Economic Systems

[Henry Hawk]

Sixty-eight percent of Americans — including 49 percent of Republicans — say President George W. Bush is responsible for the state of today's economy, a new Gallup poll finds. (June 14, 2012)

A majority of the public once again say things in the U.S. are going pretty badly and disapproval of Obama's job performance has climbed back above 50% as well.

In fact, former President George W. Bush is more popular than Obama.

http://www.cnn.com/2015/06/03/politics/obama-approval-rating-cnn-poll/

And now, 53% are waking up and realizing that Obama is BAD for the ECONOMY.

http://i2.cdn.turner.com/cnn/2015/images/06/02/obama,.economy.poll.pdf

[Locutus]

Don't go confusing Hank with facts. 

[Bo D]

A majority of the public once again say things in the U.S. are going pretty badly and disapproval of Obama's job performance has climbed back above 50% as well.

In fact, former President George W. Bush is more popular than Obama.

http://www.cnn.com/2015/06/03/politics/obama-approval-rating-cnn-poll/

And now, 53% are waking up and realizing that Obama is BAD for the ECONOMY.

http://i2.cdn.turner.com/cnn/2015/images/06/02/obama,.economy.poll.pdf

All right, I admit it. I shouldn't have included that poll data.  but the facts are ....

5 Reasons Americans Are Right To Blame Bush For The Economy

Sixty-eight percent of Americans — including 49 percent of Republicans — say President George W. Bush is responsible for the state of today's economy, a new Gallup poll finds. (June 14, 2012)

1. Deregulated Wall Street: It was a great time to be a Wall Street executive during the Bush administration. Sweeping financial deregulation helped build the housing bubble and allowed financial institutions to pursue risky trades unchecked. In fact, Bush eliminated the rules that allowed Wall Street to cause the financial crash that plunged the nation into the Great Recession.

2. Cut Taxes For The Wealthy: The Bush tax cuts — over 50 percent of which benefited the richest 5 percent of American taxpayers — cost about $2.5 trillion over the decade after they were enacted. Ten years later, Bush's tax cuts are still the main driving factor of the national debt:


3. Ran Up A Tab On Two Wars: The wars in Iraq and Afghanistan have cost the country trillions of dollars. Combined with Bush's tax cuts, war spending was a main factor in blowing up the deficit and spending the  surplus accumulated under Clinton. Lawmakers now use the deficit as an excuse for inaction.

4. Left Homeowners In A Lurch: While Bush was happy to help out the banks in the wake of the housing crisis, he did little to assist struggling homeowners. Hope For Homeowners, Bush's proposal to assist those struggling with their mortgages, was a colossal failure; in its first six months, it helped just one homeowner renegotiate his mortgage. Many mortgage holders — 15.7 million or, one in three — are still underwater today.

5. Weakened Workers: Bush weakened worker safety regulations and collective bargaining rights under the Occupational Safety and Health Administration (OSHA) and the Department of Labor throughout his time in office. Today, corporations are back to making record profits, while workers' incomes are falling.


http://thinkprogress.org/economy/2012/06/14/499523/5-reasons-americans-are-right-to-blame-bush-for-the-bad-economy/

[me]

Another Conservative Myth Busted -- Did Fannie and Freddie Really Cause the Financial Sector Meltdown?

"Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. Even so, by 2007 only 17 percent of their total portfolio was either either subprime or Alt-A loans. Due to regulations, their percentage of these loans are actually better than many banks."

"During those same explosive three years, private investment banks -- not Fannie and Freddie -- dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data."

"If the conservative view was correct, one would expect to see mortgages originated for Fannie and Freddie securitization, as well as those originated for purposes of CRA, to default at higher rates, since these were the loans directly subject to affordable housing policies. In fact, we see quite the opposite, as these loans have performed exponentially better than those originated for private securitization, which the FCIC Republicans ignore."

http://www.huffingtonpost.com/marvin-meadors/fannie-mae-freddie_b_1549411.html

You go right on believing that if it makes you feel better BoD.

[Bo D]

You go right on believing that if it makes you feel better BoD.

It isn't a question of believing. Those are facts based on hard numbers.

[Henry Hawk]

It isn't a question of believing. Those are facts based on hard numbers.

tit for tat...


