Sunday, July 12, 2009

Response to Obama's op-ed

Keith Hennessey, one of the fastest up-and-coming bloggers, came out with a "brilliant and devastating critique of our president." This post of his is a point-by-point rebuttal and criticism of Obama's op-ed in Sunday's Washington Post.

More and more, I am coming to the conclusion that Obama knows very little if nothing about economics. He is naive. He believes the vast majority of people are stupid, and can be helped by smart people like him. He has never doubted his ability to resolve previously intractable problems. He has made many mistakes in the past six months. Big mistakes that will come back to haunt him in coming months and years.

No person on this earth is smart enough to do all that he has done in a few short months without committing major errors.

"The bigger they are the harder they fall," as the saying goes. Obama is now falling, and this fall bears very close watching, as it is the most important thing happening in the world today.


Paul said...

Imagine the arrogance of a guy who never ran so much as a hot dog stand thinking he can "transform the economy" for the better. I agree his mistakes will come back to haunt him. They'll haunt the rest of us, too.

alstry said...

Imagine the ignorance of an idiot not to recognize that when a person inherits a government with over $6 trillion in collective spend against a back drop of evaporating revenues, the ship was sunk before Obama ever walked in the door.

Any entry level business analyst could have figured it is why so many "economists" horribly missed the serverity of this downturn.

The debt that infected our economy under the Bush era is simply driving our nation into a systematic bankruptcy and any mentally impaired person should be able to see it. Granted, Obama is doing little to help the situation.

But to blame Obama for big government is ignorance taken to new America continues shutting down as a result of a massive government and excessive debt built up under the Bush era.

RG said...

Alstry - How about some honesty here? The Democrats controlled Congress since 2006, and Obama was one of them. He said nothing. Not one peep, and neither did most of his party. There's blame to spread around.

randy said...

I find little to disagree with in Hennessey's editorial. In fairness though, Obama's op-ed seems to me to be fairly mild political posturing by today's standards. At least to me, Bush's arrogance was quite a bit more offensive. (I was a Bush supporter in the first term, but became progressively more disgusted [there is no other word] as his governance unfolded.) Maybe they are different side of the same coin.

"No person on this earth is smart enough to do all that he has done in a few short months without committing catastrophic errors of judgment."

This statement somewhat contradicts Hennessey's position that Obama has actually done very little to this point. Is it the fear of what he has announced intentions to do that you refer? I would agree with that. Cap and Trade and Health Care at the top of the list of initiatives, if passed, are destined to cause more harm than good.


alstry said...


I have no disagreement with your statement. But to some how blame Obama is simply wrong and misplaces the culpability. If you want to posit that Obama is a difference without a distinction, then we are singing the same tune.

The simple issue is that our economy is systematically bankrupt. It was bankrupt when Obama took office. We will see millions of jobs lost in the upcoming months, the question is how are we as a nation going to equitably deal with the shuttering of our economy.

The key word is equitable, as the financial condition is clear as the patient presents.

Public Library said...

Obama is a product of the technocratic system; you should be more liberal in your abuse of politicians, fiscal & monetary. Why not throw Bernanke, Paulson, Greenspan, and their ilk in with the lot? Their hubris is mind numbing.

Your narrow stance contradicts your macro views. Obama is not the only one who thinks he can tinker with the Global system and solve the crisis. The monetary mess is as equally as disgusting and abusive as anything Obama has to offer. I do not agree with his policies thus far, but it is only logical to assume that since the monetarist blew up the system the first time around that the fiscal authorities now want to have a shot at it too.

Paul said...

"But to blame Obama for big government is ignorance taken to new highs...."

I'm clearly blaming Obama for the big government he wants to enact, not the big government he inherited and embraces. You're the ignorant one if you dispute that, Alstry a.k.a. CBP Comment Stalker.

alstry said...


The patient was on a path to flat lining the day Obama took office.

At this point, if Obama doesn't spend, the economy goes into an immediate DEPRESSION as current government spend is 50% of GDP.

Any argument that government spend is simply a transfer of wealth is losing relevance as more and more government spend is simply borrowed money.

If Obama keeps spending, it is likely our currency will devalue and the potential for a hyperinflationary depression is very real.

You pick, a deflationary depression or hyperinflationary depression....both are not very pleasant from this perspective.

But if you want to keep living in fantasy land smoking green shoots, please don't let me stop you as I am a free market thinker.

Paul said...

"The patient was on a path to flat lining the day Obama took office."

Nobody said the economy wasn't in bad shape. What's that got to do with Scott's post?

"At this point, if Obama doesn't spend, the economy goes into an immediate DEPRESSION as current government spend is 50% of GDP."

Really? He has to piss away another 10 trillion over the next 10 years or we're all going to die? Call me unconvinced by your argument.

alstry said...


Nobody said anything about death....simply a DEPRESSION while Scott is calling an end to the recession.

New Home Sales are down 80%.
Auto Sales are down 50%.

Magna reported today advertising sales are DOWN double digits.

Fastenal reported over 21% sales decline which is an excellent barometer of the economic health of construction and industry.

Based on my calculations, save government and health care, our economy is already in a Depression.

With government's $6.5 Trillion dollar spend and a collective deficit of over $2 is a mathematical certainty we are going into a DEPRESSION....the only question now is whether it will be an inflationary depression or deflationary depression.

The math NEVER lies...and soon Scott will be blogging we are in a depression.......and it will have little to do with Obama, but he will certainly be a contributing factor if he continues on the same policies being articulated.

Scott Grannis said...

randy, Public: Of course there are many in politics who suffer from hubris, and I too was very unhappy with Bush.

