The author, Scott Clair, Of the Friday, February 10,2012 , Wall Street Journal in ‘Obama’s economic policies leading U.S down the wrong track’ , notes that the writer Stephen Moore criticizes Obama for policies that he says have made things worse. Moore and Gov. Mitch Daniels share the sentiments that Obama has negatively affected the economy with business over-regulation, refusal to allow domestic energy production, and proposals to increase taxes on the rich that amount to dividing the country. However, this is not quite the idea. The economic crisis was brought on mainly by outsourcing, bad debt and phony financial profits, but not by Obama’s policies. Republicans need to stop playing an obstructionist role in Congress and work towards a better America. Obama is working on pulling us out of the Bush wilderness. Americans do not need to waste their time on symbolic gestures; they need and deserve real solutions to very real problems, which are what president Obama has offered since he took office in 2008.
Moore compares the economic policies of President Obama to Ronald Reagan, the President of the USA from 1981 to 1989. Obama took office within a recession of historic proportion, but there was little to look back and compare with. The United States faced a difficulty in 2008; it was the largest since 1929. It was fundamentally different from other postwar recessions. Rather than being caused by monetary policy actions, it began with interest rates at low levels. It is borne of regulatory failures and unsound practices that led to the housing bubble bust and the financial crisis that dealt a huge blow to the economy. Thirteen trillion dollars of household wealth was the price the USA had to pay because of the collapse of the household prices. The decision of the fiscal and monetary policymakers to take action when President Obama came into power helped not to turn the recession into the second greatest. A month later after Obama’s inauguration, the Recovery and Reinvestment Act of America was issued, which was aimed at making profound changes. It is, however, hard to see what the act has done because it was a set of measures: some of them do not even have solid grounds for implementation. This is mainly because it spreads funds widely and it really works efficiently due to previously set programs. The Act was agreed on by the new economics team back in 2008 so that it could be issued finally and was supposed to bring great changes as they were aware that the economy was facing a terrible downturn (Olive & Obama 168). These steps were relatively positive ones towards dealing with the situation that had threatened the economy. The policies were always there but measures that would extraordinarily deal with the extraordinary situation were very necessary.
The Recovery Act indicates some of Obama’s top forward-looking priorities. For instance, more than 90 billion dollars were invested in clean energy, thereby, providing a down payment toward the transition in line with greater efficiency and renewable energy (Rourke, 2011). The Obama administration took a wide range of recovery actions, including the Financial Stability Plan which was supposed to improve plans for credit provision and bond guarantees with the Federal Reserve. The President also demanded concessions from the stakeholders in the automobile industry in return for the supplies needed to reform that vital sector. As for the housing sector, 50 billion of TARP funds were spent in order to support programs designed to help responsible home owners keep their homes. It was decided by the administration to cooperate with the GSE and Federal Reserve to reduce mortgages rates. The specific steps were taken to complement each other in various sectors. These actions have made tremendous changes in the economy. Financially, credit spreads have returned to pre-crisis levels and even though credit still is considered to be insufficient for consumers of minor entrepreneurs, lending standards start to loosen. Some policies have been implemented in the automobile industry as well. Chrysler and GM emerged from bankruptcy and recorded profits. This was done for the first time in six years. The rate of employment in this industry also increased in comparison to June 2009 to almost 80,000. In housing, under the HAMP program, more than 1.3 million homeowners have received trial mortgages (Olive & Obama 2009).
The economic changes are profound and insufficient. Real GDP has been increasing over the last four quarters compared to its falling at an annual rate of 6 percent in 2008 and early 2009. This growth is encouraging, but it is not quite aiming at creating the tens and hundreds of job places needed to lower unemployment rates. The economic recovery from horrifying negatives to positives is a clear sign of the speed. This is why Scott Clair’s article is questionable and, in particular with Moore’s view. He says that everything that has been done in Washington in the last four years, including the last year of Bush’s administration and the first three of the Obama administration, towards improving the economy was exactly a wrong thing to do. Although American people are still suffering, we should give credit where it is due. Obama has given the economy a boost in the right direction, that gives him and policymakers the possibility to successfully accomplish the task and improve the economy of this country once again to full power, and no one should interfere with essential actions. This may be thought to be a common recession as the economy is still crawling despite the aggressive action. Due to the fact that the recession began with having low levels rates, they may not just lower in the selected sectors such as housing. The economy deals with a great number of obstacles which, as a rule, are absent while recovering. Construction is likely to remain at a low level for some time as a result of the overbuilding in housing and commercial spheres. Furthermore, households have managed to get over a crisis due to the housing oversupply that is aimed at making them more critical and careful for a longer period of time. It is just like the generation of cautious investors and high savers which was created by the Great Depression. Similarly, the decline in wealth is about to lead to multiplied savings to pay off debts. This prudence and those savings are suitable for the economy, although it means that a number of consumers will decrease dramatically (Rourke 201).
