Obama, the Recession, and Polls

November 20, 2009

Comments

A CNN poll released today finds that “opinion about which political party is responsible for the severe economic downturn is shifting.” According to the survey, “38 percent of the public blames Republicans for the country’s current economic problems. That’s down 15 points from May, when 53 percent blamed the GOP. According to the poll 27 percent now blame the Democrats for the recession, up 6 points from May. Twenty-seven percent now say both parties are responsible for the economic mess.”

Similarly, the Gallup tracking poll has President Obama dipping below 50 percent approval for the first time, with 49 percent approving and 44 percent disapproving of the job he’s doing as president.

None of this is surprising, really. While we may technically be out of the recession, unemployment is now in the double digits for the first time in many Americans’ memory and trending upwards. Obama’s sitting in the White House and, rightly or wrongly, he gets the blame.

It’s actually rather remarkable that he’s doing as well as he is. I credit Bush Fatigue. People were so glad to see his predecessor leave office that Obama still seems good by comparison.

But that won’t last forever.

As longtime readers know, I believe presidents get far, far too much credit for good economic circumstances and far, far too much blame for economic downturns. But that’s the nature of the game.

45 responses to “Obama, the Recession, and Polls”

Steve Verdon

November 20, 2009 at 6:34 pm

Was there an option for both? 🙂

Actually, while the recession started well before Obama was even considered the front candidate, his policies certainly have had dubious value.

Yes, Cash for Clunkers, and the home buying incentives did some good in the last quarter, but will it provide enough boost to keep thing goings? I’m skeptical as I think it just moved forward future purchases–that is in the future we’ll see less auto and home purchases than we otherwise would.

Second, the Health Care Expansion and Entrenchment Act will likely make hiring workers more expensive and thus blunt any positive impact a recovery will have on the labor market.

Third, the various stumblings and bumblings over global warming are making capital investments less desirable. Will that new plant you were thinking of investing in get dinged under the new regs. Maybe we should wait and see…wrong policy when the economy is in the crapper IMO. Why not wait till the economy is stronger?

Fourth, zombie banks. Many of our banks still have those dreaded toxic assets. There is the specter of government micro-management. And the oveall situation is pretty much the same as it was 6 to 8 months ago, but now lots of taxpayer dollars are at risk too. This creates and additional incentive to prop up these zombie banks and keeping them stumbling along muttering, “Brains.”

Fifth the stimulus spending. Possibly reasonable if we didn’t have such a hideous fiscal situation to begin with. We have massive actuarial imbalances in Medicare and Social Security. On top of it we have these huge deficits. Health care will in all likelihood add to the problem–that is I don’t believe the cost saving measures in the legislation before Congress will be followed through. And toss in the reduced tax revenues because of a weak labor market and economy, and it is a very grim fiscal picture indeed. We are quickly approaching the 100% debt-to-GDP ratio and my guess is that within the next year to 18 months will pass it. last time we did that we were fighting a World War.

All in all, we appear to be making all the same policy choices the Japanese did that ended up with their “Lost Decade”.

Not exactly a very good report card if you ask me.
odograph

November 20, 2009 at 6:50 pm

Voters tend to elect Republicans when they think the economy is working (the free market is booming) and Democrats when they need help (and the free market isn’t providing).

It produces a predictable pendulum effect: Republicans until things go wrong, Democrats until they get better.

One could almost say that was appropriate.
Drew

November 20, 2009 at 6:52 pm

“As longtime readers know, I believe presidents get far, far too much credit for good economic circumstances and far, far too much blame for economic downturns. But that’s the nature of the game.”

As you might suspect, I would echo Steve verdon’s observations.

I would further them, as a private equity investor who speaks with small to medium sized business owners on a regular basis, by noting that they are absolutely paralyzed at the prospects of higher taxation on investment, higher employment costs, and the general attenuating effect on demand of an anti-business administration. I know this is anecdotal, but it is absolute first hand reality.

So how does one “break out” from this? Well, not by stuffing a cost increasing health care bill down America’s throats on Saturday night………

I have predicted 11% unemployment. After Saturday I may be revising my estimate upwards. And, James – your comments aside – that’s why I think we can indeed sometimes put these things on Presidents.
James Joyner

November 20, 2009 at 6:57 pm

I would further them, as a private equity investor who speaks with small to medium sized business owners on a regular basis, by noting that they are absolutely paralyzed at the prospects of higher taxation on investment, higher employment costs, and the general attenuating effect on demand of an anti-business administration. I know this is anecdotal, but it is absolute first hand reality.

