Obama Is Making a Bad Situation Worse

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AP Photo Like Roosevelt, Obama inherited an economic mess. But the president is making a bad situation worse. Charles Gasparino on echoes from the past.

In between his meek response to the oil spill fiasco and his lame attempt to talk his way out of the Joe Sestak pseudo-bribery scandal, President Obama on Friday probably thought he had something cool to talk about: the economy.

People are still hurting, the president conceded, but look on the bright side: Unemployment has fallen two whole percentage points to 9.7 percent, and the economy is getting stronger, with three consecutive quarters of positive GDP growth.

His stimulus package was supposed to produce shovel-ready jobs that would repair our infrastructure much like the various public-works programs instituted by Hoover and Roosevelt. But instead of spending the money on building roads and bridges, states have horded much of the stimulus cash to keep their own workforces fat and happy.

To borrow a phrase: “Prosperity is right around the corner.”

The now-infamous line from Herbert Hoover should be ringing in the ears of the president—and voters as well. Hoover may not have caused the stock market crash of 1929, but many of his policies turned the economic downturn that followed into what we now know as the Great Depression: restrictive trade policies and tax increases (in part to pay for government-sponsored work projects) to name just a few. It took Franklin Roosevelt nearly a decade to pull the nation’s economy back from the dead, largely because he followed many of the same failed policies introduced by Hoover, and added several bad policies of his own. Taxes went up, while the government began socializing even bigger parts of the economy.

If you look back at those years, you will see mini recoveries in GDP, and rallies in the stock market. You will also see something else: persistent and staggeringly high unemployment. The one thing that made the Great Depression so devastating was that people were out of work for long periods of time, even as the stock market (that supposed barometer of future economic growth) went up, and the government tried to right things through the implementation of massive works programs.

But the unprecedented meddling of government came at a price: Businesses faced an uncertain future, so they simply refused to hire more workers, and job losses continued to mount. It took an unfortunate hiring binge—World War II—to put people back to work and bring the Great Depression to an end.

I’m not saying we are headed for a replay of the 1930s—read up on the history of economic booms and busts, and you’ll see they’re different in their own way—but there are disturbing similarities: Buried in those wonderful economic numbers, which the president touted on Friday, was the fact that almost all of the job growth was a function of the government’s hire of temporary Census workers, rather than businesses beginning to hire again. After a period of improvement, private-sector job creation has almost ceased. Even worse, “the real” unemployment rate (which doesn’t count people looking for jobs) is rising above 17 percent, depending on the survey, which means that more people are simply dropping out of the workforce. Finally, a 9.7 percent unemployment rate is nothing to brag about, particularly when you have the Fed pumping massive amounts of money into the economy with near-zero percent interest-rate policy.

Of course, the president didn’t create the economic mess we’re in. Much like Roosevelt before him, he inherited it, giving George W. Bush the dubious honor of rivaling Hoover as one of the worst presidents on record. Yet, like Roosevelt, Obama is making a bad situation a hell of a lot worse—and that’s a far bigger scandal than offering Sestak a job to go away.

And that’s what the stock market told us on Friday. Surely, there were several reasons why the Dow, which has risen now for more than a year, dropped more than 300 points, including the spreading European banking crisis that has investors scared. But if investors tried to look to the U.S. as a safe haven, here is what they saw: The president’s stimulus package wasn’t working. We were promised an 8.5 percent unemployment rate if we spent $800 billion but instead got an unemployment rate closer to 10 percent. Furthermore, we had a meandering debate about health care that came to mean massive new entitlements, higher taxes on energy and small businesses as well as new programs designed to create "green jobs" at the expense of ones that actually put people to work.

His stimulus package was supposed to produce shovel-ready jobs that would repair our infrastructure much like the various public-works programs instituted by Hoover and Roosevelt. But instead of spending the money on building roads and bridges, states have horded much of the stimulus cash to keep their own workforces fat and happy. While the construction industry suffers 20 percent unemployment, state and local governments are keeping employment at the DMV just humming along.

