As they used to say on Sesame Street, “One of these things is not like the others, one of these things is not the same.” The current recession “is not like the others.” At 33 months it is already more than three times longer than the average length of the other ten recessions we’ve had since WWII. There are no clear signs it will be ending anytime soon. Glimmers of a recovery appear from time to time, but most indicators remain depressed and many are worsening. On balance, the outlook is more negative than positive. Not since the Great Depression have we had two consecutive years of unemployment in excess of nine percent. What we’re seeing is economic stagnation.
Something else about the current situation that “is not like the others” is the defeatism of those in charge. President Obama’s economic advisors, Tim Geithner and Larry Summers specifically, have been warning that unemployment could remain painfully high for years to come. Vice President Biden has declared that we may never regain the eight million jobs lost over the past two years. I don’t think an administration’s spokesmen have ever before been so pessimistic, especially for the long term.
Mr. Obama and his advisors are not draftees. They asked for this job. They asked to be put in charge. They wanted us to believe that they were “the ones we’ve been waiting for.” In no uncertain terms they convinced voters that they would do a vastly superior job than that dufus cowboy George Bush. Now they have been reduced to pleading, “No one told us it was going to be hard!”
This raises a crucial question — why is the current recession so long and deep? A frequent focus of scientific research and analysis is the attempt to explain and account for differences or anomalies. This recession is “not like the others.” A new name has been invented — the Great Recession. It’s being said that 10 percent unemployment is “the new norm.” Why, exactly? What’s changed?
Past recessions have been largely self-correcting. Furthermore, they have self-corrected in a matter of a few months. Why is it taking so long for that to happen this time around? What’s standing in the way of the self-correcting mechanism?
Geithner, Summers, Biden and Obama are all saying “this time it’s different.” They can say that, of course, but they need to elaborate. They are making assertions that cry out for explanations. If you’re going to make a dramatic, unprecedented proclamation, you really ought to provide details and support. If you make a bold statement, you must have some idea as to why it’s so.
The answer is relatively obvious to anyone with open eyes. The overarching factor that is making this recession different is that the Obama agenda is qualitatively and quantitatively different from any previous president’s agenda. The anomaly of the current recession is the anomaly of Barak Obama’s political philosophy and worldview.
A fundamental conclusion of financial economics is that there are two main dimensions to investing — risk and return. What space and time are to physics, risk and return are to investing. When evaluating an investment opportunity, return is the good, risk is the bad. Another basic conclusion is that risk and uncertainty are just two ways to looking at the same thing. Risk is uncertainty in work clothes.
The Obama administration’s reckless and unprecedented restructuring of the economy has greatly increased the level of uncertainty for anyone thinking about investing, starting a new enterprise, or making consumption expenditures. Mr. Obama has turbo-charged the amount of uncertainty in the minds of decision makers. This is an administration with no brakes, and the ride is frightening.
The massive and rapidly growing federal debt overhanging the economy portends future tax increases. Those probable tax increases reduce the expected return of investments. The lapse of the Bush tax cuts is little more than four months away. The bad news is relatively certain, the good news is highly doubtful.
Mr. Obama and his spokesmen need to explain what’s going on with the economy, and how exactly their policies will cure our serious economic difficulties. If they can’t explain the nature of our problems, what are they doing? Are their policies based on nothing more than a hope and a prayer? Why should anyone have confidence in your corrective action if you don’t show that you understand the nature of the problem?
Mr. Obama and his advisors act as though they themselves are hapless victims of the Great Recession. They imply things have gotten so bad we’re just going to have to get used to it. This is pathetic. Rather than rising to the occasion and dealing with the challenge, they whine and blame the previous administration. They need to be rethinking their strategies and analyzing why their previous solutions have not worked. Unfortunately, because of their doctrinaire attitudes, that is extremely unlikely. They will never admit that the fundamental problem is them.
The president is losing the support of even his most ardent supporters. Arianna Huffington, for example, said recently, “The president put all his trust in the wrong economic team — an economic team that didn’t understand what was happening.”
The injuries done by the Obama administration are painful but not fatal. The U.S. economy has fundamental strengths that will allow it to recover eventually in spite of the damage done by the Obama administration.
More and more, voters are recognizing that electing Barak Obama president was a terrible mistake. In November they will have opportunities to begin reversing that mistake and start undoing the damage. As Sarah Palin said recently, “From my house I can see November.”