Fair enough. My view is that there’s little presidents can do to fix the economy but a lot they can do to hurt it. I do think these policies are hurting it, at least on the margins.
odograph

November 20, 2009 at 7:13 pm

Even I can find much to agree with in Steve’s comment, but to bring back an old chestnut, a lot of this trouble was “baked in.”

Fifth the stimulus spending. Possibly reasonable if we didn’t have such a hideous fiscal situation to begin with.

Right. If you want to manage countercyclical spending, then you need to build your surpluses in boom times.

No President would or even could build a balanced budget starting in January 2010. That’s the wrong phase of the cycle. Any President would have to spend through the downturn and then manage the transition to recovery.

Now, who is going to tell me Bush is ancient history? That it’s water under the bridge? That we should judge Obama by his budget?

Those arguments are pleasantly empty-headed, but that’s all. You can’t understand the spending cycle looking just at this month, or even just at this year.
odograph

November 20, 2009 at 7:20 pm

Oops, I meant to say 2009
Zelsdorf Ragshaft III

November 20, 2009 at 7:22 pm

The Democrats took control of the congress in 2006. What was the unemployment rate that year? Facts do not lie but liberal democrats do not seem to share that virtue. Democrats made laws to force (allow) banks to make bad loans to people who could not pay them. That is a fact Barney and Chris. Chuckie Schumer leaked information on a bank in Colorado which was in trouble but could have been saved from failing. That was the domino that started it. For the rest, follow the money. This recession is not over. The lost jobs are gone forever. It is Bush’s fault. He did not have all of those sons of bitches arrested and shot.
odograph

November 20, 2009 at 7:25 pm

Democrats made laws to force (allow) banks to make bad loans to people who could not pay them.

I know you are just a troll, but can we raise the level to be “factually correct” and just troll on opinion.

There was no such law. Unless … what the heck does “force (allow)” mean?

LOL.
Drew

November 20, 2009 at 7:27 pm

“My view is that there’s little presidents can do to fix the economy but a lot they can do to hurt it. I do think these policies are hurting it, at least on the margins.”

I’d be more inclined to assert that President’s can in fact “fix” an economy, but would be in absolute agreement that it is much easier to “hurt” it.

By “fix” I mean tax and regulatory policy, and general tone and tenor. Any business leader will tell you that the “tone and tenor” or “attitude and energy” quotient in a business is a huge factor in productivity and overall success. When the management (or labor) views the situation as hopeless or “down,” or adversarial with the general environment, results will fall. Its almost axiomatic. That’s where we are right now.

On the “hurt” side. Well, I just think we agree.

I would admonish any and all observers to consider that successful businesses are not fatted calves to be slaughtered for tax revenues to fund Utopian dreams. They have an incredible amount of risk capital and labor investment to make them successful, and such parasitic schemes will only result in a diminishment of their success. Be careful what you wish for, lefties.
Drew

November 20, 2009 at 7:36 pm

odo –

I know its an argument for another thread, but regulators did indeed enforce the making of bad loans. If you didn’t comply with CRA the regulators challenged your loan reserve estimates or your interstate banking requests. Its really not that complicated. And its reality.

I know, I was a banker in the 90’s. You (and Alex Knapp) can stay in a state of denial if you like.

My favorite line – from Groucho – “who are you gonna believe, me, or your lyin’ eyes?”
odograph

November 20, 2009 at 7:55 pm

I could choose between dozens of takedowns of the CRA argument Drew, but I’ll go with Barry Ritholtz since he’s written a well respected book on all this:

Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy
odograph

November 20, 2009 at 7:57 pm

BTW, the Wall Street Journal said the book:

“Succeeds in laying out all that transpired in easy-to-understand language. If you want to know how we got into this mess and what might still be coming, this is the book for you.”
Michael Reynolds

November 20, 2009 at 8:04 pm

James:

This is off-topic, but have you ever paused to consider that if you were introduced by Governor Schwarzenegger he would refer to you as Chames Choynah?
kth

November 21, 2009 at 1:05 am

Among Presidents immensely popular (near 70%) 1 year into their first elected term: Truman, Ike, JFK, LBJ, George H.W. Bush, George W. Bush (boldface for presidents who, though eligible, failed to be re-elected).

