How long will it take for Obama to own the economy?
Barack Obama is unfortunate to have inherited the worst financial climate in many decades. But in other ways he’s a very lucky man.
One huge piece of good luck for Obama is that the bad news about the economy was almost perfectly timed to help his campaign and even ensure his election. And although his depressed and depressing economic predictions, coupled with Wall Street’s fears about the possible anti-business climate of a future Obama administration, may have helped the slide in its downward trajectory, not even those who detest Obama can really blame this recession on him.
Not only did the timing of the downturn help him, but most of the American people will give him a pass—for a while. And if things improve fairly soon, Obama will undoubtedly get the credit, whether he deserves it or not. But what if we are in for many more years of this? At what point will it become Obama’s recession rather than Bush’s?
For some people, my guess is that the answer would be “never.” For a certain unknown percentage of the American public it will always be Bush’s fault, along with every other problem the Obama administration faces and fails to master. But what about the rest of us?
Obama himself, as well as his advisers and surrogates, has been hard at work making sure that everyone understands not to expect a recovery any time soon, and that it will be a matter of years rather than months for any turnaround. That way, a quicker reversal would make Obama look even better if it were to happen, and a slow one will not disappoint too much.
Obama benefits not only from his own personal popularity, but from the fact that it is attached to what are perceived to be his inherent qualities (articulate, attractive, youthful, intelligent, black) rather than any particular policy or policies he is expected to implement. In the case of the economy, this lack of precise expectations plus Obama’s own shifting message on what he will actually do—combined with the confusion among “experts” about how best to go about improving the situation—help create increased tolerance for a period of confusion and/or experimentation and a resulting lag in the appearance of positive results.
One event that could ultimately earn Obama the disapproval of much of the American public would be if he were to institute policies that were then followed by a significant worsening of the financial situation, especially if that decline were to persist for any significant amount of time. However, a situation very much resembling that scenario failed to cause the majority of Americans to decide during the 30s that FDR was more responsible for the length and depth of the Great Depression than his predecessor Hoover was. The popular FDR was perceived by most people as acting with good intentions, and he was given a pass by most people on the fact that his policies failed to significantly improve the economy and perhaps even prolonged the Depression.
How long will people sit tight during an Obama presidency, and continue to hope for change rather than angrily demand it? This recent poll indicates that Obama will have a significant time before he is blamed if he fails to revive the economy. People are very optimistic yet very patient, at least for now; two-thirds say they believe it will take at least two years before they can expect improvement in the economy. That’s a pretty long honeymoon.
The worst thing he could do would be to continue soaring non-committal speeches AFTER his coronation. This would also include non-committal answers to questions or vague plans. Outside of the Obama Fantatic wing, I suspect people who voted for him want some quick action on something! They did not sign on for the depression or extensive “sharing of the wealth”. They accepted the media vision of GWB being stupid or tool of oil interests and figured Obama was not.
Raising taxes on middle class (and the very important middle middel class), dicking around too much with health care and favoring unions too much would be fatal.
FDR also had the advantage of a citizenry that believed, for the most part, that we were all in it together. Sure there was grumbling about bankers and the wealthy but they were a target of convenience — a way of letting off steam. The atmosphere today is far more selfish, factional, and even cutthroat. After you start distributing and redistributing wealth, people are far more likely to see things as “every man for himself”. In the zeitgeist of our time, instant gratification and “what about me”, I will be surprised if people sit tight for very long — no matter what the polls say and Obama notwithstanding. Keeping an eye on California’s predicament may be instructional.
Obama himself, as well as his advisers and surrogates, has been hard at work making sure that everyone understands not to expect a recovery any time soon
Well, if fairness counts (and yes, I know that it doesn’t), one would reflect that these were the same warnings President Bush gave us about Iraq, and that those warnings were universally ignored and instantly forgotten by the angry left.
Bush “owned” 9/11 after eight months in office despite eight years of Democratic neglect and incompetence. That’s how long I will give Obama to fix yet another major problem caused by the same Democratic congressional buffoonery.
My take is Obama and his close circle want things to get worse and worse. As that occurs, the public mood for help will allow greater (and, of course, permanent) concentration of power and money at the Federal level. That “help” will flow to some, the voting victim members of the developing American mob.
