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The Recession Test for Leaders

It looks like we are headed for a recession, might already be in one. OK, so technically a recession is a decline in GDP for two or more consecutive quarters, but all the media seems to be saying we are in a recession, so let's say we are in one.

This election has many issues, but the Economy is the big one so far. That being the case, it seems reasonable to ask how Barack Obama, Hillary Clinton, or John McCain would suggest we address this recession. So, let's see what a Google search with the candidate name and the word 'recession' brings up:

Barack Obama - Google News did not have much, except to say that Obama believes we are in a recession; no comment on what he would do as President to deal with that. So, on to Obama's website, barackobama.com. Under his 'Economy' section, Barack tells us

"I believe that America's free market has been the engine of America's great progress. It's created a prosperity that is the envy of the world".

Well, no one would argue with that, but it's, well, kind of vague. I clicked on a promising tab, titled "Provide Middle Class Americans Tax Relief". Obama plans to give a tax credit of $500 a person or $1,000 a family to about the lowest half of taxable income. Obama also likes the idea of having the IRS create "pre-filled" forms for us to sign and return. Of course, that ignores that most savings real people get from filing their taxes intelligently involves declaring deductions, and that small businesses would not benefit from this plan.

Not much there that addresses the macro economy, though. Looking through the rest of his economic proposals, Obama wants federal regulation of energy providers, internet service, and mortgage companies, preferential treatment of unions, indexing the minimum wage to inflation and to set collection limits on medical bills and mortgages. Heh, there goes that "free market" he said was so great, hmm?

In the end, I can't say I saw much that would help end a recession. And several things that could precipitate or aggravate one.

On now to Hillary Clinton. Like Obama, Clinton does not say much about recessions, except that she is sure we are in one. At her site, hillaryclinton.com, I found even more vague platitudes than at Obama's site. For example, Hillary wants us to know that

"Hillary has a plan to restore America's middle class"

Uh huh. I think the problem there, is that a lawyer who can turn $1,000 of someone else's loaned money into a hundred thousand dollars in a few months, who can 'donate' book revenue to charity and yet somehow become a multi-millionaire on the salary of a public servant, probably lost sight of us in the middle class a long time ago, and is just assuming we disappeared. Anyway, Hillary promises to "lower taxes for the Middle Class". Hey, waddaya know, she found us! So, clicking on that link to find out how she plans to lower taxes, I found 2,523 words to describe how unfair things are for Americans, but the only specific mentions of taxes were how Bush is about "tax cuts for the rich", how the national debt amounts to a "birth tax" (not that Hillary voted against spending while she was a Senator, I note), tax credits for Gore-friendly energy practices, health tax credits for individuals to be funded by new taxes on employers, and higher taxes on "the rich". Turns out Hillary has no real plans to lower taxes for regular people after all. Can't say that sounds like a smart way to address a recession. Like Obama, Hillary sounds like she would make things worse, not better.

On to McCain. Well, McCain stubbed his toe this week, admitting the country is "very likely in a recession" after repeatedly saying he did not think one was on the way. Oops. Then again, we are not technically in a recession - yet - so perhaps Senator McCain was transiting between the formal definition and the subjective opinion. But it does not help for a leader to look confused about the situation. At his site, johnmccain.com, there is nothing specific about recessions, so I clicked on 'taxes and economics". Well, there is another plan for middle class tax cuts. Seems to be de riguer to promise to watch out for the middle class, hmm? Let's see, McCain's tax cut would come from eliminating the AMT. Ah, so it's not really a tax cut, but something else. McCain wants to make it harder for Congress to raise taxes, but last I heard that was up to Congress, not the President. McCain does want to lower the corporate tax rate from 35 percent to 25 percent, but again that would be something Congress does, and while President could propose it I don't see John McCain getting that one to fly. I like McCain's plans better than Obama's or Clinton's, but then I would say that as a Republican. I have to say that I don't see any specific plan to addressing a recession. Seems as though McCain, just like Obama and Clinton, has not given that question a lot of thought, which bothers me considering how important everyone says the Economy is to this election.

It's not as though fighting a recession is all that complicated. The Economy basically runs on one prime fuel: Confidence. If folks have faith in the Economy, they buy things and that drives production and revenue, which gets companies to hire folks and spend money on materials and investment, which in turn gives folks the money to buy things. All a recession really is, is confidence stumbling for a bit of time. No surprise these things happen a lot around election seasons. And no surprise that every President in a recession talks up confidence, tries to get folks to feel good about the Economy. And when you get into it, most of the time the President can't really prevent a recession, unless he's Jimmy Carter. All he can do is react when it hits and try to lessen its duration and depth. It's not easy, not at all easy for a President to admit something that important could be out of his hands. I'm not sure a President ever really does admit that, even to himself. Then again, I want a President who knows what he means to do about the situation, and so it's a problem that we're not hearing it from the three people closest to the office.


