Posted By Tait Trussell On September 14, 2010 FrontPage
Bush is charged with putting the economy in a ditch. But who really dug the hole?
President Obama is correct. Our economy is in a ditch. He has used that analogy to blame Republicans uncountable times. He did so recently, Sept 5, campaigning in Parma, Ohio, where he pleaded, “Do we return to the same failed policies [1] that ran our economy into a ditch, or do we keep moving forward with policies that are slowly pulling us out?
But it was not the economic policies [2] of George W. Bush and the GOP that got us into this economic ditch. It was Obama’s own Democrat party that is primarily to blame, and Obama himself.
Bush economic policies [3] included tax reductions for all Americans, spending to fight two wars, and a free-market ideology aimed at reducing the role of the federal government in the private sector. He promoted the concept of individual accountability. The national debt did rise significantly from 2001 to 2008. But in his State of the Union speech in 2005, Bush said his budget eliminated 150 government programs [2] that “don’t fulfill priorities.” Bush spending actually averaged that of President Clinton. But Bush policies were not flawless.
The recession started 13 months before Obama’s inauguration, by the measurement of the National Bureau [4] of Economic Research. In February 2008, Bush agreed with the then-Democrat controlled Congress on a $168 billion combination of spending and temporary tax rebates. These steps were supposed to prop up growth due to the house slump. Once in office, Obama’s top economic advisers called for their hoped-for mighty stimulus [5]. The Wall Street Journal reported on Sept. 7 in an article explaining how trillions in fiscal and monetary stimulus bucks have produced an embarrassingly anemic 1.6 percent recovery. Talk about being in a ditch!
During this Keynesian ***********///////********//////****** economic policy—from cash for clunkers [6], $8,000 home-buyer’s [7] tax credits, to jobless pay [8] for 99 weeks, not to mention the nearly $800 billion stimulus [9] that didn’t stimulate, the Obama economy decelerated to the abysmal 1.6 percent ditch, with 9.6 percent unemployment. Never has anyone dug the ditch so deep. Obama’s “shovel” seemed the only one “ready.”
Instead of focusing on the economy, The Obama Administration “embarked on the most sweeping expansion of government since the 1960s,” as The Wall Street Journal put it. A year was wasted on a health plan that a majority of American don’t want. “Obama’s policies have spread fear and uncertainty,“ while he blasts anyone in sight for “greed and recklessness,” The Wall Street Journal commented.
In April, Peter Wallison, the Arthur Burns Fellow in financial policy studies at the American Enterprise Institute in Washington, wrote in The Wall Street Journal: “Obama has taken to accusing others of representing ‘special interests,’” Obama charged that “the financial industry and its powerful lobby have opposed modest safeguards against the kinds of reckless risks and bad practices that led to this very crisis.”
Wallison wrote: “He should know. As a Senator, OBAMA was the third largest recipient of campaign contributions [10] from Fannie Mae and Freddie Mac, behind only Sens. Chris Dodd and John Kerry.
This brings us to what started the digging of the economic “ditch.”
Why did Bear Sterns (the global investment bank) fail? How does this relate to AIG (the international insurance and financial services giant)?
Kevin Hassett, director of Economic Policy Studies at the American Enterprise Institute, shortly before Obama took office, wrote. “Fannie Mae and Freddie Mae exploded, and many bystanders were injured in the blast, some fatally.” They did this by becoming “a key enabler of the mortgage crisis. They fueled Wall Street’s efforts to securitize subprime loans” by becoming the primary customer of subprime mortgage pools.
As of June 2009, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. “They created an environment in which even mortgage-backed securities assembled by others could find a ready home. The problem was that the trillions of dollars in play were low-risk investments only if real estate prices continued to rise. Once prices began to fall, the whole house of cards came down with them.”
Take away Fannie and Freddie, and these highly liquid markets would never have emerged. The whole mess would never have happened [11]. In 2005, then-Federal Reserve Chief Alan Greenspan warned Congress about Fannie and Freddie, saying, “We are placing the total financial system of the future at risk.”
What occurred then “was extraordinary,” Hassettt said. “For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee.” It was supported by then-President Bush. The bill would have required Fannie and Freddie to eliminate their investments in risky loans. Many loans were given to low-income borrowers who couldn’t afford them. But the Democrats voted against the bill. So, it was Democrats who created [12] the financial problems that helped dig the “ditch” when they launched “affordable housing mandates” that lowered lending standards.
According to Wallison, today Fannie and Freddie hold $5.5 trillion in mortgage loans. “They have lost billions of federal dollars and continue to bleed billions more because of the high default rate.” Fannie’s and Freddy’s toxic assets set off the financial crisis that TARP I and II [13] (Troubled Asset Relief Programs) were supposed to have eliminated.
The housing crisis was the central cause of the recession, Wallison said. Other proposals by Bush to oversee Fannie and Freddie were shot down by Rep. Barney Frank (D-Mass) and Maxine Waters (D-Calif).
Senior Fellow at the Hoover Institution Thomas Sowell, Sept 7 agreed in All Clear Politics that the risky loans by Fannie and Freddie are what “set off the chain reaction that bought down the whole economy…The current policies of the Obama Administration are a continuation of the same policies that brought on the current economic problems—all in the name of Fannie Mae and Freddie Mac—still sacred cows [14] in Washington.”
And so Obama keeps digging and digging the ditch.
Posted by Jim Hoft on Saturday, September 11, 2010,
The US now owes more money than all of the money in the world combined.
Kevin D. Williamson at National Review Online reported:
I have argued that the real national debt is about $130 trillion. Let’s say I’m being pessimistic. Forbes, in a 2008 article, came up with a lower number: $70 trillion. Let’s say the sunny optimists at Forbes got it right and I got it wrong.
For perspective: At the time that 2008 article was written, the entire supply of money in the world (“broad money,” i.e., global M3, meaning cash, consumer-account deposits, checkable accounts, CDs, long-term deposits, travelers’ checks, money-market funds, the whole enchilada) was estimated to be just under $60 trillion. Which is to say: The optimistic view is that our outstanding obligations amount to more than all of the money in the world.
Global GDP in 2008? Also about $60 trillion. Meaning that the optimistic view is that our federal obligations outpace the entire annual economic output of human civilization.
So, John Boehner wants to roll spending back to where it was in the last year of the Bush administration. Okay, great. Nice start.
The Obama-Pelosi economic plan resulted in a cumulative 7.5 million jobs deficit. By every objective measure the democrat’s Trillion dollar stimulus bomb was a complete disaster.
Barack Obama and Nancy Pelosi tripled the national deficit last year by nearly a trillion dollars – something unheard of in our nation’s history.
After an unheard of record deficit last year of $1.4 Trillion the economy is on track to experience a $1.3 Trillion deficit this year.
Instead of focusing on the economy the past two years the radicals in Washington beat up on business and rammed through an unpopular nationalized health care entitlement program.
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