Wednesday, November 9, 2011

Will we stay an ObamaNation?

In 1933, Franklin Roosevelt became president just as the banking system was about to come apart, again, with a serious run on the banks.  He came up with a rescue plan which restored the confidence of the American people in the soundness of their financial institutions.  In 2009, Barack Obama was inaugurated as president after the financial system had nearly collapsed and had been bailed out under his predecessor.

In the Spring of 2008, President Obama and the Democrat-led Congress developed the stimulus package that provided aid to the states, funded construction projects and provided tax relief (with limited stimulative effects).  Unfortunately, many economists were already skeptical, correctly, that the stimulus was not big enough and that it would likely need to be sustained.  For an economy experiencing the problems that were already becoming evident, roughly $800M over two years was not much of a kick.  It prevented the current depression from becoming the equal of the Great Depression, but little else.  In the early days of the Obama Presidency, some were hoping for the reincarnation of FDR, but, as some commentators have recently said, Mr. Obama is beginning to sound Hooverian.

There is something deeply wrong about this whole experience.  FDR promised bold experimentation to fight the Depression, but President Obama did not have to promise to experiment because Keynesian economics provides a good guide to what should be done to end a Depression.  Professor Krugman has suggested that we have entered a Dark Age of Macroeconomics, where what was learned of Keynesian economics has not been taught to the more recent graduates of economics programs.

The health care reform promised by President Obama had been enacted by 2010, when Republicans managed to, somehow, run successfully on their promise to revert health care policy back to its broken state.  In December 2010, President Obama gave in to the Republicans on extending the Bush Tax Cuts, which are not very effective forms of stimulus, in exchange for extending unemployment insurance benefits.  President Obama took the position that the debt ceiling did not have to be raised because the Republicans are grown-ups who will be willing to raise it, when push come to shove.

The Republican Congress refused to raise the debt ceiling until practically the last minute and is promising to impose savage cuts on government if savage cuts to government are not approved by the "supercommittee".  They have unveiled their plan for economic prosperity, the "anti-stimulus".

In the meantime, the Republican presidential nominees are not making any headway as they pander to a base that is deeply unhinged and has seemingly no sense of reality.

With all the mistakes that President Obama has made, and there are far too many, I would still rather stay an ObamaNation than let the lunatics... you know where I'm going.

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