It should come as no surprise that unemployment is alarmingly high just about everywhere—except in government and on Wall Street, the recipient of government bailouts, which is yet another reason why investors are getting antsy and stocks are starting to slide.

Probably the most frightening thing about our president is that if he knows anything about economics, he doesn’t show it. He promised hope and change, but brought 1930s economic remedies that are producing similar results. Taxes on the rich are a good thing, he assures us, no matter how anemic our recovery; more borrowing will make us better, he says, even if we are morphing into Greece, with its massive deficits, and massive government workforce.

And Obama doesn’t appear to be listening to those in his Cabinet with economic knowledge. Chief economic adviser Larry Summers and Treasury Secretary Tim Geithner have been cut out of the debate on Wall Street reform. According to people in Wasthington, Summers is barely heard from or consulted these days when it comes to financial reform—or anything else for that matter. “He’s MIA,” a lobbyist told me the other day. Maybe that’s the reason he’s also been telling his buddies on Wall Street that this year might be his last with the administration.

In the last election, several Republicans I know jumped party lines to vote for Obama because they believed that Mr. Hope and Change was somehow different, smart and driven enough to put aside ideology to do what’s right for the country. What they (and many independents) are finding out, however, is that President Obama isn’t hope and change but a throwback to a different era— a time when unemployment remained high yet the president talked an optimistic game and “prosperity was just around the corner.”

Charlie Gasparino is a senior correspondent for Fox Business Network. He is a columnist for The Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His new book about the financial crisis, The Sellout, was published by HarperBusiness.

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If Gasparino missed any Fox News talking points, I don't know what they are. He is, however, more fair than most conservatives, as he pinned the blame for our Great Recession directly on George W. Bush, where it belongs. But Gasparino's proposals to get us out of depression sound depressingly like those used by Herbert Hoover. Even Roosevelt crashed our economy a second time in 1937 when he tried to balance the budget. Should our deficit hawks get their way, I think a double-dip recession is rather likely (if not - in the worst case - a fall into Great Depression II). We need more stimulus, guys - not a balanced budget.

The problem with this article is that no one knows how the hell the economy really works, even expert economists don't fully understand it, if someone did, the economy would have been stabilized a long time ago, instead throughout history there has always been ebbs and flows in the economy. Recessions are natural occurrences in capitalism. The other problem with this article is Gasparino gives no alternatives, just mud-slinging, which btw is much more respectful than the moronic RW'ers that post here, but mostly just speculation. Just as easily as he says the stimulus isn't working one could say that without it unemployment might be at 15%, again its all speculation. And last but not least, did anyone really think 8yrs of Bush bashing the economy and trashing the Constitution, all would be well in just over 1 year?! If we learned anything from the article, pertaining to history, its that the road to recovery will most likely be a long one. But progress is progress.

I agree that "answers" are hard to come by these days. The true unemployment rate that factors in all groups of the under and unemployed plus those who have just quit looking is 15 %. Gaspariono is right about the stimulus money being spent to fill short falls in state revenue so state workers can stay in their jobs. The market fell hard last week due to the lion's share of jobs being created are government jobs and not in the private sector. I hope we all understand the economy enough to know that we all pay the wages of a government worker. American was built on backs of the private sector not on the backs of civil servants. The hard truth is every government job is like another barrel of crude in the Gulf...a lost opportunity to power our nation.

Worse are the fake liberals though. Offering comparisons to Fox doesn't elevate the discussion above moronic mud-slinging or demonstrate independent thought. The ability to execute a Google search doesn't make them an intellectual. It only shows them to be a slightly more resourceful observer than those posting faith-based facts. There's nothing progressive about it; it's the new moderate.

Like Obama and his band of liars and thieves, LeftWingFister's definition of progress is the Census Bureau hiring someone, laying him off and rehiring him a day later. Result: Two jobs created or saved!