But I think Obama takes the all-time prize. His proposed 20% expansion of federal government spending as a percent of GDP, his proposed takeover of the healthcare industry, his proposed remaking of the way our economy uses energy, his blatant redistributionist policies, his mea culpa approach to global affairs, his decision to let Pelosi and Reid design the stimulus; well, we've never seen such ambitious efforts or careless decisions from anyone in modern times, to my knowledge. No one comes even close.

Bernanke has certainly gone way beyond what any of his predecessors have done, but here we're just talking about monetary policy. And in fairness to him, the situation he found himself in (partly due to his own previous errors of course) was unprecedented, and his actions have helped improve things. Whether he reverses course appropriately will be the thing to watch for.

Public Library said...


I agree wholeheartedly about the misplacements of Obama’s ambitions, however, I feel the monetarists are the true plunderers of the US economic system, not the politicos on Capital Hill. Everything starts and stops with the money and since 1913 that has meant the Fed. It is no coincidence that the President of the times lamented his decision to hand our fate over to the banks.

Your comment “but here we're just talking about monetary policy” should read more like “monetary policy is the end all be all”. Without banks offering untold amounts of debt, the politicos would fight over how to slice the revenue pie, not expand the pie beyond its natural and healthy borders. There would be no Grand Obama plans without the existence of the Federal Reserve. Pick your poison. It hardly seems rationale to complain about one without bringing the others into the discussion.

Scott Grannis said...

I have no qualms about criticizing the Fed. I think they have blundered quite a few times in the last decade alone, not to mention the hyperinflation of the 1970s, and those blunders have been terribly painful for the economy. But to say the Fed has allowed the politicians free rein is going a bit too far I think. If the Fed were to truly fund Obama's deficits, then of course we would be in the hyperinflationary soup. But that hasn't happened. Gold stands out as a clear inflationary sign, but gold has not risen for the past 18 months. The dollar has not plumbed new lows. Commodity prices are still far below their highs. TIPS breakeven spreads are below average. The yield curve is steep, but nothing we haven't seen before. T-bond yields are unusually low. Inflation has averaged just under 3% a year since it peaked in early 1981.

In short, there is precious little evidence to support an outright condemnation of the Fed. From a monetary perspective, things could be orders of magnitude worse. From a fiscal perspective, however, things are already worse than anyone could have imagined just a few years ago.

alstry said...


You and I agree completely regarding hyperinflation and the Fed's funding Obama's ridiculous spending programs.

But I rarely see any commentary from you on the catastrophic economic effects if Obama cuts spending to simply close the gap on the rapidly approaching $2 Trillion dollar deficit.

Mr. Burns said...

how much of the deteriorating fiscal situation is simply obama chosing to bring the middle east war expenses back on the balance sheet? that probably represents half of the increase

the reason there is no inflation is not due to Bernanke's prudence but due to the fact that money is evaporating faster than he can print it.

the bond and fx market are quite aware of our fiscal situation but inflation is no where to be found.

you guys need to do the math - as much as the government is spending or committed to spend it is a small fraction of the money that has evaporated due to deleveraging process - like maybe half thus far and we still have to get thru massive CRE maturities that are coming due '10-'12 with collateral that is worth 50% less - that might be why inflation is not showing up in bond and fx markets

Scott Grannis said...

vincent: I don't mean to be crude, but you are way off base. The costs of middle east war are a very small fraction of this big problem. Money has not evaporated, because all measures of the money supply are at all-time highs.

alstry: If Obama cut spending it would be fantastic. Government is a very inefficient spender, so less spending would free up resources that the private sector could better utilize. Less spending would also reduce expected tax burdens, and that would help unleash animal spirits. I devoutly hope that both Obama and Sacramento are able to significantly reduce planned spending. It can be done and it would be terrific.

Public Library said...


I did not mean the Fed gives the politician’s free reign sorry if that was confusing.

I believe the Fed creates more disasters than any other office of the US government, plain and simple, and that if anyone gets an "F" for tinkering with the system in hopes of managing a brighter future, it should be the Fed. We need less government across the board. Less Executive, Legislative, Judicial, and Monetary.

The Federal Reserve is out of control, economics is out of control, technocratic mismanagement is out of control. We need to slash their powers across the board and take back what is rightfully ours, life, liberty, and the pursuit of happiness. If that means bankruptcy and hardship for the risky, so be it, but it should be clear that the Fed is already steering us into the next debacle regardless of how stabilized things become between here and now.

Mr. Burns said...

i don't think i'm off base at all - you are obviously only looking at data that supports your agenda

the cost of the wars is closing in on $1t

the $700b tarp was passed by bush on his way out the door, not obama

so is obama responsible for all the $1.4t budget deficit? is obama responsible for the baby boomer social security and medicare shortfalls? just because he is finally reporting the real numbers doesn't mean he's responsible, sheesh, man, lets be honest

the loss of net worth in US household balance sheets alone is over $12t in just one year - it is a fraction of what the gov't has spent thus far on the bailout - there is no doubt money is evaporating at an alarming rate - if it weren't prices wouldn't be down 50% in every levered asset class

i'm not making this up

Scott Grannis said...

vincent: all of the cost of the wars is included in the spending numbers released by Treasury. Even though I think it was a terrible idea, TARP "spending" is not really spending, since most of the money was used to purchase assets, and there is a reasonable expectation that most of the money will be recovered. The loss of household net worth is not equivalent to money that has evaporated. There is more money in the economy today than ever before, even though net worth has declined by 12 trillion. Basic monetary theory explains this. Net worth is not money.

ronrasch said...

Great thread. Thank you for the clarifications Scott. Inefficient government spending to grow us into prosperity is Obama's ruinous strategy. Cuts in corporate, personal, and capital gains taxes and in government spending will allow us to recover. If we have torte & regulatory reforms and reforms to the professional unions (MD's, lawyers, accouuntants, universities) to reduce the costs of services, we will really get our economy moving