The Obama bear market? Not quite

[Richard Tafoya]

LA Times:
http://www.latimes.com/business/la-fi-petruno7-2009mar07,0,869176.story?page=2

The continuing meltdown in share prices, the worst since the Great Depression, now has become Exhibit A in the political battle between the Obama administration and its harshest critics.

...

Others say the market is more upset with the administration's failure to stabilize the ravaged banking system -- a Herculean task that Wall Street had hoped would be the first major challenge the White House tackled.

...

Still, the question of why stocks have fallen so hard this year is not so easily answered with Obama's name alone, despite what Limbaugh and Kudlow would have us believe.

There is, of course, the horrendous recession Obama inherited. Consumer and business spending fell off a cliff beginning in September as the global credit crisis deepened, and there have been scant signs that the economy has even begun to bottom.

Obama's critics also conveniently forget to mention that the U.S. stock market meltdown this year isn't happening in isolation. Major European stock markets also are down more than 20% since Jan. 1. In Japan, the Nikkei index hit a 26 1/2 -year low this week.

What's more, Obama isn't responsible for the cascade of securities-fraud cases that have come to light since December, when the Securities and Exchange Commission charged Wall Street veteran Bernie Madoff with running a $50-billion Ponzi scheme.

For well-heeled investors, the scam revelations have been another heavy blow to confidence -- and a good reason to pull some of their money from ever-secretive hedge funds, if they've had any doubt at all about their manager's veracity.

[Venisenvy]

Yes this recession is not Obamas fault anymore than the recession Bush inherited from Clinton was Bush's fault. In that i completly agree. People saying this stock market is an indictment on obamas policy were probably in a coma all of last year.

[oxymoron]

Yes this recession is not Obamas fault anymore than the recession Bush inherited from Clinton was Bush's fault. In that i completly agree. People saying this stock market is an indictment on obamas policy were probably in a coma all of last year.

Venis,

Have you turned into a commie pinko? What's with the avatar?

[DoubleEdgeSword]

Luis has swung over to the dark side. Mwahahahhha!!

[Venisenvy]

lol Not completly while I might be officially a democrat its more because I can no longer be a republican and to not be any major party is just not smart! And the avatar is because for that last year I just had Bush as my avatar because he was president so I figure I should have an obama avatar that shows him as some grand figure as well.

[Whoda Thunk?]

Venis,

Have you turned into a commie pinko? What's with the avatar?

:susp2:

[oxymoron]

lol Not completly while I might be officially a democrat its more because I can no longer be a republican and to not be any major party is just not smart! And the avatar is because for that last year I just had Bush as my avatar because he was president so I figure I should have an obama avatar that shows him as some grand figure as well.


I too am much more anti-Republican than pro-Democrat. These old school house Democrats that continue business as usual are almost as bad as Republicans, who think the way out of the recession is to reduce taxes and tighten the budget belt. The truth of the matter is that if government doesn't spend now, nobody will. The problem with the Stimulus is that it is TOO SMALL.

[Venisenvy]

In a way i agree with you and in a way i disagree. See i think the size of the stimulus is plenty big, if all that money was actually going to stimulate the economy. The problem is that it is not, it is filled with tons of pork that doesnt create any jobs. 1.3 million to help build a health center that will be usefull to the community is good, it will create jobs etc... Millions of dollars to refurnish the homeland security heaqquarters well i dont think buying them new desks and drapes is my idea of stimulating the economy. I love puerto rico but 150 million for parking improvements at a little league facility, ummm i must be missing something here. So if all that money went directly towards stimulating the economy within this year i would be happy. Not enough is being spent on stimulating the economy because congress doesnt understand the meaning of stimulus.

[DoubleEdgeSword]

I suppose it depends on your definition of "stimulating the economy," Luis.

To me, it's whatever creates work stimulates the economy. Refurbishing an office building? I'm not sure if buying desks and curtians is all that includes, but let's say that is the extent of the refurbishing. Someone has to manufacture those desks and drapes. Companies will be paid for those goods. How do I know that those companies may not hire more people to meet the demand, or not lay off people because they got the contract? And perhaps that sale will allow that company to keep their doors open longer, to keep their employees on the job longer.

So, I really don't understand why people see some of these projects as "pork." If people are working and money is flowing, how is this pork?

Now, building a bridge from one uninhabited island to another uninhabited island would put people to work, sure. But, that's another story, isn't it? That would provide no value to anyone when it's completed. But an office building that is falling apart? What is wrong with refurbishing it?

And what is wrong with building a parking lot in a town? It will serve the citizens of that town, put local people to work and put money into the local businesses.

[oxymoron]

Venis,

I agree with you that the it is not just the size of the stimulus, but how it is spent. For example, I do not believe tax cuts will be particularly stimulative in that Americans are now in a saving mode. Good for the long-term, but not good to get our economy moving. While I support the adjustments on Alternate Minimum Tax, I do not think those belong in a stimulus.

While I am against pork, the truth is that some pork is stimulative. Money for a bridge to nowhere may not create long-term value, but it does get money into the economy quickly.

My view is that there should be two criteria for the stimulus:

1. What can take effect FAST. That means the next 12 months. Obama's timeframe is too long.

2. What stimulates, but also is an investment in long-term good. This would be spending on green jobs, some health care and education.

If a spending proposal meets one of these criteria it should be considered. If not, then it should be sh*t-canned.

[oxymoron]

In my view, Obama has misplayed this issue. The funding budget has tons of pork in it...which Obama should end. But one reason he won't is because he needs the spending. The other is he doesn't want to spend the political capital. But this leaves him looking hypocritical.

What he should have done with the stimulus is made a two-pronged argument:

1. We need a big stimulus. Budget deficits matter, but right now private enterprise and consumers are not spending. The Gov needs to step in or there will be a downward spiral.

2. The nature of the stimulus should be spending vs. tax cuts.

Because he never effectively made the argument on #1, the Republicans are able to move back and forth and attack him on either front.