Presidents at or below 50% 1 year in: Barack Obama, Bill Clinton, aaand… Ronaldus Maximus Reagan (boldface for presidents who, though eligible, failed to be re-elected).

(Nixon, Carter around 60% approval at the first year milepost, Ford never elected; Gallup data here)
sam

November 21, 2009 at 5:33 am

Here’s some grist for this mill:

New Consensus Sees Stimulus Package as Worthy Step

Now that unemployment has topped 10 percent, some liberal-leaning economists see confirmation of their warnings that the $787 billion stimulus package President Obama signed into law last February was way too small. The economy needs a second big infusion, they say.

No, some conservative-leaning economists counter, we were right: The package has been wasteful, ineffectual and even harmful to the extent that it adds to the nation’s debt and crowds out private-sector borrowing.

These long-running arguments have flared now that the White House and Congressional leaders are talking about a new “jobs bill.â€ But with roughly a quarter of the stimulus money out the door after nine months, the accumulation of hard data and real-life experience has allowed more dispassionate analysts to reach a consensus that the stimulus package, messy as it is, is working.

The legislation, a variety of economists say, is helping an economy in free fall a year ago to grow again and shed fewer jobs than it otherwise would. Mr. Obama’s promise to “save or createâ€ about 3.5 million jobs by the end of 2010 is roughly on track, though far more jobs are being saved than created, especially among states and cities using their money to avoid cutting teachers, police officers and other workers.

More at the link, of course.
sam

November 21, 2009 at 5:40 am

@Drew

Any business leader will tell you that the “tone and tenor” or “attitude and energy” quotient in a business is a huge factor in productivity and overall success. When the management (or labor) views the situation as hopeless or “down,” or adversarial with the general environment, results will fall. Its almost axiomatic.

Ah, Animal Spirits. On which see, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, George A. Akerlof and Robert J. Shiller(2009). Pretty interesting book.
charles austin

November 21, 2009 at 10:48 am

As longtime readers know, I believe presidents get far, far too much credit for good economic circumstances and far, far too much blame for economic downturns. But that’s the nature of the game.

Perhaps if they weren’t so anxious to claim credit for the good they would not receive so much of the blame for the bad.
charles austin

November 21, 2009 at 10:55 am

Drew, as state governments start to run out of money and lay people off the only growth sector of the current economy will also go into decline. I fear 12% unemployment is the lower limit for the coming year and won’t be surprised by 14%.

The bills for the extended holiday from history are coming due. They’re not all President Obama’s fault but he still has to deal with him. Remember, he desperatey wanted the job and claiming now that he didn’t know it was this bad does nothing to instill confidence that he is qualified to hold the job in the first place. None of this is really news, it’s just getting harder and harder to ignore or sweep under the rug.
Ghostzapper

November 21, 2009 at 12:26 pm

IMHO, the new administration did not adequately adjust its plans and associated priorities for the economic environment when they took office. Instead, they embarked on a path of attempting to increase taxes and regulations by pushing an “over the top” health care bill for the President to sign into law as it was a political priority with a climate change bill in the “wings”.

Although it was apparent that the economy was deep trouble, there was no concept of reassessing priorities to focus on ways to improve jobs in the private sector including temporary tax cuts and a posture of minimizing the short to intermediate threat of expensive mandates (costs) on business and increased regulations. With both the Health Care legislation and Climate Change legislation marching through the process, small business owners have protected themselves the only way they could which was to either do very little in terms of hiring since they had no idea as to the future or additional costs and/or eliminating jobs and placing future investments in their businesses on hold if they could. Now, the administration and the Congressional leadership is belatedly focusing directly on the “jobs issue” (“jobs summit” and recent Pelosi comments).

Thus, the administration and Congress by their actions has had considerable influence as to where the economy is today. They could have delayed the two big pieces of legislation and focused on ways to allow businesses to be confident that they could operate in a more certain decision-making environment vis-a-vis an environment that has potential costs and regulations coming with no certainty as to the impact on their businesses other than understanding that it would have a negative impact on their situation.
odograph

November 21, 2009 at 12:29 pm

Sam, I’ve read about half of Animal Spirits. I like it.