We need a new Civilian Conservation Corps, like in the 30's. It would provide jobs and improve roads, bridges, and such. The CCC built the 'Skyline Drive'' in Va, every national park in the country, Camp David and the Leray Caverns. It also gave men who had little education, experiences and knowledge, the chance to improve their own and their families lives. This is where stimulus money should be spent. Earmark it, if necessary so that states can't use the money anyway they see fit.

we need to increase the cost of govt even more? Are you serious? It is not the role of govt to "provide jobs" to its people, not unless the govt is one of those people's republics we have strived to avoid becoming.

newswoman: The halcyon time you and Helen Thomas shared with the CCC can't be duplicate. Look out the window of the old folks home and you'll see there isn't a single Model A in the parking lot.

AlanD2 is exactly right. Mr. Gasparino's ignorance of history is really breathtaking. Businesses did not invest because the Fed kept money tight and industry's production capabilities were underutilized. It took WWII to increase demand enough to require investment in capital goods. It forced the budget hawks to shut up and let the government spend. Gasparino disparages states for keeping their workers "fat and happy" by which he means that they did not fire enough workers at, for example, the DMV. Does he really think firing more people would help the economy? Does he not think that the DMV provides a necessary service? He is right that our infrastructure is getting old and needs maintenance and replacement. But that could only happen by spending money and that requires taxes. No--it is better to let our roads and water-works crumble into dust. It is the lesser of two evils.

Chucky: " . . . industry's production capabilities were underutilized." You nailed it. Do you suppose that's why they called it a Depression? Nah, that's too obvious.

President One-dur-ful doesn't know anything, let alone the dismal science. George Bush might have been a simpleton, but this guy is the village idiot. The longer he is in office the more we become aware he has a second rate mind. Anyone who thinks we have 57 states and Navy corpsemen, who wrote nothing while an affirmative action choice as editor of the Harvard Law Review, and had grades at Occidental and Columbia so mediocre or worse that we still don't know what they were is also not a prime candidate to understand a problem in science and technology like the oil spill. That's why it took so long to get the federal government moving. Bush was on Katrina three days afterward; it took the cool, laid-back Obama 37 days to get his slow mind around the subject. He didn't practice as a lawyer and Bill Ayres wrote at least the first book with Obama's name on it and who knows about the other one. Bush at least could fly a jet plane. Anybody think Obama could pull that off?

I have a PhD in modern US history and think a lot of this analysis is just plain incorrect. FDR inherited a capitalist system that was in total collpase after four years of depression. Hoover's main accomplishment was the Reconstruction Finance Corporation (RFC) of 1932, which was similar to the TARP in the sense that it provided federal aid to banks, insurance companies, railroads and other large corporations. When the New Dealers took it over, they expanded the RFC greatly to aid state and local governments and fund a wide vaiety of public works and infrastructure programs, as did the Public Works Administration and other New Deal agencies. To be sure, we could use something like the RFC and PWA now, although by themselves they were not enough. By the time FDR took office, trade, agriculture and the banking system had collapsed, industrial production had fallem 85% and the stocj markey by 95%. It is true that industry did not fully recover until after the start of the Second World War and the stock market did not return to its 1929 levels until 1954. I'm not particularly concerned about it now, either, since both the New Deal and World War II proved that very massive public sector investments can break the back of a depression, as long as they are spread broadly enough across the economy. I know the Replicans hate organozed labor--always have and always will--but the 1935 Wagner Act that finally opened the door to mass unions in american industry for the first time also benefitted economic recovery and created a large middle class that had never existed before. I know the Republicans have always hated Social Security and always will, but its creation in 1935 also helped lift the elderly out of poverty--and in the depression many of them were literally eating out of garbage dumpsters. The New Deal also established the federal minimum wage and 40-hour work week, which have also been very beneficial to the ordinary workers no matter how much the Republicans have always opposed these. All in all, the New Deal programs were not sufficiently funded to end the Great Depression--only the massive World War II spending finally did that--but if they had not been in place the condition of the country would have been much worse, especially the conditions of the working class and middle class. If we follow the standard Republican policies, we will not get out of this current depression in ten years. I'm as absolutely convinced of that as I am of anything in this world. They will make the depression even worse. FDR found out the hard way in 1937-38 when he tried to start balancing the budget and the depression came back full force. Republican policies of lower taxes on the rich and unregulated capitalism will lead this country to absolute disaster. I am trying my best to warn people about that. I fear for the worst for this country if we go in that direction again. I am literally terrified of what will happen here, and in the rest of the world if we do.