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Comments (22)

I thought this particular r... (Below threshold)

I thought this particular recession had a lot to do with the systematic deregulation that's been going on since Reagan - allowing, for example, financial institutions to offer housing loans, which, not long ago, would have been illegal as usurious. I'd also conjecture that if we weren't spending hundreds of billions of dollars on our much worse than useless Bush War, an amount that dwarfs other government expenditures, we just might be in better shape.

I don't think psychology is either the whole story or most of the story.

The economy runs on confide... (Below threshold)

The economy runs on confidence ? wow ...

What a load of nonsense ...

Interference with the market is what brings on recessions ... that interference can come from wars (mideast oil) or govt regulation or the threat of new govt regulation (cap and trade?) ...

Just a History question, Pa... (Below threshold)
DJ Drummond:

Just a History question, Paul.

Given your take, what caused the recessions of 2001, 1992, and 1971?

The answer then, as now, has a lot more to do with business cycles than wars or capital investments.

You are also poorly informed on the sources and causes of Usury.

You're full of crap, Jeff.<... (Below threshold)
DJ Drummond:

You're full of crap, Jeff.

Explain the Great Depression using your theory. Or the 1837 Panic.

Bush no more caused this recession than your BDS explains it.

Oil is the cure. ethanol is... (Below threshold)

Oil is the cure. ethanol is the culprit..

The Great Depression - Smo... (Below threshold)

The Great Depression - Smoot Hally ... pin head ...

BDS ... wow ... no mentio... (Below threshold)

BDS ... wow ... no mention of Bush by me ... You and I both know that Presidents can't create or stop recessions ... Congress maybe ...

Confidence ... BDS'ers have had no CONFIDENCE in Bush for 7 years ... didn't cause a recession ...

it is a lie that the war in... (Below threshold)

it is a lie that the war in iraq is the biggest single expenditure. entitlement programs still take more money than the entire military budget, including the war.

Let's see if I've got this ... (Below threshold)

Let's see if I've got this right.

Obama - vague promises of tax credits. Paid for by raising taxes on the rich and companies that actually employ people.

Hil - vague promises to restore the middle class, nebulous tax cuts for the middle class. To pay for those tax cuts we'll have to soak the rich and companies that actually employ people and make a profit.

McCain - reduce taxes for companies that provide jobs.

Which do I think most likely to work? Oh, that's hard... um, let me think on it!

You know, I just don't think that taxing the folks who provide jobs is gonna do much good. Call me crazy, but I'd rather see the Fairtax implemented than more structured tax credits and targeted tax increases.

JLawson,I think I... (Below threshold)


I think I will pick McCain out of the 3. Does'nt seem to have that hate businesse's that support the economy chip on His shoulder like the other 2 angry bitter candidate's do.

Still wish Bush would decree an executive order to open oil fields where ever they lie..Maybe McCain will?

"Confidence ... BDS'ers ... (Below threshold)
P. Bunyan:

"Confidence ... BDS'ers have had no CONFIDENCE in Bush for 7 years ... didn't cause a recession ...'

Prolly 'cause the BDS'ers don't have much of a positive effect on the economy.

Those who do contribute positively to the ecomony are very nervous right now fearing the opressive taxes that could be on the horizion with a left Congress and potentially a left Whitehouse.

It scares the hell out of me.

Its hard to separate out th... (Below threshold)

Its hard to separate out the effects of the upcoming election from the rest of the economic news, but it should be obvious that this election does not give Wall Street much confidence that 2009 will see favorable political conditions for economic growth. The Democratic party is in thrall to destructive ideologies.

It was the combination of S... (Below threshold)

It was the combination of Smoot-Halley and an anticipated tax increase that contributed to the beginning of the Great Depression. But those two matters didn't exist in a vacuum. A speculative bubble of then unseen proportions and a feeble national monetary policy exacerbated the problem.

The difference today is a much more diversified and larger economy, a distribution of risk among financial institutions, and a better informed Fed strategy.

Huckabee had a plan, and it... (Below threshold)

Huckabee had a plan, and it was a good one. But when the conservative right split, and the moderate right went all out for McCain, you fools lost that chance.

The difference between McCain and Clinton and Obama is one of scale, not type.