The FDR crowd did the same. FDR despised “industrialists”, capitalists, and Wall Street, railed and worked against them. We see the same today, the demonization of Wall Streeters, bankers, corporate CEOs.
The demonization of physicians, Big Pharma, and health insurors is well underway. What can we expect from Daschle, Obama (and Hillary, whose domestic counsel will be sought)? Why, Federalization of health care, of course; enabled by academic medicine and “ethicists” who see their rightful places at the top of the pyramid.
Come on, folks: it’s too painfully clear. Economic hard times, yes, but Federal disaster monies to DC and more than $170 million spent on The One’s inauguration ? Any dissonance there?
Obama and his advisers know the effect of their “climate change” countermeasures are going to have on the economy. Not good. The carbon tax or the cap and trade system are going to bite. And bite hard. At least I think the more realistic economic advisers are telling him this. They know how it affected Western Europe’s economy when those countries tried to implement the Kyoto penalties to businesses and consumers.
As a professional investor I am indeed concerned about the restraining effect that this program is going to have. I feel like a Cassandra among very few fellow Cassandras who are sounding the alarm.
If we are measuring fairly, the current president and congress own the economy on a decreasing scale for 18 months, at which point the new brooms own it more than the old.
Public perception is not fair, however. Some partisans will blame him within a few months. Partisans for Obama will blame Bush for years. The center of gravity for the whole population will be something short of a year.
The poll results that people will give Obama a two year honeymoon and expect improvement within five years sounds likely to me.
I know that many on the right are predicting that people will turn on Obama, but I don’t see that happening. I also don’t see an Ayn Rand armageddon coming either.
I suspect that Obama’s rhetorical displays will be larger than what he actually does. That’s his pattern. I’ll be surprised if these huge stimulus packages come to all that much, that when the time comes to pay for them the cupboard will be bare and the payments quietly shrugged off.
Obama will be the Motivational Speaker-In-Chief, try not to rock the boat too much, let the economy recover on its own, and then take credit for it. It could be worse.
The above quote is from Lawrence of Arabia.
Recent past history has shown that the public today does not have the patience that they had in the 1930s. Comparing Obama’s timeline to FDR’s is like comparing our 24-hour news-cylcle, Talk-Radio/Blogosphere Information Superhighway world to that of the fireside chats of vacuum tube radio. Remember, Clinton also inherited a bad economy, and when he had not turned it around in two years, he lost both houses of congress (I know, that was not the only reason, but his popularity dipped to around 40% approval).
I agree with the Assistant Village Idiot, Obama will have anywhere between 10 to 18 months, probably about a year.
What will really hurt Obama is if the economy is percieved to get better for a short period, only to get worse later on. Then he will have no recourse to blame Bush.
“”My take is Obama and his close circle want things to get worse and worse.
Tom””
I couldn’t agree more. No amount of paper being printed with President’s faces on them can offset the doom and gloom this man and his party spews forth. If i won a million dollars on the lottery today i’d stash it all away. These people have no concept of how free markets recover and eventually thrive. The man and his party can’t stand free markets is the bottom line.
I think it has been Obama’s economy since late summer when it was apparent Obama would defeat McCain. Banks and other businesses listened to Obama’s campaign promises to increase taxes and responded by hoarding cash, trimming personnel and planning to survive the Obama years.
***One huge piece of good luck for Obama is that the bad news about the economy was almost perfectly timed to help his campaign and even ensure his election.***
Wow, what a coincidence. Yeah. Right.
Question is, when the time comes that Obama does own the economy, will it be worth anything?
I expect Obama to “own” the economy when good times return. He will be shielded from responsibility until that occurs.
The DJIA dropped 332 points today. How’s that for a message?
The Dow also fell nearly 500 points the day after ‘The One’ defeated Mccain in November. I wonder if this is a sign karma is real after all.
I suspect the market will find very little to love anytime soon. Ugh.
Due to the fact Reagan was so quoted by the Republicans (and some democrats) in the primaries I am a little reticent about doing it here, but I must bring up his quote, “the nine scariest words in the English language are -‘I’m from the government and I’m here to help.”
