Wednesday, July 15, 2009

Neophyte Obama at the Helm in a Deepening Recession

When the Democratic Party selected neophyte Barack Obama as its nominee over the seasoned and experienced Hillary Clinton in 2008, no one anticipated the global financial meltdown that left Americans in a recession with soaring unemployment. Early on, President Obama surrounded himself with a squadron of financial advisors, including Larry Summers and Timothy Geithner. Having no background in economics, Obama made his decisions based on the advice of said advisors while ignoring warnings from folks like the Nobel-prize winning economist, Paul Krugman. Krugman has graciously refrained from saying “I told you so,” but he has urged the increasingly defensive president to take action soon. In a recent column, Krugman wrote:

Now, it’s bad enough to be jobless for a few weeks; it’s much worse being unemployed for months or years. Yet that’s exactly what will happen to millions of Americans if the average forecast is right — which means that many of the unemployed will lose their savings, their homes and more.

To head off this outcome — and remember, this isn’t what economic Cassandras are saying; it’s the forecasting consensus — we’d need to get another round of fiscal stimulus under way very soon. But neither Congress nor, alas, the Obama administration is showing any inclination to act. Now that the free fall is over, all sense of urgency seems to have vanished.

A follow-up editorial in the NY Times begins:

Unemployment is rising. Foreclosures are surging. Lending is still constrained. So why exactly is the Obama administration waiting to act?

The editorial discusses three main areas in which the Obama Administration should at least lay the groundwork at the present time despite its current preoccupation with health care reform: stimulus spending, foreclosure relief, and bank rescue.

The editorial concludes:

If wait-and-see is anything other than a near-term tactic, it’s bound to be a miscalculation. The need for expanded relief and recovery efforts is compelling. Rather than avoid those fights, the Obama team must win them.

Times reader Dwight Bobson of Washington, DC pointed out:

Most all that Obama and the Dems have done is play it too safe. They had a super majority and knew what must be done. They acted by hiring the insiders and rewarded the criminals in the financial community again benefitting from self-induced bonuses. When it came time for the working class to receive some help, they got $250 to spend wildly on basic food and clothes for their kids. The more things change the more they remain the same.

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