Obama didn't end the Great Recession that Bush didn't causeIf you think George W. Bush's economic policies caused the Great Recession and Barack Obama's ended it, then your Election Day decision is likely an easy one. But placing politics aside, I don't think the economic evidence supports that thesis. I've stated my reasons, in bits and pieces, across several blog posts. Maybe now would be a good time for a unified, though brief, rebuttal.
Let's take the two strands of the argument and examine each. First, did Bushonomics cause the worst economic downturn and financial crisis since the Great Depression? To make that case, you need to specify a policy causality (or two or three) and a transmission channel. But when you go down the list of usual suspects, none of them pans out:
— It was the Bush tax cuts. Except lowering taxes increases demand and improves supply-side incentives. The only way this theory might be true is if bond markets feared tax cuts would be inflationary or would hurt the ability of the US to pay back its debts. But interest stayed low during the 2000s. Also note that Obama says he wants to again extend most of these cuts.
— It was Bush's income inequality. Except that a 2012 study, Does Inequality Lead to a Financial Crisis by economists Michael Bordo and Christopher Meissner, seems to dismiss that linkage. Using data from a panel of 14 countries for over 120 years, they found "strong evidence linking credit booms to banking crises, but no evidence that rising income concentration was a significant determinant of credit booms. Narrative evidence on the US experience in the 1920s, and that of other countries in more recent decades, casts further doubt on the role of rising inequality."
— It was the Bush budget deficits. Except both inflation and interest rates were low during the 2000s. This is really another version of the tax cut argument, but adds in deficits from Medicare expansion and the wars in Iraq and Afghanistan. Besides, annual budget deficits averaged just $220 billion from 2001-2007. During the 2010-2012 recovery, they've averaged roughly $1.3 trillion. So deficits caused the Great Recession even though they are six times higher now?

— It was Bush's financial deregulation. Except the law that ended Glass-Steagall was signed by President Bill Clinton. And few analysts think the end of Glass-Steagall directly contributed to the financial crisis. Another candidate was a 2004 rule change by the Securities and Exchange Commission that supposedly allowed broker dealers to greatly increase their leverage, contributing to the financial crisis. But as Prof. Andrew Lo of MIT explains in a 2011 paper, "... it turns out that the 2004 SEC amendment to Rule 15c3–1 did nothing to change the leverage restrictions of these financial institutions."

So what did cause the Great Recession? Politicians love to blame big downturns on "market failures." Doing so then allows them to expand government and their own power. That's what happened during the Great Depression. But it wasn't the free market that failed back then, it was the Federal Reserve.

And the same goes for the Great Recession. In The Great Recession: Market Failure or Policy Failure, Robert Hetzel, a senior economist at the Richmond Fed, pins the blame squarely on the US central bank. The downturn first started with "correction of an excess in the housing stock and a sharp increase in energy prices" — the housing bust and the oil shock. Those two things were enough, in Hetzel's view, to cause a "moderate recession" beginning in December 2007.

But it was the Fed's monetary policy miscues after the downturn began that turned a run-of-the-mill recession into a once-in-a-century disaster. Not only did the Fed leave rates alone between April 2008 and October 2008 as the economy deteriorated, but the FOMC "effectively tightened monetary policy in June by pushing up the expected path of the federal funds rate through the hawkish statements of its members.

In May 2008, federal funds futures had been predicting the rate to remain at 2% through November. By mid-June, that forecast had risen to 2.5%. As Hetzel writes in a Fed paper that inspired the book, "Restrictive monetary policy rather than the deleveraging in financial markets that had begun in August 2007 offers a more direct explanation of the intensification of the recession that began in the summer of 2008. Irony abounds.'

And what ended the Great Recession? Was it the $800 billion Obama stimulus? As I have often pointed out, White House economists thought the stimulus would help lead to roughly 5% unemployment and 4% GDP growth in 2012.

Instead, the US economy is growing at half that pace and unemployment is sharply higher — even before you account for the massive drop in labor force participation.

But what do left-of-center or pro-Obama economists say? Here are Alan Blinder and Mark Zandi in a 2010 paper:> In this paper, we use the Moody's Analytics model of the U.S. economy—adjusted to accommodate some recent financial-market policies—to simulate the macroeconomic effects of the government's total policy response. We find that its effects on real GDP, jobs, and inflation are huge, and probably averted what could have been called Great Depression 2.0.
For example, we estimate that, without the government's response, GDP in 2010 would be about 11.5% lower, payroll employment would be less by some 8½ million jobs, and the nation would now be experiencing deflation.

When we divide these effects into two components—one attributable to the fiscal stimulus and the other attributable to financial-market policies such as the TARP, the bank stress tests and the Fed's quantitative easing—we estimate that the latter was substantially more powerful than the former.