Economic fairness is Obama’s goal, as he wants to bring the economy to the level when everyone can enjoy equity, whereby each acts according to the same rules and does his/her fair share. Giving his State of Union address on Capitol Hill in Washington, Tuesday, Jan 24, 2012, Obama was proud saying that the nation’s economy has improved, although quite slowly, from the Great Recession’s depth. He said, “ the State of our Union is getting stronger.’’ He added that the middle class has been losing ground for some time now and persuaded the people about a new agenda of government spending and taxes. It is no secret that the powerful and rich have rigged our political systems together with the economic systems to favor their own interests over those of the other citizens. The President wants Americans to go back to the time when they had faith in the basic American promise that its citizens would do well enough to raise a family, send their kids to college, own a home, and put a little away for retirement if they worked hard. He stressed that the issue at hand is how to keep that promise alive.
In the United States, all families care about the economic future of their children. People can stand almost anything knowing that the future will be brighter. Policymakers under Obama have done everything possible to improve the current situation. According to the financial regulatory reform, it was stated that our future generation would never have to deal with a financial deterioration like the one experienced in the fall of 2008. This type of structure is supposed to make the system safer and is aimed at protecting consumers from unsound and unfair practices (Rourke 2011). Obama’s agenda is to lay out themes that will become the “progressive era” by asking the wealthy to pay more taxes, vowing even more oversight into the administration of Wall Street.
Obama has directed the Attorney General Eric Holder to create a Financial Crimes Unit to look into and prosecute financial fraud, to create a specific bureau, and further to involve the federal government to do more in helping the middle and the working classes.
To do the latter he proposes:
- Community colleges and businesses partnerships to train and place 2 million workers;
- Getting all states to make a requirement for students to stay in school until they reach 18 or until they graduate, as some states do now;
- Overhauling of the unemployment compensation program which provides checks to laid-off workers.
Obama’s proposal to help building a fairer economy is laid out into four major categories: improving the energy independence of the U.S, helping in the restoration of U.S manufacturing , getting to teach workers new skills needed for a changing economy ,and what he calls ‘a renewal of American values’ that involves tax increments.
Obama proposes a 30 percent minimum tax on millionaires, on companies that ship jobs overseas, and a $200 billion six-year plan to build roads, bridges and railways with the money saved from bringing U.S troops home from Iraq. Obama’s lobby for tax fairness for individuals has rubbed the wealthy the wrong way, leading to accusations that he’s advocating for class warfare, but is he? The ugly truth is that wealthy people pay lower taxes. However, millions of middle class households have to pay higher tax rates. Today, the rich and their corporations pay a very small share of the gross national tax burden. Given this revenue shortfall, the federal government has a difficult time funding initiatives and other related proposals that help average working families. The majority of the middle-class citizens pay higher taxes. On the other hand, the income of rich people consists of investments mainly which are not taxed in the same way as wages. This is because of the loopholes and shelters in the tax code which are all results of previous decisions in congress that have seen the rich grow richer and left the middle income Americans struggling over the past several decades. An end should be put to the excessive tax breaks for rich people. He is entitled to demand that the country must stop financing wealthy people.
President Obama asserts that ‘the fight for manufacturing is the fight for America’s future.’ It is safe to boast that for the first time in more than a decade jobs are being added to the market by manufacturing, which has been an upward mobility stepping stone. The new plan must be clear, aiming at making the manufacturing sector a center-piece of the economy.
He has also identified the green revolution as a centerpiece of this effort. He promised to seek to create millions of new jobs and new industries through harnessing of renewable energy. His energy bill is designed to create a framework for a clean energy economy, fuel-efficient cars, environmentally certified construction and spurring investment in renewable energy sources (Olive & Obama 2009).