I’ve been reading books over the last few years that bridge new brain science and new economics. Jason Zweig’s Your Money & Your Brain might be a lighter and more read on this (and “spirits”).

To back up and really look at brains, not much beats Descartes’ Error by Antonio Damasio. Emotion not only runs through our decision making, but without emotion we fail.

Cheating Monkeys and Citizen Bees by Lee Dugatkin is a good one for anyone who wishes to understand the biological underpinnings of group versus individual natures. When we argue libertarianism versus socialism, we are arguing in a very narrow band of human group behavior.
sam

November 21, 2009 at 4:42 pm

Yeah, Odo, I like it, too. Those guys seem pretty level-headed. I look into the ones you list, also.
Thanks.
Drew

November 21, 2009 at 5:19 pm

odo –

You can pick any four dozen for all I care. There is no substitute for having seen and heard it with your own eyes. carry on.

sam –

You completely missed the point.

I think ghostzapper makes a crucial point. The new administration appears so idiologically driven that it could not alter its legislative plans given economic realities. And that failure persists to this day. Charles Austin may be correct, 12%+ is on the horizon. I would not that Michigan, a test bed for national policies is at 15%.

Best post of the thread: Michaael Reynolds.
odograph

November 21, 2009 at 5:30 pm

Look, Drew:

1) CRA was an actual law
1a) True

2) CRA was a dumb idea
2a) True

3) CRA frustrated bankers
3a) True

4) CRA was a significant contributor to this crisis
4a) False

When you said the following, what you did was provide support for items 1-3, while proving nothing about item 4.

I know its an argument for another thread, but regulators did indeed enforce the making of bad loans. If you didn’t comply with CRA the regulators challenged your loan reserve estimates or your interstate banking requests. Its really not that complicated. And its reality.

Anyone who reads Ritholtz’ “Ask yourself the following questions” section will get why 1-3 and 4 do have different answers.
JVB

November 21, 2009 at 10:59 pm

Thought we could have serious discussions without the word ‘troll’ being thrown around when someone disagrees.
ghostzapper

November 21, 2009 at 11:24 pm

JVB, agree. Typical HuffPost move to toss out troll reference. Usually employed when person casting out the troll reference is having difficulty making their point. It works on HuffPost as it is tolerated and if fact, encouraged.
vnjagvet

November 22, 2009 at 2:04 am

1) CRA was an actual law
1a) True

2) CRA was a dumb idea
2a) True

3) CRA frustrated bankers
3a) True

4) CRA was a significant contributor to this crisis
4a) False

There is only one problem with this series of Q’s and A’s.

It ignores the considerable “encouragement” by Fannie and Freddie to support the exotic securities peddled by the investment banking sector. Most of that encouragement was done in the name of the same objectives of the CRA. Under CRA, banks were graded on the numbers of loans to communities deemed under served by the lending industry. This both increased demand for high risk loans and provided the incentive for the international investment banks’ and insurance companies’ significant but ephemeral profits.
sam

November 22, 2009 at 7:24 am

@Drew

sam –

You completely missed the point.

What point was that? I wasn’t responding to any particular point in a critical way. I was just keying off something you wrote to point folks to a book on the subject of “animal spirits”. Lighten up.
sam

November 22, 2009 at 7:40 am

@Ghostzapper

Thus, the administration and Congress by their actions has had considerable influence as to where the economy is today.

Alright, Drew, I will respond by making a prediction: If the economy does turn around and the job situation does improve, neither you, nor Charles, nor Mr. Zapper will give one scintilla of credit to Obama or the Democratic congresscritters.
sam

November 22, 2009 at 7:41 am

@Ghostzapper

Thus, the administration and Congress by their actions has had considerable influence as to where the economy is today.

Alright, Drew, I will respond by making a prediction: If the economy does turn around and the job situation does improve, neither you nor Mr. Zapper will give one scintilla of credit to Obama or the Democratic congresscritters.
sam

November 22, 2009 at 7:42 am

Ooops, sorry Charles, tired to get you out of there as I’m altogether sure that you quite a ideological as Drew and Ghostzapper.
ghostzapper

November 22, 2009 at 9:42 am

“Ah, Animal Spirits. On which see, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, George A. Akerlof and Robert J. Shiller(2009). Pretty interesting book.”