So Blinder and Zandi credit the Fed and TARP, Bernanke and Bush, mostly for breaking the back of the downturn. Indeed, the steepest drops in GDP ended before Obama took office and before the stimulus kicked into gear. And eventually, of course, the economy would recover on its own as long as government didn't interfere with anti-growth policies such as tax hikes or massive new regulations.

[Bo D]

tit for tat...


Obama didn't end the Great Recession that Bush didn't causeIf you think George W. Bush's economic policies caused the Great Recession and Barack Obama's ended it, then your Election Day decision is likely an easy one. But placing politics aside, I don't think the economic evidence supports that thesis. I've stated my reasons, in bits and pieces, across several blog posts. Maybe now would be a good time for a unified, though brief, rebuttal.
Let's take the two strands of the argument and examine each. First, did Bushonomics cause the worst economic downturn and financial crisis since the Great Depression? To make that case, you need to specify a policy causality (or two or three) and a transmission channel. But when you go down the list of usual suspects, none of them pans out:
— It was the Bush tax cuts. Except lowering taxes increases demand and improves supply-side incentives. The only way this theory might be true is if bond markets feared tax cuts would be inflationary or would hurt the ability of the US to pay back its debts. But interest stayed low during the 2000s. Also note that Obama says he wants to again extend most of these cuts.
— It was Bush's income inequality. Except that a 2012 study, Does Inequality Lead to a Financial Crisis by economists Michael Bordo and Christopher Meissner, seems to dismiss that linkage. Using data from a panel of 14 countries for over 120 years, they found "strong evidence linking credit booms to banking crises, but no evidence that rising income concentration was a significant determinant of credit booms. Narrative evidence on the US experience in the 1920s, and that of other countries in more recent decades, casts further doubt on the role of rising inequality."
— It was the Bush budget deficits. Except both inflation and interest rates were low during the 2000s. This is really another version of the tax cut argument, but adds in deficits from Medicare expansion and the wars in Iraq and Afghanistan. Besides, annual budget deficits averaged just $220 billion from 2001-2007. During the 2010-2012 recovery, they've averaged roughly $1.3 trillion. So deficits caused the Great Recession even though they are six times higher now?

— It was Bush's financial deregulation. Except the law that ended Glass-Steagall was signed by President Bill Clinton. And few analysts think the end of Glass-Steagall directly contributed to the financial crisis. Another candidate was a 2004 rule change by the Securities and Exchange Commission that supposedly allowed broker dealers to greatly increase their leverage, contributing to the financial crisis. But as Prof. Andrew Lo of MIT explains in a 2011 paper, "... it turns out that the 2004 SEC amendment to Rule 15c3–1 did nothing to change the leverage restrictions of these financial institutions."

So what did cause the Great Recession? Politicians love to blame big downturns on "market failures." Doing so then allows them to expand government and their own power. That's what happened during the Great Depression. But it wasn't the free market that failed back then, it was the Federal Reserve.

And the same goes for the Great Recession. In The Great Recession: Market Failure or Policy Failure, Robert Hetzel, a senior economist at the Richmond Fed, pins the blame squarely on the US central bank. The downturn first started with "correction of an excess in the housing stock and a sharp increase in energy prices" — the housing bust and the oil shock. Those two things were enough, in Hetzel's view, to cause a "moderate recession" beginning in December 2007.

But it was the Fed's monetary policy miscues after the downturn began that turned a run-of-the-mill recession into a once-in-a-century disaster. Not only did the Fed leave rates alone between April 2008 and October 2008 as the economy deteriorated, but the FOMC "effectively tightened monetary policy in June by pushing up the expected path of the federal funds rate through the hawkish statements of its members.

In May 2008, federal funds futures had been predicting the rate to remain at 2% through November. By mid-June, that forecast had risen to 2.5%. As Hetzel writes in a Fed paper that inspired the book, "Restrictive monetary policy rather than the deleveraging in financial markets that had begun in August 2007 offers a more direct explanation of the intensification of the recession that began in the summer of 2008. Irony abounds.'

And what ended the Great Recession? Was it the $800 billion Obama stimulus? As I have often pointed out, White House economists thought the stimulus would help lead to roughly 5% unemployment and 4% GDP growth in 2012.

Instead, the US economy is growing at half that pace and unemployment is sharply higher — even before you account for the massive drop in labor force participation.