I was about to say a lot of the same stuff, but then I saw your comment here. You nailed it, and Gasparino pretty much produced a crap article here that offers superficial historical analysis to back up his own ideologies.

You seem to forget that marginal tax rates rose to 90% under FDR, and that Kennedy (a Democrat) fought to bring them down 20 points to 70%. What happened? Did revenue drop? Quite the opposite: tax revenues actually increased a third (after inflation) at a rate nearly 30% lower. That's because it's not a zero-sum game. Ayn Rand said in Atlas Shrugs: "If you ask me to name the proudest distinction of Americans, I would choose--because it contains all the others--the fact that they were the people who created the phrase 'to make money.' No other language or nation had ever used these words before; men had always thought of wealth as a static quantity--to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created." By removing the smothering influence of government from the one engine of wealth creation we have, you get more productivity and more wealth creation, not less. Hoover was not a free-market capitalist and was far closer to FDR then Kennedy in this respect, so party affiliation is irrelevant here. This is capitalism vs. statism, and Kennedy said it best: "[A]n economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits... In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now."

*at a rate 22% lower.

Please spare me the Ayn Rand quote. She believed in unbridled capitalism and we know how that worked, don't we? To Ayn Rand, 'Greed is good'.

"i have a phd in modern us history" so in other words you either have a gov't job or your unemployed. so you are obviously biased against people who actually produce things for a living. the point of this article is dead on, gov't interference in the private economy created all of these problems and the less gov't in our lives, the better for everyone except leeches like you.

You really couldn't be any more wrong without actively trying to be incorrect.

You don't sound so 'innocent' to me. In fact, you sound biased against people who produce things for a living, like auto workers, steel workers, small businessmen, etc. Gov;t helped the little man, not unchecked capitalism. To this day, the capitalists hate the unions because they fought for better wages and conditions for the working man, and that cost the capitalists money! Horrors. Less gov't my ass.

innocentcitizen: A post at 2:37 AM should tell you something about the job status. But raising tax's only works till the tax payer runs out of money. Never heard of a poor person hiring or creating jobs. Republicans hate organized labor, dont think so, seen both sides of the fence on that, organized labor does not play fair, how many do you think are in organized labor that were forced to be a part of organized labor? Or the percentage of organized labor dues that are not spend according to the other point of vies from the right wind laborers? Or even now, organized labor does not condone a fair vote. And mcmcugh, bet your not complaining about unregulated interest rates on savings accounts or your 401.

Innocentcitizen nicely show the anti-intellectual bias of much of the far right. Teaching and scholarship are unproductive enterprises, particularly if the person is employed by the government. Even the hard sciences, much less history, are feeling the wrath of the right. McCain was upset about DNA studies of bears. Bobby Jindel railed against "something called volcano monitoring." But Palin topped them by criticizing geneticists for using fruit flies in their studies. It is one thing just to be ignorant of modern science, but quite another to be so ignorant that you think you can criticize scientists without knowing the first thing about their methods and procedures. But what is there to know? If it is government spending, it must be stupid.

"To be sure, we could use something like the RFC and PWA now... " We sure could...maybe if we ask nice, China will buy a couple more trillion dollar programs for the USA? :(

it's not very often one sees an actual living caricature, but in the far left-leaning PhD mcmc, we have it. If it was a Repub idea, it was bad. Period. If it was Dem, it was good. Also period. Things that were established long ago may have been valuable long ago; doesn't mean they are necessary today. Things like labor unions and minimum wage have outlived their usefulness, sort of like the telegraph and horse and buggy. And more than one retrospective analysis has shown that the New Deal did more to prolong the Depression than end it. Lower taxes - for everyone - work. Only statists believe that govt can make smarter decisions about using your money than you can. And make no mistake - it is your money. Govt can only raise revenue by force.