Barack Obama

Worse Than the Recession

The Obama administration has engineered a "recovery" in name only.

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When this column was written, the smart money was once again saying that the bad times were behind us. "Nearly seven years after the housing bubble burst, most indexes of house prices are bending up," David Wessel wrote in The Wall Street Journal in July. "Nearly 10 percent more existing homes were sold in May than in the same month a year earlier, many purchased by investors who plan to rent them for now and sell them later, an important sign of an inflection point."

In the summer edition of the house magazine for Markit Group Ltd., a credit-default swap pricing firm, Bruce Kasman, head of economic research at J.P. Morgan, explained why he believes the American economy will triumph over "persistent lacklustre growth." Kasman identified three hopeful trends: 1) "A competitive corporate sector that is willing to hire," 2) "Consumer behaviour has turned neutral," and 3) "Housing turns from drag to lift."

But in the battle for hope, it's no surprise that President Barack Obama has gained the highest ground. "The private sector is doing fine," the president intoned in June. That phrase was immediately controversial, but it had the rare distinction of sounding even worse in context than standing alone. Obama's real concern was for government employees facing "cuts initiated by, you know, governors or mayors who are not getting the kind of help that they have in the past from the federal government."

President Obama signs the Stimulus in 2009. Economic boom does not ensue.

So is economic health returning? The short answer is no. The mortgage crisis has become so grave that some city governments are threatening to deploy their eminent domain powers to seize loans at high risk of default. Seven municipal governments, including three of the 50 largest cities in California, have declared bankruptcy. Wealth creation in America has become so difficult, and wealth destruction so common, that in many respects the recovery, which is not a recovery at all but a period of indefinite stagnation, has become worse than the "Great Recession" that allegedly ended in 2009.

The long answer is also no. A June Federal Reserve study revealed that the median value of pretax family income fell 7.7 percent between 2007 and 2010; during the same period, median net worth declined a whopping 38.8 percent, and mean net worth dropped 14.7 percent. The Fed's quarterly flow of funds reports have consistently shown flat household net worth since 2010. At $62.9 trillion in the first quarter of this year, household net worth is still almost $5 trillion below where it was in 2007.

As if having fewer dollars weren't bad enough, the dollars have been, according to the strict definition of the word, decimated. Consumer Price Index inflation has robbed the dollar of 10 percent of its value since 2007. With the interest rate on a savings account below 1 percent, saving money in the bank has come to mean losing your money, and not slowly.

Under those conditions, who would save? Nobody. According to the Bureau of Economic Analysis, the U.S. personal savings rate (disposable personal income less outlays), which briefly topped 6 percent in 2009, has averaged below 4 percent throughout this year and is now close to 3 percent. That rate was 10 percent as recently as the late 1980s.

Also headed steadily downward is the equity portion of real estate owned: Mortgage debt makes up 55 percent (and growing) of all real estate assets in America. Again, the long-term trend is even more frightening: In 1983 American homeowners had more than 70 percent equity stakes in their homes.

According to a July report from Bianco Research, aggregate personal debt has increased since the recession ended. Total credit-market debt is nearly $54 trillion. Public-sector debt has increased from $21 trillion to $24 trillion during that period—and as the Golden State cities of Stockton, Vallejo, and San Bernardino show, government bankruptcy is no longer something that only happens in Rhode Island, nor is it a figment of alarmists' imaginations.

Against this slow (and sometimes fast) dribbling away of wealth, we are supposed to believe the economy is improving because U-3 unemployment is "holding steady" at more than 8 percent, or because of a small spike in real estate settlements.

Don't believe it for a minute. It's a step in the right direction that lenders have finally increased the pace of foreclosures (according to RealtyTrac, foreclosures jumped 6 percent in the first quarter), but it will take many years to work through the backlog of distressed mortgages. The percentage of Americans even looking for jobs, let alone holding them, continues to fall, and the 80,000-a-month rate of private-sector job creation doesn't come close to keeping up with population growth.

There's something about old-fashioned print media that makes doomsday predictions all the more enjoyably awful. From Paul Erdman's The Crash of '79 and The Panic of '89 to the late libertarian leader Harry Browne's How You Can Profit From the Coming Devaluation through Nassim Taleb's recession appetizer The Black Swan, people still love to curl up with dead-tree visions of hell in a handbasket.