But what do left-of-center or pro-Obama economists say? Here are Alan Blinder and Mark Zandi in a 2010 paper:> In this paper, we use the Moody's Analytics model of the U.S. economy—adjusted to accommodate some recent financial-market policies—to simulate the macroeconomic effects of the government's total policy response. We find that its effects on real GDP, jobs, and inflation are huge, and probably averted what could have been called Great Depression 2.0.
For example, we estimate that, without the government's response, GDP in 2010 would be about 11.5% lower, payroll employment would be less by some 8½ million jobs, and the nation would now be experiencing deflation.

When we divide these effects into two components—one attributable to the fiscal stimulus and the other attributable to financial-market policies such as the TARP, the bank stress tests and the Fed's quantitative easing—we estimate that the latter was substantially more powerful than the former.

So Blinder and Zandi credit the Fed and TARP, Bernanke and Bush, mostly for breaking the back of the downturn. Indeed, the steepest drops in GDP ended before Obama took office and before the stimulus kicked into gear. And eventually, of course, the economy would recover on its own as long as government didn't interfere with anti-growth policies such as tax hikes or massive new regulations.

I might take this seriously if I thought you had even a glimmer of understanding of what you posted.

I liked this comment at the end of that article ...

The author commits a number of logical fallacies in this propaganda piece. The chief among these is to assume that "lowering taxes increases demand and improves supply-side incentives." This assumption does not hold. Net taxes among the very wealthy – those holding primarily interest-bearing instruments as wealth – are lower than middle class taxes. Combine that with decades of low wage growth relative to productivity, and higher net taxes paid by the middle class compared to the property-owning super-rich, along with huge losses in the chief investment of middle class people- their home; and the result is no increase in demand, and supply-side incentive is to continue to move production to low cost foreign markets, in turn helping to push up those unemployment numbers.
Secondly, the author separates several Bush policies as if to show no single one caused the financial collapse. But the effects should be taken together.

[Exterminator]

I might take this seriously if I thought you had even a glimmer of understanding of what you posted.

Discussing economics with these mental midgets is an exercise in futility.

I wonder if their asses get jealous of the shit their fingers type?   

[Henry Hawk]

I might take this seriously if I thought you had even a glimmer of understanding of what you posted.

AND THIS IS WHY I HAVE NO REAL NEED TO DEBATE ON HERE....YOUR ARROGANCE AND CONDESCENDING ATTITUDE IS WHY.  I expect this shit from Ex.

[Exterminator]

I expect this shit from Ex.

Just trying to keep things at your level of understanding. 

[Y]

tit for tat...

Oh c'mon!  A blog, from AEI no less!?!  Are you EVER going to learn to chose valid sources?

[Y]

A majority of the public once again say things in the U.S. are going pretty badly and disapproval of Obama's job performance has climbed back above 50% as well.

In fact, former President George W. Bush is more popular than Obama.

http://www.cnn.com/2015/06/03/politics/obama-approval-rating-cnn-poll/

And now, 53% are waking up and realizing that Obama is BAD for the ECONOMY.

http://i2.cdn.turner.com/cnn/2015/images/06/02/obama,.economy.poll.pdf

1. a. Can you show us how that poll was conducted?  b. That's only yet ANOTHER example of your continued use of the logical fallacy 'Appeal to Popularity', and means nothing.

2. a. Again, "Appeal to Popularity' only in the reverse.  b. The things you claim about Obama can, in actuality, be laid at the feet of Big Money and Big Business and their wildly successful ownership of Congress - especially the Republicans, whose intent for decades has been to repeal every control on Capitalism enacted since Teddy Roosevelt and especially those of Franklin.

[Henry Hawk]

Oh c'mon!  A blog, from AEI no less!?!  Are you EVER going to learn to chose valid sources?

And Think Progress is a valid source?  C'mon Y. 

Lets just make a deal.  I won't comment on your shit, and you don't comment on mine.  Actually, you can comment on mine all you want....but, it means NOTHING to me.  You have proved to be so biased its not funny.  You are no different that what you accuse me of.  Maybe take a long look in the mirror before you spout off.

[Y]

It is when Obama's economic policies has failed....leaving the fed to do this.

This IS a test! 

What exactly are those policies, exactly how have they failed, and if those policies have failed, exactly how is that Obama's fault?

You WILL be graded on this!

[Henry Hawk]

This IS a test! 

What exactly are those policies, exactly how have they failed, and if those policies have failed, exactly how is that Obama's fault?

You WILL be graded on this!

Obamacare was supposed to improve our economy.......it has not.