the plan to push through Obama's agenda. But do the words cause economic harm, or are the words merely a reflection of a declining economy? In other words, which came first, the economic chicken or Obama's policy egg?

The evidence is in. Obama's fear mongering is part of the problem, not part of the solution. There is no lack of money in people's pockets, but people are saving the money not spending it.

This from a Marketwatch summary of the Commerce Department's January 2009 report showing that disposable incomes are at a 14-year high even though total income is down:

U.S. households socked away most of the extra income they got in January from annual cost-of-living raises, boosting the personal savings rate to a 14-year high, the Commerce Department said Monday.

Disposable real incomes rose in January at the fastest pace since May as annual pay raises and cost-of-living increases took effect, the Commerce Department said. Real disposable incomes (adjusted for inflation and after taxes) increased 1.5%, despite the third straight decline in income from wages and salaries....

With disposable incomes rising faster than spending, the personal savings rate rose to 5%, the highest since March 1995. At an annual rate, personal savings rose to a record $545.5 billion....

In the past year, real disposable incomes have risen 3.3%, while real spending is down 1.6%.

In other words, people are saving more and spending less. Why would this be? Fear stoked by this administration.

We don't need massive government spending to get this economy moving. What we need is to invigorate confidence in the economy through rhetoric and policies which free up the private sector, and give people the confidence to resume normal economic life.

9 comments:

  1. Absolutely right! Carter spoke so dire about the issues that faced the nation and look at what happened. Reagan spoke of optimism and look at what happened. This is an absolute no brainer. Now the question is, if Obama is so naïve he is clueless on his words or is their a calculated method to his words? I am afraid it both!

    http://franklinslocke.blogspot.com/

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  2. "In other words, people are saving more and spending less. Why would this be? Fear stoked by this administration."

    It could also be consumer saturation, after an 8 year binge. Collapsing home prices could actually be a result of overbuilding of McMansions, until everyone with the money who wanted to buy one ... had bought one. Perhaps it's because of where I live, but I don't see people largely driving cars that are ready for the junkyard ... they're not buying cars because they're happy with the ones they're driving. And how many 52" high def TVs do people need? The slowdown in the economy was a natural cycle - the massive collapse in housing and stock market valuations is more a reflection of over-leveraging based on the presumption that there never would be any natural cycles, and values would always be expected to rise, not only in the long term, but in the short term. And when people leverage too much based on assumptions of short-term gain, very small changes in the economy can result in credit calls and foreclosures, sending everything into a too-rapid downward cycle.

    Now, had Government kept running surpluses for the last 8 years, paying down the Federal debt, the Federal Government could have responded quicker to intervene without risking inflation. But we were told in 2001 that surpluses were dangerous, so we quit trying to eliminate the debt.

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  3. RonClark, I think you're trying a little too hard and missing -- or indifferent to -- what is obvious. Fear and talking down the economy and market are part of the plan.

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  4. Ahh. It's a plan.

    Was the Bush Administration talking up the economy, and denying that there was a recession, for most of a year after the point at which economists concluded the current recession started part of a plan?

    Perhaps it was. And perhaps it didn't work. And perhaps the next plan needs to be very different from the plan that didn't work over the last year ... or over the last 8 years, for that matter.

    I guess you and I disagree on the fundamental economic conditions of the current market. I don't think all the positive talk in the world from the President is going to get people to run out and buy a car when their neighbor just got laid off. I don't think happy talk will get people to pay market value for a home in a neighborhood where 10% of the homes are in foreclosure. I'm personally encouraged by the President taking a discussion of our economic condition seriously. I wish that had started a year ago.

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  5. There wasn't a recession until the credit system was hit with massive, coordinated withdrawals in October.

    This is about right.

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  6. And wasn't a major talking point for voting for Obama that he would enlighten us all with the power of his rhetoric?

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  7. "There wasn't a recession until the credit system was hit with massive, coordinated withdrawals in October."

    That's one opinion. Here is another:

    http://www.reuters.com/article/businessNews/idUSTRE4B05YX20081201

    "The NBER said its committee looked at payrolls, which peaked in December 2007 and declined in every month since then, as well as real GDP and other data to determine when the recession started."

    And to be honest, I don't even know what "enlighten us all with the power of his rhetoric" means.

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  8. The NBER waits until the economy shrinks and then looks backward to find the last time the economy grew most quickly. If the economy had not begun shrinking, the declining rate of growth would not have been included under their label of "recession". The most important point is that the economy would not have dropped into negative growth if the credit default swap system had not been hit with sudden, massive withdrawals, and then there would have been no recession.

    And I remember hearing over and over that Obama would use the power of his words to heal the oceans and the blind make liberals proud to be Americans once again. Well, I suppose he actually did that last one.

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  9. "I remember hearing over and over that Obama would use the power of his words to heal the oceans and the blind"

    Funny - I don't remember that at all ... and I followed the election pretty closely.

    Perhaps we live in alternate universes.

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