Thursday, February 9, 2012

Presidents, Governors, and Quarterbacks

Presidents and governors are like quarterbacks. When things go well, they get too much credit. When things go badly, they get too much blame. The economy dwarfs government. The most that a president or governor can really do is attempt to minimize the pain during bad times.

Technically, the recession ended long ago. For many the economic pain persists. Now there are signs of improvement beginning to reach the 99%. (The 1% don't have recessions.) Pundits and politicians on both sides of the ideological divide are busy taking credit or assigning blame. Each finds validation of their particular political ideology in the facts of this unfolding story. No matter how thinly you slice it, that is pure pandering baloney. We had a recession. A bad one. It started on President Bush's watch and is ending on President Obama's. Lucky Obama.

Recession is Over

Government policies had precious little to do with the start or end of the Great Recession. What can be fairly said is that deficit spending during this recession, just as it has in every recession since the Great Depression, reduced the pain of temporary economic hard times.

Now is not the time to be assigning credit or blame for the inevitable vicissitudes of the business cycle. It is time to assess what is happening in the longer term to the middle class and the American Dream. Both have suffered grievous harm from ill-advised policies that created Gilded Age income divergence and a growing wealth gap. These are the central economic and social issues of our time. Let's cease the chest-thumping and finger pointing and get to the real work.

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  1. I must disagree that the vicissitudes this country has suffered are just those of a "slight" excess turn of the "Business Cycle." This has resulted from the marginally effective stimulus of the Bush tax cuts and the lax financial oversight from the Bush-appointed head of the SEC and the refusal of the Greenspan-FED to enforce mortgage granting by the "shadow banking system."

    Without identifying the exact causes and getting all to acknowledge the causes, there is no hope to put in place the corrections that will put the economy back on track. Whether you call this assigning blame or not, it is necessary whether or not you put the persons responsible for those decisions in the dock.

  2. I had intended top also comment that the government DOES HAVE the capability to do MORE than just minimize the pain. While it cannot eliminate all the pain, it can ensure that those (most of the middle class and the poor) who did nothing to cause the crisis do not pay the brunt of the costs.

    By enacting an appropriate-sized stimulus with MINIMAL or NO tax cuts the jobs of first responders and teachers could be saved and money put back in circulation to create the missing demand that would keep other private sector jobs stable and growing until the "confidence effects" of the financial shock and the private debt excess had been "worked off."

  3. Thanks for your comments.

    The policies you mention do indeed affect the long term health of the economy and I have no quarrel with any of your proposals. Nevertheless, the precise timing of the precipitous decline was not predictable based on policy decisions alone nor was the precise beginning of the recovery.

    My point is that the time scale for economic policies to have significant impact is long compared to congressional or presidential elections. (Think 30 years since the advent of Reaganomics.) Blaming or crediting an administration for the timing of business cycle ups and downs is as unproductive as predicting the next tick up or down of a stock index. However, a stimulus in the form of deficit spending can have an almost immediate impact by replacing the dearth of private investment.

    In the longer run economic policy must change to address the serious threats posed by growing income divergence and the wealth gap that are destroying the middle class and the American Dream.