And so, not 24 hours after Barack Obama’s universally panned performance in the first debate against Mitt Romney and continuing to this day, he resorts to a well-worn theme that defines not only his candidacy, but his tenure as president. In a feeble attempt at damage control, Obama has rallied around the theme that Romney lied, was misleading, or mischaracterized his own positions. Harry Reid has compared Romney to a “snake oil salesman.” Thankfully, we haven’t heard any words of wisdom from Debbie Wasserman-Schultz and her take on the debate. Joe Biden had this golden obeservation: the president looked “presidential.” The fact is that Obama got spanked by Romney like a child getting spanked for something they were clearly guilty of doing. And like that child, Obama did the childish thing: “I swear, mom, they are all telling lies.” Leaving aside the media’s fact checking apparatus that turns even Obama lies into a truth on some level, these self-appointed arbiters of truth were dumbfounded by the Obama performance. His performance makes Clint Eastwood’s performance at the convention take on added resonance.
But, if Obama wants to talk about lies, mischaracterizations and half truths, then the past four years are full of them. If Obama and company want to go down that road, then they need to realize that the road is full of potholes, bumps and obstructions. We need to look no further than the central theme of Obama’s campaign. Likening any program Romney or Ryan put forth as the same failed policies of the past, they claim that policies of the Bush Administration- entitlement expansion, unfunded mandates, two unfunded wars, tax cuts and deregulation- is what “got us into this mess.”
First, “what got us into this mess” was not Iraq, was not Afghanistan, not tax cuts, not defense spending and not deregulation. What got us into this mess was the collapse of the housing bubble which was fed, in part, by cheap credit, that very credit being extended to people who had no right to loans, and a frenzy of home buyers using houses not for a home, but as an investment or a credit card. Along the way, there were sleazy loan originators, sleazy bankers, and yes- sleazy consumers.
Regarding those Bush tax cuts, it is true he entered office in 2001 with a “surplus.” When the government states they have a budget surplus, it is not as if there billions of dollars suddenly appearing in some bank in Washington somewhere. Surpluses are projections based on either (1) better than expected revenue collections or (2) lower than expected expenditures. That is the “surplus.” Obama now would have us believe that this alone was a factor in the financial crisis; if not a direct cause, then it impeded our ability as a nation to deal with it. This is an important assumption since it leads to the solution. But, they leave out a very important fact along the way. Since its founding, the United States has rarely had a surplus for an extended period of time. Just as financial advisors suggest consumers keep at least one credit card for emergencies and a gauge of creditworthiness, the government must maintain a certain level of debt.
The key to deficit management is to keep the deficit as a small percentage of GDP. When the Bush tax cuts were instituted, the federal deficit as a percentage of GDP was in steady decline until the 2008 financial collapse. In 2004, it was negative 3.5% and by 2007, it was a mere -1.2%. While there was obvious deficit spending during the Bush Administration, the rate was decreasing because the economy was growing. There are three explanations for these decreasing percentages- decreased spending (which the Democrats point out was not the case under Bush), increased revenue (which would defeat their line that increasing taxes is the only means to close the budget deficit) or the economy was actually growing under Bush (something they will never admit). Regardless, those gains under Bush were blown out of the water as a result of the recession and Obama’s response- deficit spending on steroids- has only made anything Bush did look like small potatoes.
And speaking of mischaracterizations, Obama and company are very proud of the fact that there has been job growth in the private sector for over 40 months now. It is true that under Obama, more than 4 million jobs have been “created.” But, that is only half the truth. The first part of the remainder of the truth is that after the 2003 Bush tax cuts went into effect, the economy added about 7 million jobs from 2004-2008 before the most recent recession hit. This is almost double the number of jobs Obama can lay claim to in a similar time frame. The second half of the truth is that the jobs added under Bush were substantially higher paying jobs than those created under Obama. This is revealed in the fact that under Obama, when home values are controlled for, the average median income of a family of four under Obama has decreased by $3,500 per household. This is attributable to stagnant wages, increased health care costs, inflation, the doubling of gas prices under Obama and the fact that when the unemployed do have the good fortune to find a job, they pay substantially less than the job they lost. It also explains why the average workweek under Bush was 36.4 hours compared to 34.2 hours under Obama- more people are working two part time jobs to earn less than they did with one full time job.
