The GOP is trying to pin the horrible economy on Obama. It is truly breathtaking to watch.
Let's start with a couple of basic facts.
1. Q4 2008 GDP was falling at -6.3%
- GDP is the broadest measure of how the $14 trillion U.S. economy is doing.
2. The falling Q4 2008 GDP (-6.3%) is the worst quarterly economic performance since Q1 1982 (-6.4%)
3. As a result of the rapidly worsening economy, unemployment rose rapidly throughout 2008
. It went from 4.8% in Feb 2008 to 7.6% in Jan 2009.
4. The 2009 budget year that we are currently in is mostly made up of George W. Bush's spending priorities. The first budget that Obama is proposing is for 2010.
5. George W. Bush's proposed budget for fiscal year 2009 was $3.1 trillion
. When it passed through Congress and he had signed it it was about $3.3 trillion. Keep in mind that there was about another $100 billion that he kept out of the budget for Iraq/Afghanistan (that was emergency supplementals).
6. As Bush was leaving office the economic crisis (that he caused) really started to hit. So we ended up with $700 billion TARP (October 2, 2008), the nationalization of AIG (September 17, 2008), Freddie Mac (September 7, 2008) and Fannie Mae (September 7, 2008). In addition to the TARP money, the Fed pumped in hundreds of billions of dollars into the economy in Q4.
7. As Obama was proposing his budget, the CBO published the baseline budget numbers. They showed that as a result of all of the Bush spending, the baseline budget deficit for FY 2009 had exploded to $1.67 trillion
. To be fair, as much as $150 billion of it comes from stimulus spending this fiscal year that Obama passed, but the reality is that Obama inherited about $1.5 trillion of the deficit when he took office.
8. The Dow Jones Industrial Average stood at 8000 when Obama took office.
This is the mess that Obama inherited and that he is dealing with. His economic plan is fairly simple at its heart. The first thing to do is to make sure the financial sector is not going to collapse. It looks like things are stabilizing there, and some of the $700 billion TARP is going to be repaid in coming months.
Second, get the economy going again through stimulus spending on construction projects and middle class and business tax cuts. Contrary to what Republicans want to believe, more than $200 of the $787 billion stimulus plan is made up of tax cuts.
Once the economy is growing, tax revenues will increase naturally and the deficit will fall. However, this won't be enough to close the huge structural deficits that Bush left behind. We are winding down in Iraq over the next two years, the Bush tax cuts on those in the upper income bracket will be allowed to expire, and there is an effort to fix health care so that it does not eat up as much of the federal budget or private spending.
Let's be clear that the financial sector is stabilizing. The Dow is rising and is on a major bull run. The Dow is a LEADING indicator of the economy, so it seems to be predicting rising GDP. Unemployment is still worsening and hit 9.4% last month, but this is not surprising. Unemployment is a LAGGING indictor of the economy. Firms hire after recovery is in full swing - that is just the way it is.
Here is the bottom line - if the economy continues to improve from where it was, Obama will be largely responsible. If the economy sours and gets worse than where he took over, he will be to blame. Unlike Republicans who blame Clinton and refuse to accept the disaster that Bush created, next year and then again in 2012, I won't make excuses for Obama. Either his plan will work or it won't. However, Republican bitching and moaning and trying to pin everything on Obama this early in his presidency is just plain stupid.