Another Victim of Obama’s Economy

We hear a lot about the effect of the economy on small business but this video says it better than any other I have seen. Bill’s Barbecue was an institution in Richmond, VA for 82 years but it couldn’t survive four years of Obama’s economic policies.

Obama’s Mortgage Plan: More Harm Than Good?

The Wall Street Journal takes a look at President Obama’s proposed mortgage rescue plan and finds that it could create far more problems than it solves:

President Obama yesterday announced his plan to prevent home foreclosures, saying he wanted to be “very clear about what this plan will not do: It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans . . . And it will not reward folks who bought homes they knew from the beginning they would never be able to afford.”

We really do wish he were right. In fact, the details released yesterday suggest the President’s plan will do all of the above. The plan will help some struggling homeowners. But by investing in failure, the Administration will also prolong the housing downturn and make financing a home purchase more difficult for future borrowers. Meanwhile, the plan isn’t likely to slow the continuing decline in housing prices.

The President’s plan is predicated on the false belief that everyone deserves to own a home. The fact is that not everyone can afford to own a home. The efforts of Fannie Mae and Freddie Mac to make it easier for people to buy homes they could not afford are at the heart of the current financial crisis. Unfortunately, the President’s plan does nothing to address this fundamental issue and instead just prolongs the crisis and leaving taxpayers on the hook.

As CNBC’s Rick Santelli correctly points out in this clip, this is an example of government rewarding bad behavior. Unfortunately it’s the 92% of honest, hardworking Americans he refers to that will pay the price.

Bush’s Legacy and Obama’s Burden

As we approach the end of George W. Bush’s presidency, many postmortems will be written to explain how horrible or wonderful the President performed depending on point of view. No doubt many liberals will be quick to proclaim Bush as the worst president ever. But he did in fact have many achievements.

I believe that history is likely to judge him far more kindly as time passes. President Bush’s lasting legacy will be the War on Terror. His response to the 9/11 attacks reset forever our approach to terrorism. Unless President-elect Barack Obama totally dismantles the anti-terrorism measures adopted under President Bush (and I don’t think he will), President Bush will long be remembered as the President who forever changed America’s approach to terrorism.

But there are those critics of President Bush who will bring up the economy as evidence of malfeasance on the part of the outgoing President. A couple of factors to consider: (1) the foundation for the economic collapse was laid back during President Clinton’s time in office when regulations restricting lending practices at Fannie Mae and Freddie Mac and (2) the financial crisis occurred so late in President Bush’s term that there was not time for him to see the crisis to a conclusion.

Come January 20th, the economy will be Obama’s problem. It will be the issue most likely to dominate his presidency much as the Great Depression did for most of Franklin D. Roosevelt’s time in office. The best way that President-elect Obama can succeed is to realize first that blaming President Bush will get him nowhere.

Mr. Obama has stated on several occassions that FDR has been a role model for him as he prepares for the presidency. He would do well to remember that Roosevelt’s economic policies did more to prolong the Great Depression that to relieve it. Unfortunately for him, Democrats have never met a government program that they didn’t like. Unless Mr. Obama can demonstrate a willingness to stand up to his party and try to relieve the economy through other means besides more spending we may be in for tough economic times for many years to come. That will  be the legacy that will dog President Obama, not President Bush.

Another New Deal? Let’s Hope Not

President-elect Barack Obama frequently referred to the state of the economy as the worst since the Great Depression during the most recent campaign. But adopting New Deal policies like those imposed by Franklin Roosevelt would be a mistake according to author Amity Shlaes (The Forgotten Man: A New History of the Great Depression):

The historical model that the Democrats are choosing to hold up as they ponder our financial crisis isn’t Harry Truman’s Fair Deal or Lyndon Johnson’s Great Society. It is Franklin D. Roosevelt’s New Deal. At least three economic reforms under discussion now were also central in the New Deal package. Trouble is, these reforms didn’t necessarily work well when they were first tried – and some failed outright.

Roosevelt tried a stimulus package and investment in infrastructure both of which are being considered under the incoming Obama administration. But Roosevelt’s leadership style was also a huge liability:

Even more than specific New Deal projects, Obama and his fellow Democrats are evoking Roosevelt’s leadership style. In school, we learned that it was FDR’s personality that pulled the country through the Depression. If only, the suggestion is, we can have a strong enough leader, Americans will also find recovery again. We need some “bold persistent experimentation” of the Roosevelt variety.

There is evidence, however, that FDR’s very strength was a negative, because he used it to give himself a license to do true experimenting. In his second inaugural address, FDR said that he sought “an instrument of unimagined power for the establishment of a morally better world.”
No one knew what it meant, and markets were terrified. Everyone feared FDR would regulate or prosecute them next. Businesses refused to invest. The 1930s’ second half proved frustrating for the country: The economy was always recovering but never quite recovered. The Dow didn’t get back to its 1929 level until the mid-’50s.

President-elect Obama will be under tremendous pressure come Inauguration Day to do something to fix the economy if it isn’t already back on track by then. If history is any guide, repeating the failed policies of FDR is not the answer that America needs.

The Problem and The Solution

The looming financial crisis has been all over the headlines this week and presidential politics has inevitably been tied to it. But much of the coverage is confusing and the myriad of problems that have led to the current crisis can be confusing. Mark Alexander’s essay today on the crisis is a good primer on how we got to where we are and what some of the options that are available.
Equally worth consideration is this column from Daniel Henniger in the Wall Street Journal. He argues that what we need is a return to old-time values.
Yes, the need is great. But the worst thing that government could do is rush to fix the problem. I’d rather see lawmakers take their time and get the solution right. Otherwise it could turn out to be like many government “solutions” which become bigger problems that the original problems they are designed to fix.