Sam, I will get a look, thanks.

In terms of your prediction, if the Administration and Congress, somehow change course and decide to actually cut government spending (across the board cuts) and look to ways to get out of the way of small business and encourage them, then yes, I will give them credit.

As I write this, Administration and Congress moving forward on a bill that will place massive unfunded mandates on states as part of the plan and also will unilaterally force small businesses increase their costs. It is unconstitutional but that is a discussion for a different day as it is OT.

This is basically an impossible outcome as Obama has never had to actually cut spending. His sole experience is related to getting money (grants, foundations, government money) that is then redistributed. Thus, the concept of profit and loss and actually having to exist in a real business situation is completely foreign to him.
sam

November 22, 2009 at 10:38 am

@GZ

In terms of your prediction, if the Administration and Congress, somehow change course and decide to actually cut government spending (across the board cuts) and look to ways to get out of the way of small business and encourage them, then yes, I will give them credit.

Look, GZ, I don’t know if any of this will work or fail to work. I honestly don’t. And, in truth, I regretted my snark–and that’s what it was– about you and Drew and Charles upthread. I don’t suppose for one moment that any of us wants anything other than the best for our country. But I find I can’t really get a purchase on exactly what’s going on. These days, I try to read as many economics blogs as I can, both left and right. Let me requote a bit from that NY Times piece I cited above:

Now that unemployment has topped 10 percent, some liberal-leaning economists see confirmation of their warnings that the $787 billion stimulus package President Obama signed into law last February was way too small. The economy needs a second big infusion, they say.

No, some conservative-leaning economists counter, we were right: The package has been wasteful, ineffectual and even harmful to the extent that it adds to the nation’s debt and crowds out private-sector borrowing.

The thing I find interesting about economics is that the reality it purports to describe seems to be ontologically determined by the politics of the economist I’m reading. Both camps can’t be right, but it’s possible they’re can both wrong. Maybe there’s some middle-ground interpretation out there, but I’ve not found it. I keep looking, though. All I’m seeing, unfortunately, is a food fight.
odograph

November 22, 2009 at 11:08 am

vnjagvet writes:

It ignores the considerable “encouragement” by Fannie and Freddie to support the exotic securities peddled by the investment banking sector. Most of that encouragement was done in the name of the same objectives of the CRA. Under CRA, banks were graded on the numbers of loans to communities deemed under served by the lending industry. This both increased demand for high risk loans and provided the incentive for the international investment banks’ and insurance companies’ significant but ephemeral profits.

I think that’s answered in Ritholtz’ piece, and others. Basically while Freddie and Frannie and CRA were bad, they were nothing compared to what came after. And what came after came from independent roots. It wasn’t because anyone was forcing bad loans, it was because securitization and fraudulent bond ratings meant that no one was even checking IF loans were bad.

Assign percentage blames if it makes it easier to understand … 5% CRA, 15% GSEs, 80% securitization with fraudulent ratings.

Now, if you are stridently political you can come back to that 20% as the “cause” but that is not really very honest.
odograph

November 22, 2009 at 11:16 am

This is basically an impossible outcome as Obama has never had to actually cut spending. His sole experience is related to getting money (grants, foundations, government money) that is then redistributed. Thus, the concept of profit and loss and actually having to exist in a real business situation is completely foreign to him.

I really find it astonishing that people will make arguments like this. Not only is it a “just so” story based on an incomplete slice of the man’s life (raised by a banker?), it runs contrary to his actual words:

BEIJING, Nov 18 (Reuters) – President Barack Obama gave his sternest warning yet about the need to contain rising U.S. deficits, saying on Wednesday that if government debt were to pile up too much, it could lead to a double-dip recession.

