Sunday, September 16, 2012

Economic Recovery: How Did Successful Presidents Do It?

Published in The Tennessean, Sunday, September 2, 2012 and in FORBES with archives.

by Richard J. Grant
From a political perspective, the best time for a new president to take office is either during or immediately after a recession. Given the pattern of political and business interaction over the past century, any new president is likely to inherit the politically induced economic imbalances bequeathed by previous presidents and congresses. Recessions are the painful but necessary corrections of those imbalances, when businesses readjust their production, processes, and workforces to better fit the demand for their products.
In this, the Obama administration has two reasons to be thankful for their inheritance. Although Democrats already controlled the Congress in 2008, their opponents’ party held the White House when the recession hit. That eased their way to power and they entered office with the economy in the process of cleaning itself out. All they had to do was to let businesses sort themselves out, let the legal system do its job, and to wind down the bailout programs implemented by their predecessor.
But, as we know, they didn't do that. Instead, they added more money and their own politically inspired micromanagement of the bailouts and “stimulus” programs. The February 2009 stimulus package added more than $700 billion to a budget that was already in deficit. While it might have made life easier for a few mayors and governors, it saddled each American with an increase of more than $2000 as their share of new public debt. This was followed by the passage of two Leviathan-sized regulatory bills: one that pulled more of the healthcare and insurance industries under federal control, and another that further centralized federal control over the financial industry.