by John Hawkins | June 8, 2009 11:16 am
Admittedly, when Obama came into office, he had a tough economy to deal with. So, in all fairness, he can’t be blamed for all the problems we have.
However, Obama is spending so much money and interfering in the market so gratuitously that he’s creating a much bigger crisis than the one he’s trying to solve. It’s like cluster bombing a small town because there’s a crook waving around a hand grenade during a bank robbery.
Worse yet, Obama’s policies aren’t helping the economy. Don’t forget: the “Congressional Budget Office estimated that the recession would end in the ‘second half of 2009’ even if Obama did nothing.”
So, for Obama’s policies to be judged a success, we’d need to see major improvement RIGHT NOW.
Yet, despite the fact that Obama has engaged in a radical takeover of whole industries and is spending so much money that it threatens the continued prosperity of this nation over the next fifty years, so far, he has little to show for it than mountains of debt and a jobless rate of 9.4%.
Moreover, his plans to help the mortgage market? They’re failing,
The Federal Reserve announced a $1.2 trillion plan three months ago designed to push down mortgage rates and breathe life into the housing market.
But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.
That’s the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won’t be able to afford.
To understand how this is all connected, you have to think like a bond trader. Inflation is their enemy because it means the purchasing power of the dollars they receive when bonds eventually are paid off will be diminished. The only question is by how much.
Yields on 10-year Treasury notes, a benchmark for home mortgages and other consumers loans, jumped from 2.5 percent in March around the time of the Fed announcement to as high as 3.7 percent in recent days as signs that efforts to stabilize the financial system and economy were starting to pay off. And 30-year mortgage rates jumped more than a quarter-point this week to 5.29 percent, the highest level since December, Freddie Mac reported.
“If the meltdown continues in the bond market, then mortgage yields will soon be at levels that choke off refinancing activity,” said economist Ed Yardeni, who runs his own investment firm. “Even worse, they could abort any necessary recovery in home sales and prices.”
What about Obama’s stimulus plan? So far, it’s not stimulating anything except the size of government,
The data is in for April. Here’s what happened:
1. Household personal income (inflation adjusted) rose, but every penny — and then some — went into savings or paying down debts. Consumer spending, on which Barack Obama is betting to stimulate the economy, actually fell. None of the stimulus money was sent. None.
2. Meanwhile, to pay for this stimulus spending that didn’t stimulate, Obama had to borrow so much money that long-term interest rates have almost doubled since he took office, forcing postponement or abandonment of business expansion and hiring across the board.
What a record!
Here are the details. In April, personal household, inflation-adjusted income rose by $122 billion. Of that increase, one-third — or $44 billion — came from the government’s stimulus program. But while personal income was rising, household savings (which includes paying down credit-card balances, mortgages, student loans, car loans, etc.) rose by $132 billion — $10 billion more than the rise in income. So personal consumption dropped 0.1 percent.
The stimulus package was a total and complete failure. As predicted, as happened with Bush’s 2008 tax cut, as happened with the Japanese stimulus packages of the ’90s, fearful consumers sat on their money and wouldn’t spend it. Keynesian economics didn’t work. Again.
Our economy is resilient and eventually, it is going to recover. In fact, it may yet recover by the end of this year despite the utter disaster for our country that the Obama presidency has become. However, the larger the government gets, the more debt it takes on, the higher it raises taxes, the more regulations it churns out, the more employees it hires, and the more of private industry it swallows, the weaker our economy is going to be when it recovers.
Because of Barack Obama, we’re likely to have lower growth, higher unemployment, less innovation, and less success in America for the foreseeable future. That’s the change that Barack Obama has brought to our country.
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