Now, I expect conservative thought to be at odds with reality. If you really want to sway me you don’t want to reinforce that bias. Instead, you should engage with what’s real.
Ghostzapper

November 22, 2009 at 12:22 pm

Hey Odograph,
First of all it is real and not at odds with reality, name one component of Obama’s experience that dealt with actual P&L responsibility. The statement is completely factual and you actually could sway me if it was a real argument. Also, it is common sense. Unless you are telling me that common sense only relates to conservative thought. Rather than actually coming back with, “no Obama ran a business in xx to yy” or he had senior lever administrative experience in a for profit business for yy” you just act like it is a made up statement. Fact is the statement is true as far as I can tell. He has never had to balance a budget and as always been in a situation where he received funds to redistribute. I would love to see some noted experience as that would actually give me some confidence that he is working a secret maneuver to save the economy.

Actions speak louder than words. Obama increases the deficit massively, 4x previous administrations number, over 10% of annual GDP and then under his plan they attempt to get it back to 3% of GDP, Bush never exceeded 2.5% the entire time so, it is ridiculous. Then, Administration turns around and just says that spending is out of control. Remember when he said that if his stimulus package was passed that unemployment would not exceed 8.0%. Well, that is what he said and they passed the stimulus and now unemployment is already passed 10.0%.
odograph

November 22, 2009 at 1:05 pm

If I wanted to descend to your level Ghostzapper, couldn’t I make this argument: “since any business man only has with private P&L responsiblity, he has NO experience crafting a public budget!” That would be stupid too.

Given that Obama was raised by a Grandma-Banker I suspect that he had the kind of young dinner-table P&L education that I had.

Oops! My dad was a teacher, even as he taught me to avoid debt, save, and build a portfolio. Does that mean he couldn’t know?

(BTW, isn’t amusing that when Obama did the unpresidential thing and told people to buy stocks, he actually did call the bottom? That was within days of the market lows.)
Ghostzapper

November 22, 2009 at 1:18 pm

odo,
Ok, so I will take that response as he does not have any experience with a P&L, period. As he does not have any experience with a public budget either.
Understand that he worked with foundations, etc. where they received money and redistributed it. So therefore, my statement is accurate.
odograph

November 22, 2009 at 1:25 pm

Here’s what you won GZ, just so you understand:

1) You artificially constructed a litmus test.
2) I didn’t care.
3) You declared victory.

As I said, anyone else could stoop that low, but I won’t do it. I’d rather think about these things honestly and in a broader sense.
ghostzapper

November 22, 2009 at 2:03 pm

Odo,
So let me get this straight —
I artificially constructed a litmus test in which — I only said my statement was accurate which you apparently are agreeing is true, but this is somehow a low blow.

Everything that President Obama says is completely accurate and we should take the administration’s statements without question. Then, we look at everything else in a broader sense.

So unless we agree with everything the administration is saying, then we are stooping too low for you to even entertain us plebes.
odograph

November 22, 2009 at 2:13 pm

Geez, that sounded totally sane ghostzapper.

“Everything that President Obama says is completely accurate and we should take the administration’s statements without question. Then, we look at everything else in a broader sense.”

Oh yeah, not crazy at all.
ghostzapper

November 22, 2009 at 6:45 pm

Hey odo,
I was making the everything Obama says is correct statement as your point based on your posts. Thanks for making my point for me. As you basically strung that in previous posts.

It is crazy, your words, not mine. It is possible that you are posting to many places and not paying attention, who knows.
Drew

November 23, 2009 at 2:05 pm

You’ve totally ignored the important point, odo. A credit culture was set into motion that snowballed into a total mess. Staying with that analogy, you want to blame the bottom of the mountain, and ignore the snow, the top of the mountain and the event that set off the avalanche.

If you had ever been involved in credit you would know just how this momentum works. Some day you may gain wisdom, and not find all answers in some book.
Steve Verdon

November 23, 2009 at 2:30 pm

Alright, Drew, I will respond by making a prediction: If the economy does turn around and the job situation does improve, neither you, nor Charles, nor Mr. Zapper will give one scintilla of credit to Obama or the Democratic congresscritters.

Given that the economy will eventually improve this is kind of silly, IMO. Or do you believe in perpetual motion machines too?

Tell you what, how much of the last recovery was due to Bush policies. I’m thinking your answer is going to be ontologically determined by your politics.
sam

November 23, 2009 at 3:59 pm

You evidently chose to disregard that part of my later post in which I lamented that snark. And as I said, all I’m seeing in the left vs right economists debate is a food fight. You’re not helping me see the error of that evaluation.