When President Barack Obama took office Jan. 20, 2009, the U.S. economy was in an epic freefall, leading Wall Street to lose a colossal $7 trillion in market capitalization. By the time the recession hit bottom in 2009 the Down Jones Industrials had dropped from 14,000 to around 6,000, trashing the retirement plans of vast number of seniors. Former President George W. Bush handed Obama the worst economic calamity since the Great Depression, prompting former Federal Reserve Board Chairman Alan Greenspan to forecast an agonizing 10-year recovery. When he passed the baton Feb. 1, 2006 to former Princeton University economics professor Ben S. Bernanke, few predicted a crash of the derivatives market built on a flimsy pyramid of toxic mortgage-backed securities. When the nation’s biggest banks ran out of cash in 2008, it prompted Bernanke to take draconic measures.
First came Bush and his Treasury Secretary Hank Paulson’s $700 billion bailout approved by Congress Oct. 3, 2008, a drop-in-the-bucket to the trillions needed to save the economy from another major depression. Wall Street’s avalanche caused the nation’s biggest businesses to shed over 200,000 jobs a month to stave off possible bankruptcies. When the economy bottomed out in March 2010, over 7 million jobs were lost, causing federal budget deficits to swell to $1.4 trillion. But no sooner than Obama placed his left hand on the bible, the GOP was already blaming him for the recession. Yet it was Obama’s economic policies under 48-year-old Treasury Secretary Tim Geithner—with the Bernanke’s astute guidance—that helped the economy recover to the Dow’s Oct. 24 all-time close of 15,505. As Wall Street recovered, the jobs market eventually came back to life.
Starting last year, Republicans began mucking around with Obama’s economy imposing the “sequester” or mandatory spending cuts that tossed thousand of federal workers and government contractors out of work. GOP economic policies led to the economic collapse of 2007-08 and are designed to tank the economy before the 2014 Midterm elections. According to S&P, Republicans Oct. 1 shutdown of the U.S. government and refusal to raise the debt ceiling caused the economy to lose $24 billion, shaving about six-tenths off the nation’s Gross Domestic Product to under two percent. Had Sen. Ted Cruz (R-Texas) and other Tea Party-backers had their way, they would have defaulted the U.S. government, driving the economy into another recession. GOP politicians often talk about the tragedy of passing debt onto our children and grandchildren , while, simultaneously, piling it up.
GOP officials have been warned repeatedly by Bernanke and the nation’s leading economists to stop slashing government spending. They’ve been told that government spending expands the nation’s GDP, adds millions on new jobs, reduces federal budget deficits and leads to balanced budgets. Yet Cruz and the Tea Party want Obama to follow a suicidal economic path for one reason: To gain political advantage in next years Midterm elections. Former Massachusetts Gov. and GOP presidential candidate Mitt Romney built his entire campaign around the Obama’s economic mismanagement. Had Romney run against Bush’s failed economic policies in 2012, he might have seemed more credible. Instead he chose to rip Obama’s economy that showed economy growth by every objective measure, including Labor and Commerce Departments’ data.
Romney’s economic plan that was rejected by voters Nov. 6, 2012 involved slashing thousands of government jobs to eventually shrink the size of the federal establishment. Anti-tax Tea Party policies that shutdown the government and refused to raise the debt ceiling are designed to shrink the government and reverse government entitlements, like Medicare, Social Security, Medicaid, and, more recently, Obamacare. GOP economic policies that currently fight to slash government spending are designed to throw the economy in reverse. “Underlying labor market conditions probably are not as bad as the recent claims, data suggest,” said Daniel Silver, an economist with JPMorgan in New York. GOP officials hoped for bad economic news in 2012 and they’re engineering a double-dip for 2014. No one should have any pretence about what GOP economic policies intend to do.
If Obama can resist GOP attempts to tank the recovery, the economy should continue to improve through 2014. “The layoff side of the labor market equation continues to improve,” said Gennady Goldberg, an economist with TD Securities in New York. Today’s Labor Department data indicated that unemployment claims fell by 12,000 to seasonally adjusted 350,000. While there’s still talk of the Tea Party pulling the same shenanigans in 2014, the GOP has bigger fish to fry holding onto the House. When House Speaker John Boehner (R-Ohio) pulled the rug out from underneath the Tea Party Oct. 16, he let the rebellious upstarts know that he won’t let them sink the GOP in 2014. If unemployment drops in 2014 and the nation’s GDP bounces back, it might help Beranke’s expected replacement for Fed Chairman Janet Yellin begin to “taper” QE3, the Fed’s controversial bond-buying program.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.