Unfortunately the Republicans of the last eight years were too inclined to meddle but are capable of learning a lesson. I have known very few democrats in the last forty years who have be able to refrain from meddling. Clinton’s only salvation in that respect was the Gingrich led republican congress. If Obama were wise he would do well to heed Voltaire –
“The art of medicine consists of amusing the patient while nature cures the disease.”
In other words – if left alone the economy will get better on its own and if he spends his time “amusing the patient” (the American people) while that happens he will be lauded as a great man. However I think Obama, Pelosi, and Reed et al are too full of themselves to understand that doing nothing is often the best way of doing something.
Dane, while I take your point, I don’t think the economy will get better on its own unless and until the government gets the banks sorted.
Obama has already overhauled the whitehouse.gov website to actively blame Bush for any problems we may have for the next 100 years.
Obama will not “do nothing and let the economy recover on its own.” Instead, he and the Pelosi congress will take strong active measures on the economic, energy, and climate change fronts which will make the economy far worse than at present.
They will continue to successfully blame future downturns on Bush, with the aid of the media.
Obama will *own* the economy only after it begins to revive. Up to that point it will always be blamed on Bush.
Given my own suspicion that the economy – at least on main street – is already starting to come back around this means at least 2 things if it proves out to be the case.
One, Obama would not have a thing to do with the turnaround.
Two, it means that Bush’s policies were already starting to have an effect prior to the inauguration.
So, I expect the media to do a subtle tap dance to talk up the economy in order for The One to be seen as successfully addressing the financial crises, but do so slowly enough that the *credit* can be taken by their Messiah.
Of course, if the dollar crashes all bets are off either way….
Why, Never!
Remember it will always be ‘the mans’ fault be that GWB or ‘the system’ or white privilege. The current regime of “The Ones” shall never have to accept responsibility for their actions.
oblio,
As an analyst who follows bank stocks, I can tell you that the banks and financial institutions are not making money because they are not lending. Their reserves are doing just fine and there is more liquidity, but they are cautious and sitting on the cash. Part of the reason is that they are still writing down the value of assets on their books. We should have suspended the mark to market rule, as Newt Gingrich suggested, or at least modified it so that the mark to market would happen, say, quarterly.
Isn’t it amazing how, before the election in a most timely manner, 5% of all the outstanding sub prime loan portfolio has unraveled everything?
I think that we now have a better understanding of economic then we did in FDR’s day. FDR level failure will not work for Obama . . .
FredHjr,
I would expect the banks are buying treasuries? And a lot of the cash that has come out of other asset classes has gone into bank deposits? Interest rate spreads on commercial loans are increasing, a good thing in my opinion.
I agree with you about the stupidity of continuing mark-to-market rules when (as I understand it) the market is very thinly traded and the only sellers are distressed.
Credit default spreads are out of sight, which basically means you can’t get somebody to buy your lending mistakes, which is as it should be.
So why the continuing panic in bank stocks, including State Street, PNC, and Citi, but also RBS and Bank of Ireland yesterday?
I am looking for a reason to believe that the sun will come up tomorrow for the banks, but right now the blood is running in the street.
Although Bush (currently) may very well be the recipient for most of the blame for the current economic crisis, it would be unfair to place all the blame on him.
What is and has been happening in the American and global economy wasn’t built over night, or even during one or two administrations, it was the result of over 20 years of the directional changes in international economics.
You could probably take a look at Reagan/Thatcher’s (or Greenspan) policies and begin there from some of their views on global economics that allowed for the formation of “shadow” banking, which included bad lending policies, lack of regulations (yes we know many fiscal conservatives aren’t proponents of regulations, but there needs to be a certain extent of regulations to protect people from themselves as we see now in the bad housing loans),etc.
These policies were more or less carried on by Bush, Clinton and W. because at the time, they were quite successful, but certainly unsustainable. Bush (W) was unfortunate to have presided over a time when Lehman, et al collapsed on his term (imagine if it was delayed for a few more months).
We must remember that although partisans would like to place some of the moonbats and wingut politicians on opposite ends of the political spectrum, in terms of greater over all foreign policies and economics, they are both generally similar.