To improve the country’s energy picture we can laud the fact that back in 2009 United States was the world’s top natural gas producer. If new rules are prepared to ensure safety during drilling of shale natural gas on our public lands, it will create 600,000 new jobs by the end of the decade. He has placed emphasis on the continued energy sources development due to the usage of new offshore oil and gas resources and exploring natural gas to a further development of clean energy technologies (Wasik 157). Obama also advocates for disclosure of chemicals used in fracking the use of chemicals and water under very high pressure in the extraction of oil from shale-operations on public lands to ensure public safety. His administration should however give a follow up on details on how to safe natural resources and protect taxpayer’s money.
The pressing issue is the one of unemployment. Something has to be done in order to increase demands and decrease the rate of unemployment. Failure because of which a great number of workers will suffer unnecessarily and the risk that unemployment will be permanent as the workers skills become poorer. Companies lack labor force and this fact will influence the economy negatively.
The writer points out the weaknesses of the economic policies of the current administration, that the United States borrowed $5 trillion in the last four years. The public debt of the United States consists of money borrowed by the federal government in order to avoid possible security issues raised by federal government agencies and the Treasury. The U.S national public debt comprises of two components:
- The public’s debt that consists of securities controlled by the Federal Reserve System, the foreign, state and local governments and investors.
- Intra government debt which is administered by the federal government, for instance, the Social Security Trust Fund.
The government borrows to make up the difference between expenditures and earnings It uses the borrowed money to help pay creditors and also to fund operations. There have been continuous disagreements between democrats and republicans regarding the debt situation. President Obama passed the Budget Control Act of 2011 into law. It averts a possible financial default on August 2, 2011 after the congressional budgets office call for rapid and large policy changes so as to put the nation on a sustainable fiscal path in June 2011(Wasik 2009). Under the President Obama, the debt has increased from $10.7 trillion in 2008 to $14.2 trillion by February 2011, with $9.6 trillion held by the public and the intergovernmental debt at $ 4.6 trillion. This is as a result of decreased tax revenue due to the late 2000’s recession. According to the Government Accountability Office (GAO), the federal government auditor, the fiscal unsustainable path of the USA is one that politicians and the electorate do not will to change. To blame president Obama for government borrowing is then clearly wrong. The man does not run the country alone, though the latest posting by the treasury department shows that the national debt has increased $ 4 trillion on the President Obama’s watch. He is also right to blame inherited policies from his predecessor’s administration for the debt where he particularly identifies:
- ‘Two wars we didn’t pay for’
- ‘A prescription drug program for seniors….we didn’t pay for.’
- ‘Tax cuts in2001 and 2003 that were not paid for.’
(CBSNews.com special report: America’s debt battle)
I agree that our country is on an unsustainable fiscal path and as the debt ratio increases the exchange rate for the dollar may fall, meaning that paying back debt with a cheaper currency may cause investors to demand higher interest rates if they anticipate further depreciation of the dollar, and paying higher interest rates will further slowdown the domestic US growth. Debt levels may also affect the economic growth rates. A higher public debt to GDP ratio could also slow the economic growth. The solution to the U.S debt problem is simply to tax the wealthy and corporations just like back then in the 1960`s and according to an Institute for Policies Study report the debt would decrease within a decade. If individuals and corporations would earn $ 1 million income per year as they did in 1961, IPS researchers stated that the treasury would collect an extra $ 716 billion yearly. So instead of wrangling in congress over who is to blame for the economic crisis, if the federal government decided to increase taxes for wealthy people and businesses at the same speed it did seventy years ago the debt owed to investors were likely to vanish within the next ten years (Rourke 2011).The best fiscal policy is still the targeted tax relief, for example, the continuation of the payroll tax cut and the prolonged attention to reining in the national debt and simplification of the tax system.
In conclusion, the facts are clear that our debt problems would be easily solved without cuts to socially important programs and the military budget. The question is why is it so difficult to reach the seemingly obvious solution to our debt problem? Or why do the wealthy have such a tight wrap on congress and senators that make them keep looking the other way on tax increases? Is it because the rich have enough money to buy off the entire political system? (Stewart 2009).These actions keep feeding the rich people and their businesses mainly. It is no wonder that we are in a debt crisis. The United States has simply suffered a colossal political failure on top of the economic crisis. When Obama was chosen to represent the USA on the world area, it was then clear that a great emphasis was about to be put on his personal success. However, the interests and demands of the nation were ignored; hardly any steps were taken to help the nation recover from economic calamity. The future of the country will be in the right hands after the next elections.