So here's my dire print prediction: By the time you read this, Americans will be feeling poorer than ever. And they won't be wrong. 

NEXT: Filmmaker Who Shot Video that Sparked Violence in Libya and Egypt Remains Defiant

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  1. “Remain calm, all is well!”

  2. The President is left-handed?

    Dare I say that has sinister implications.

    1. I see what you did there.
      (well played)

    2. You know who else was left handed?

      1. Bill Clinton?

        1. Bzzt! Try again.

          1. So you didn’t get the joke, I guess.

            1. Epi,
              Can a Dexter be sinister?

      2. Jimi Hendrix?

      3. My younger daughter?

      4. Except…he wasn’t.

      5. George HW Bush

      6. The Dread Pirate Roberts? (Unless he’s faking it)?

      7. I change my answer.
        Wil Wheaton.

      8. Sorry folks. The correct answer was Julius Caesar. Thank you for playing.

        1. I didn’t get to guess! But I was going to guess Little Richard, anyway.

    3. The roflcopter goes lololololol.

  3. YEAH BUT How many iPhones were debuted during the previous Admin?

    1. Yes, let’s not forget the iPhone 5 happened under Obama’s watch, so he totally gets the credit.

      1. Steve Jobs volunteered to be Obama’s PR man.

        Now that is an expert he should listen to.

        1. Does the iPhone have a Ouija app?

          1. Free calls to your beloved deceased. Those fuckers think of everything.

          2. That would rule

            1. Ever since I read Ouija’s origin story, I can’t help but read it as “wee-ya”, thanks to many years of German and French.

              1. I can’t help but read it as “wee-ya”, thanks to many years of German and French.

                Well, considering that it originated in China, that doesn’t make any sense.

                “One of the first mentions of the automatic writing method using in the Ouija board is found in China around 1100 AD, in historical documents of the Song Dynasty. The method was known as fuji ‘planchette writing'”

                1. The widely accepted etymology of Ouija is from the French and German words for ‘yes’.

                  If you’re going to quote Wikipedia, try reading the next paragraph. Just because planchettes were around in China does not mean the name “Ouija” was.

  4. Wealth creation in America has become so difficult, and wealth destruction so common, that in many respects the recovery, which is not a recovery at all but a period of indefinite stagnation, has become worse than the “Great Recession” that allegedly ended in 2009.

    You can’t have people creating wealth!
    That creates income and wealth inequality! Inequality! Nooooooo!

    Besides, there’s plenty of wealth out there. Plenty to spread around, or as you call it “destroy”.

    Better to have stagnation than filthy capitalists getting rich!

    Road to Serfdom is awesome!

  5. It’s all going perfect to plan.

  6. “Obama’s real concern was for government employees facing “cuts initiated by, you know, governors or mayors who are not getting the kind of help that they have in the past from the federal government.”

    This has been his consistent theme in every discussion of the Stimulus. The urgent need to protect State and Local Government “workers” who might just gasp! face layoffs or delays in their regularly scheduled raises. Explicit throughout has been the message that the stimulus is a payoff to the unions who got him elected, and whose dues will be funnelled into the campaign contributions which will help him be re-elected.

  7. A June Federal Reserve study revealed that the median value of pretax family income fell 7.7 percent between 2007 and 2010; during the same period, median net worth declined a whopping 38.8 percent, and mean net worth dropped 14.7 percent.

    Almost all of this drop in personal net worth occurred in 2008. Hey, let’s blame Obama for the housing bubble!

    The fact is there IS a recovery – GDP has been solidly positive since mid 2009.

    1. That anemic recovery? You didn’t build that…

    2. According to the chart I have, GDP was negative all the way through 2009 and not going positive until the first quarter of 10.

      1. And that’s of course including government borrowing, which is not sustainable or positive.

        1. Doesn’t GDP ignore government borrowing and count interest paid on government debt as a positive?

          Seems like a pretty meaningless measurement if it can be raised by government spending money it doesn’t even have.

        2. Government borrowing is a constant factor. Did you think Obama invented it?

          1. No – he’s just perfecting it

            1. A ruined and terrible form of life. Now… perfected. My fighting Uruk-Hai. Whom do you serve?

          2. Of course he didn’t invent it. That doesn’t detract from the fact that without the spending funded by borrowing GDP would be negative.

