Discussing what's right till there's nothing left.

Thursday, January 21, 2010

Still Paying for the Last Eight Years?

When asked about the stunning victory by Republican Scott Brown in the Massachusetts special election Tuesday, President Barack Obama made reference to the same anger that swept him to office has now done the same for Sen. Brown.

While that refrain worked well during the 2008 campaign when the bottom had fallen out of the economy, it would be a stretch to characterize the entire Bush Presidency as a failure. First of all had it been widely perceived as such, Bush wouldn't have been reelected by a relatively comfortable margin in 2004.

When Bush came to office in 2001, there was a recession already underway. His tax cuts spurred the economy as predicted, increased tax revenues and led to a six year boom. In 2006, Democrats took control of the House of Representatives and all the committee chairmanships. At the end of 2007, the stock market was at an all-time high. Unemployment was holding under 5%, home ownership was at a historical high, home prices were steadily increasing faster than inflation which was largely unknown. In mid 2007, hardly anyone would have looked back and claimed the previous five years were a "failure".

There is still a legitimate dispute about what caused the crash that started in late 2007 and accelerated in late 2008. The housing bubble that burst could be traced to over aggressive lending and a leveling and fall back in home prices that both Congress and the regulatory arm of the executive branch both contributed to. Certainly the results of the 2008 election reflected voter anger at the incumbent Republican leadership.

But looking back can be dangerous. If one doesn't address causes, the wrong remedies may be applied. Adding massive debt, spending and higher taxes, can attenuate any economic recovery, exacerbate unemployment, shrink revenues.

Small business owners know lending is almost nonexistent and new investment is tight as portfolio managers try to keep existing pre-exit investments alive. As health and tax expenses go up, more strain is put on emerging businesses, many of which will fail.

The reason Scott Brown won his election is n ot anger at George Bush. it is fear that the policies being put in place by the Obama administration will slow recovery or add to the recession, kill jobs and stall business investment. There is also fear that the health care bill will add to cost, reduce access and harm outcomes.

If the president keeps blaming the recent developments on the previous administration, he may find his own is short-lived. And if he thinks Massachusetts is an aberration, wait till November.

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