Oh, there is no doubt that ... (Below threshold)

Oh, there is no doubt that we ARE in a recession. And the Federal Reserve and Congress and George Bush all know it - why do you think they're all scrambling so hard right now to stop it?

Here's my thinking: You have to remember that GDP calculations necessarily subtract out the effect of inflation. But the government has been UNDERSTATING inflation for years (you don't really think your cost of living is only up 2 1/2 percent, do you??) So OFFICIALLY, we are not in a recession because the smaller-than-actual inflation published by the government, subtracted from GDP, yields a positive number. But if you subtracted the REAL rate of inflation, maybe 7-8 percent, from GDP, those numbers are really and truly negative. And the Fed, and Congress, and Bush all know it.

Completely wrong, "Mr Jimmm... (Below threshold)

Completely wrong, "Mr Jimmm", no serious economist believes other than that the government's various measures of inflation, the various price indexes, overstate inflation rather than understate it.

"The difference between ... (Below threshold)
P. Bunyan:

"The difference between McCain and Clinton and Obama is one of scale, not type."

Yeah, you and Ann Coulter think that but the reality is that while Obama is 92% pure socialist and Clinton is 91% pure socialist, McCain is 82.3% conservative.

There is a BIG difference on a multitude of positions and precious little in common between McCain and the fellow travelers.

SPQR - "The Democratic p... (Below threshold)

SPQR - "The Democratic party is in thrall to destructive ideologies."

The main one is that somehow you can tax your way into economic prosperity and health.

Think of our tax base as, oh, a sheep producing wool. You shear the sheep every April 15th, you get X amount of wool. If you decide you want more wool, you can skin the sheep and get 1.5X wool - but you can only do it once every 4 years (or you end up with mutton on the table) and you'll get only half the wool the other three. Obviously the optimum strategy there is to only shear the sheep - you'll get 4x wool over 4 years, while you get 3x if you skin.

Dems seem to think you can skin the sheep on a regular basis - more often than once every 4 years. Why not do it annually? But the ungrateful little buggers have a tendency to die when you do that. There's obviously something wrong, but it's never with the theory - that you can skin the sheep each year and get 1.5X wool - so it's got to be a problem with the sheep - the damn things don't want to give up their skins!

914 - Re oilfields -

It's been my observation that the Democrats aren't interested in actually solving a problem they can use for election sound bites down the line. Energy is one of those problems. We could be drilling in ANWR, we could be drilling off the coasts. Yet you will not find one serious proposal by a Democrat to actually do anything to relieve the energy problem, aside from raising taxes on oil companies and offering rebates for energy-conserving retrofits. The desire is not to fix the identified problem, but to visibly do something, because being visible is key to being re-elected.

A solved problem is worse than useless two ways. First, you can't use it as election fodder. Second - it creates expectations in the electorate that the politician WILL actually solve problems instead of telling them just how good it'll feel when their problems are taken care of.

I don't expect to see any solutions coming from the Democratic side regarding this semi-recession. Their only solution is to bleed the economy - like doctors used to do. That it would hurt more than it helps is irrelevant - they're doing something.

JLawson, in fact every acti... (Below threshold)

JLawson, in fact every action that Democrats propose on the energy issue would make things worse.

But that's not what's impor... (Below threshold)

But that's not what's important, SPQR. Like I said - the important thing for them is to get re-elected. For that, you need visibility. You don't get that by going along and fixing problems, you get it by identifying them and demagoging the hell out of them.

"We need more oil in the US!" And then they fight ANWR. They fight drilling. New refinery permits or expansions? Hah - like they'll let THAT happen and tick off the eco-minded of the voters. Then they loudly blame the oil companies for high prices, not bothering to point out when you have a finite supply of refined products on the world market, that a greater demand elsewhere in the world will restrict availability and increase prices here at home.

As I said - it's not about solving the problem, it's about how many votes they can get FOR the promise of possibly fixing it.

(In an ecologically permissible manner, of course...)

Too bad we couldn't find a ... (Below threshold)

Too bad we couldn't find a smart, successful, business-type to run for President.

Oh wait, we had that in Romney.

I blame the people of NH for this.

Excellent points JLawson. ... (Below threshold)
P. Bunyan:

Excellent points JLawson. I wish the poor and needy would realize that simple fact about the Democrats. The Democrats don't want to actually help them break the cycle of poverty, because if they did, they would no longer need the Democrats to provide for them.

If the poor and needy started to work and earn things for themselves, they might not be happy that the government is talking a substantial portion of their income and they might do the unthinkable and vote for Republicans.






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