            1. We agree. The borrowing is to support pre-Obama programs though (ex- the stimulus of $787 billion all on Obama).

              1. Of course, though since Obama is now president, and not Bush, Obama gets the credit since he hasn’t done anything to reduce spending.

            2. That doesn’t detract from the fact that without the spending funded by borrowing GDP would be negative.

              Not necessarily. That money borrowed by government would have been spent on something else. Perhaps invested in a new product or service that would have created wealth for society. Perhaps deposited into a bank for an entrepreneur to borrow to start a small business that would eventually employ people. Perhaps on private research or a new medical breakthrough.
              Fact is, we will never know.
              Opportunity cost of the unseen is a bitch.

              1. So, the spending that was funded by borrowing is postive for GDP? The exact opposite? I think you are wrong about that.

                1. GDP = private consumption + gross investment + government spending + (exports ? imports)

                  Nothing there about where the government spending came from. Everything else equal, the government can raise GDP by borrowing money to pay people to dig ditches with spoons.

                  Seems to me like a meaningless measurement.

                  1. I would suggest that government spending, since it has to come from somewhere, might be more accurately reflected as (private consumption – taxes), at least as a starting point. Debt, to the extent it lies solely within the confines of country could be added to that (private consumption – taxes – government borrowing). I would also suggest that any borrowing that originates overseas be lumped in with imports.

                  2. So, GDP = (private consumption – taxes – domestically held government debt) + gross investment + government spending + (exporst – imports – foreign held government debt)

                    Otherwise, as you point out, government can magically raise GDP by borrowing to spend more without any accounting for where the money came from.

                    1. Otherwise, as you point out, government can magically raise GDP by borrowing to spend more without any accounting for where the money came from.

                      What do you think is mean by “Economic Stimulus”?

                    2. Uh, yeah, I get the idea of a magical creation of wealth through the medium of government spending. Still doesn’t account for the repayment that eventually has to follow.

                    3. Still doesn’t account for the repayment that eventually has to follow.

                      I believe Keynes said “In the long run we’re all dead.”

                    4. While that is true it seems to me that neglecting the necessary repayment that will occur one way or another ignores the extreme economic suffering that follows from too much borrowing.

                      The debt will be repaid through either taxation or inflation.

                    5. ignores the extreme economic suffering that follows from too much borrowing

                      By then you’ll be dead and your family living off the fortune you made from a life in politics.

                      What do you care?

                    6. Really? Well, I guess I care because I don’t want the small amount of wealth I have accumulated confiscated by the government, and I’d like my kids to grow up and live in a place with dynamic economic opportunity. Niether of those things will be possible once our creditors stop loaning us money.

                      Call me crazy, I guess.

                    7. yep, its called keynesianism

              2. Not necessarily. That money borrowed by government would have been spent on something else

                The tax money spent by government would probably been spent on something else. So it being counted is a way to account all of the spending private citizens may have done if they still had their money.

                The amount of government spending that comes from borrowed money is completely different. That money didn’t exist in this economy prior to the issuance of debt. It really is just magically inflating GDP. IIRC, the growth of GDP in dollars has been less than the amount borrowed so without borrowed money the GDP would be getting smaller.

                1. The amount of government spending that comes from borrowed money is completely different.

                  Kinda. The government borrows money by issuing bonds. These get purchased in one of two ways. By regular investors who could have invested in something else, or by the Federal Reserve which prints money out of thin air.

                  So you’re half right.

          3. The existence of government borrowing is a constant.

            Obama’s version of government borrowing is exponentially larger than any before.

      2. http://www.tradingeconomics.co…..gdp-growth

        -8.9% in q4 2008

        then positive 1.7% in q3 2009.

        1. 1.7% is the worst recovery number ever you halfwit.

          1. Bushy’s -8.9% is the worst hole to dig out of ever, you lickspittle.

            1. The deeper the hole, the quicker the recovery. That is how it worked every other time. That is until Obama got in office.

              And of course the growth that there was was as Restoras points out due to government spending and borrowing.

              Doesn’t matter how much you suck his cock. Obama is still a complete failure.

              1. You are projecting your Bush cock-sucking onto me.

                And the hole caused by the Great Depression took decades to pull out of.