Another lie perpetrated by the Obama machine is that his policies prevented another Great Depression. This was the central theme of the Clinton speech at the DNC convention. Two words debunk that fallacy: “Recovery summer.” That was the summer when all that stimulus money was supposed to pay huge dividends and all sorts of jobs would be created. It never happened! Most of that stimulus money started entering the economy in September 2009, yet according to the Obama Administration’s own economists, the recession officially ended in June 2009. So, there is no way that this stimulus money was a factor in ending the recession. In fact, what we do see is that as that as stimulus money enters the economy, the rate of GDP growth starts to show a DECLINE indicating that the Obama stimulus- his solution- actually had a negative effect on economic growth. Ironically, when the bulk of this money is entering the economy- the recovery summer- we start to hear talk of a double dip recession and GDP growth slows to a crawl. Simply, you are not going to have unemployment below 7% with GDP growth below 2% which is the case since all that stimulus money filtered into the economy. Again, Obama’s policies and actions actually did more harm than good.
One of my favorite talking points from Obama and his cadre of Keynesian “yes men” is that after any financial collapse, recoveries are always slower. If that is so, then Obama lied when he sold Congress his stimulus plan for recovery. For example, it was the Obama Administration- not Bush- that was predicting 3.8 GDP growth in FY 2011 when he actually got 1.9%, 4.2% in FY12 when it will barely hit 2%, and projected 4.1% growth in FY13 when it will likely be no higher than 2.4%. In fact, whatever this inept group of economists predict, it would appear that if you cut it in half, that is the truth of Obama’s policies.
And the entire premise is untrue regardless. Since the end of World War II, there have been several recessions- some of a financial nature and some not. Within 12 months of the official end of those recessions, the average cumulative increase in GDP is slightly over 15%. That is the historical benchmark. The cumulative increase under Obama is LESS than 7% after 12 months. No matter how you look at it, Obama’s policies are not only ineffective, they actually worsened the situation by slowing economic growth.
As for those regulations, despite the metric used, regulations under Bush increased over those from Clinton which increased over those of Reagan. Even Reagan added thousands of regulations and pages to the Federal Register. In fact, the worst regulatory offender is a Republican- Richard Nixon! The problem was not the number of regulations, but the enforcement of existing regulations. Many failed to keep up with changes in the financial sector where certain instruments were being created that were so complex that even the best banking minds in the country did not know exactly what they were purchasing. One could correctly ask why Bush did not address this. The fact is that in 2003 when he tried to advance legislation to reign in the secondary mortgage market and these mortgage-backed securities, he was stopped. Even the New York Times, not exactly an ally of Bush, lauded his efforts to reform Fannie Mae and Freddie Mac which controlled the secondary mortgage market. So why didn’t it happen? In what has to be one of the biggest political ironies of all time, two Democratic legislators blocked that legislation- Barney Frank and Chris Dodd. The irony is that their names now adorn Obama’s signature piece of financial regulatory legislation. The biggest irony is that the law does not even remotely address the problems in housing, has now codified “too big to fail,” and has had unintended consequences along the way. The Durbin amendment, for example, limits the fees banks can charge consumers for use of debit cards. That sounds like a great idea, but it costs banks billions of dollars a year in revenue that is used for other things like loans and improving their capital reserve requirements. To make up that loss of “revenue” (not all of it lines the pockets of bank executives), the average account balance to qualify for “free checking” is $725 in 2012 compared to $110 pre-Frank-Dodd. Obama believes in regulation for the sake of regulation, not smart regulation. And as Romney stated in that debate, Republicans have no problems with smart regulations if they spell out the rules of the game and create transparency to allow people to make smart decisions and everyone has the equal opportunity to succeed, or fail. But, when you keep shifting the rules of the game, or ascribe the rule making to an increasing bureaucracy often at odds with another bureaucracy, uncertainty ensues and businesses, especially banks, cannot efficiently operate in such an atmosphere. Is there any wonder banks are not loaning money even to qualified people, that businesses are not hiring people, and that entrepreneurs are finding less access to capital?
If the truth is what Obama wants to talk about, then I say bring it on. Whether we are talking about the economy, Fast and Furious, job creation, the evolving narrative over the debacle in Libya, the backfiring Arab spring and so many other issues, the door of truth swings both ways. As the sitting president, that door will hit Obama harder in the ass since he is the one with the demonstrable dismal record.