                And that was the last financial crisis.

                1929 = 2008.

                1. And the hole caused by the Great Depression FDR’s Keynesian economic policies took decades to pull out of.

                  ftfy

              2. That is how it worked every other time.

                That’s not true. FDR’s intervention in the economy managed to turn a sharp dip into a decade of poverty.

                1. True enough sarcasmic. It is almost like there is some kind of trend there or something.

                  1. Those who do not understand history…

                    1. Those who don’t study history will fail to learn from it.

                  2. It is almost like there is some kind of trend there or something.

                    Yup. The more the government tries to fix the economy, the worse the economy gets.

            2. Except that’s idiotic. Historically, the relationship has always been that deeper recessions lead more robust recoveries. That isn’t even a controversial relationship.

        2. I can’t read that chart. When the quarter splits the line, what is that about?

        3. -8.9% in q4 2008

          So, the economy tanked immediately after Obama was elected.

          Thanks for admitting that.

    3. Take out the growth in government spending funded by debt and GDP is negative. Nice try though.

    4. You know, cherry-picking quotes doesn’t work when the full text of the article is directly above. The next sentence reads, “The Fed’s quarterly flow of funds reports have consistently shown flat household net worth since 2010.”

      1. Fine.

        Typically a depressed economy and bear market produce prolonged agonizing asset sales at below market prices.

        We avoided most of that.

      2. BWAHAHAHAAH

        Shrike gets told to STFU by the man, and FINALLY shuts up and takes his fucking medicine.

        Fine.

        You just can take being caught lying can you shrek?

        By the way, very diplomatic Tim.

        1. You think “flat household net worth since 2010” said anything useful?

          I readily acknowledge that “flat” is far better than the Bushpig disaster of 2008.

    5. The fact is there IS a recovery – GDP has been solidly positive since mid 2009.

      In fact, there is not, as that 1-2% of GDP growth has been goosed by 8-12% of GDP in deficit spending–which is included in the GDP calculation.

      Try harder, dumbass.

  8. Jay Nordlinger of National Review had an interesting comment on Obama and the economy today.

    Sometime in 2009, I believe, I said something like the following: “In the dark of night, I fear that Obama and his core supporters want the United States to be humbler, weaker, and poorer.” A colleague wheeled on me, saying, “Humbler and weaker, yes. But surely not poorer, Jay. Surely not poorer.”

    That may well be right. But I couldn’t help thinking: When I was growing up, I often heard that people just had too much money. That was the problem with people: They had too much money. That was the problem with America: It was just too damn rich, too damn materialistic, too damn spoiled. Too rich for its own good. Too big for its britches, in every way. We needed to be taken down a peg or two.

    If I had a nickel for every time I heard the phrase “obscene wealth” ? well, I’d be obscenely wealthy. That’s what they said: “He’s obscenely rich, that’s obscene wealth.” When I got older, I decided that poverty was what was obscene. I’ve seen dire poverty, particularly in the Third World. It is obscene.

    I too have heard a lot of talk over the years from Lefties about how America is too rich and decadent. Interesting thought.

    1. that’s obscene wealth

      Oh, THAT’S rich!

  9. Good Morning. How soon is Sam Bacile going to be in jail folks? I need him to go now.When Americans die because you are stupid…
    ?
    Anthea Butler (@AntheaButler) September 12, 2012

    Anthea Butler is an Associate Professor of Religious Studies at the University of Pennsylvania and puts herself in the running for America’s most dangerously stupid person.

    1. He can share a cell with Rushdie

    2. Most dangerously stupid person that doesn’t currently hold public office?

      1. Yes. Sorry forgot that important caveat.

        1. It’s sort of a given.

    3. Free speech for me but not for thee

    4. But she can’t be stupid John. Because people who teach at Ivy League schools are the best and brightest. She is a professor at Penn. That’s an Ivy League school. Therefore, she is actually smart.

      Simple logic, John.

    5. Well, John, she did write this too:

      Since the President didn’t have an altar call, Imo do one for you all on twitter. How many of you all enjoyed the message tonight?

      Wiki definition:

      An altar call is a practice in some evangelical churches in which those who wish to make a new spiritual commitment to Jesus Christ are invited to come forward publicly. It is so named because the supplicants gather at the altar located at the front of the church building.

      Yowza.

      1. Wow. At first it was almost too incoherent to understand. But then when I figured it out, I kind of wished I hadn’t.

  10. Tim-
    I have a question for you.
    A quick glance of the current page of this website shows about 14 “Top Stories” on Obama, and about 6 on Romney. There are even 2 on Clinton. I can safely say that just about 100% are critical of all 3, in every instance.
    Fair enough…particularly on Obama since he is the President and criticism is fair game. No problem.

    Since this is a libertarian website, why no articles on Gary Johnson? You do have a candidate who is running for President, do you not? Why no discussion of his views, particularly his opinion on daily events, such as in the mid-east today?

    One gets the feeling that all libertarians can do is complain, about either Republicans or Democrats. You’ve got about 2 months to go before an election…not much time…its not like you don’t have a candidate.

    I would start complaining after the election…now is your chance to do something proactive rather than just complain. The complaining gets old.
    I

      1. Good, but thats buried on the Hit and Run Blog without being mentioned on the first page, where numerous other articles are written on the other two candidates.

    1. I agree.

      Johnson should get more PR here.

      1. Yeah, I would have an interview with him at LEAST once a week. Does anyone know what he thinks should be done in Libya?
        Shameful this website is not making sure we know.

    2. It’s a fair critique JA. I think the reasoning behind many of these stories is to capture the interest of internet users that may have never seen a reasoned argument against their favorite politician, policy, or party. That is, to capture eyeballs from people who Google’d “Romney Speech Egypt”, click through to Hit y Run, and maybe get a different perspective.

      Also, Reason is a libertarian website, not the Libertarian Party website. So there is no obligation to promote the LP platform out of proportion to it’s interest in the general population. If the LP represents only 5%-10% of voters, it would make sense to cover the LP, and Johnson campaign in about the same proportion, no?

      1. Well, I would say no, EDG. And only for this reason:
        The complaints will rage here for 3 years after the election. You get one chance to change people’s minds in the Presidential election. Johnson needs all the help he can get. I don’t think anyone has to agree with everything he says, but I would be willing to bet that most here agree with 90% of what he says. And thats worth promoting.
        This is the chance to make Libertarians a third party in the making, and all that seems is done is complain.

        And that won’t promote anything positive.

        1. I have no connection to Reason or it’s staff, but I think the goal is to get enough eyeballs reading the articles on Hit y Run, so that the articles get picked up regularly by HuffPo, Drudge, Google News, Yahoo News, and other aggregators. The way to get those eyeballs is to write about more “mainstream” topics i.e. Dems vs. Repubs Team politics. That being said, you are right. There should naturally be more coverage of Johnson, the LP platform, and other LP candidates.

          I’m not a fan of party politics, anyhow. And I will vote for Johnson this election. But party politics are a national pastime for many people including, obviously, a large contingent of Hit y Run readers. For me, the best of Reason are the articles about free minds, and free markets.

          1. I think you are right about that. Like I said, no problem with articles they have run. But to have so few about Johnson is a missed opportunity to educate those who do then come to the website.
            It can’t all be about criticizing the other party…there has to be something positive somewhere.

      2. reasoning and reasoned? My liver can’t take this kind of abuse.

        1. Yeah. I was thinking about that as I was typing. But then I thought, what the hell?

    3. I would start complaining after the election…now is your chance to do something proactive rather than just complain. The complaining gets old.

      Then start your own blog, asshole.

  11. That money borrowed by government would have been spent on something else.

    A lot of that money is being “borrowed” from the Federal Reserve, so I wouldn’t be too sure about that.

    1. Then it’s merely inflationary, no?

  12. That phrase was immediately controversial, but it had the rare distinction of sounding even worse in context than standing alone. Obama’s real concern was for government employees facing “cuts initiated by, you know, governors or mayors who are not getting the kind of help that they have in the past from the federal government.”

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  14. Haven’t looked for a while. I see the Reason comment board is still a swamp of irrelevancies and silliness. So ironic for magazine named “Reason” – considering the generally high quality of this magazine’s articles, what a waste.

  15. This recovery is weak and weird – http://modeltstocktrends.blogs…..nomic.html

  16. Odd, didn’t you vote for Obama in 2008? Didn’t you get what you, and far too many libertarians endorsed?

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