Pajamas Media

46 Comments

1. David Thomson:

The American economy will grow only if Barack Obama’s economic policies are pushed to the side. If he wins—you will likely lose. Obama has wasted enormous money on senseless government projects. The most recent Cash for Clunkers is just another example. The individual citizens would have been far better off if they received higher tax breaks. Government spending should also be severely restricted. It appears that Arnold Kling does not trust the common folk and instead advocates the management of the national economy by technocrats and other “elites.” Is he really saying that the economy will improve if Obama successfully gets his cap and trade and health care proposals through Congress? Does Kling truly not perceive these policies as enormously destructive? If so, he and I must exist in alternate universes. We are definitely not reading the same economic works! I guess that Kling, alas, is now something of an admirer of John Kenneth Galbraith.

Any economic improvement we might see in the future will be in spite of Obama. The president, for all practical purposes, is similar to somebody who places an additional one hundred pound weight on the racehorse. There is only one way that Obama can get any credit whatsoever from an economic upturn: the MSM lies on his behalf.

Aug 10, 2009 - 12:24 am 2. Snake Eater:

“re-elected” ROTFLMAO!

Aug 10, 2009 - 12:28 am 3. steve:

You’re dreaming pal. I wish we could look forward to slow job growth with some iminor inflation. You are working under the assumption that this Marxist will stop trying to inflict any further damage on our economy.

Besides who the heck would start hiring all those workers to get us back to 6.5% with this nitwit on the loose?

Ever hear of Cap and Trade? Besides we have not yet won the war on his grab to takeover our healthcare system.

There are other curveballs out there waiting for our Black Liberationist president. Foreign policy debacles, another racist appointee to the SCOTUS, massive voter fraud and intimdation in the 2010 election, a jihadist attack on the U.S., war in the middle east, rising gas and energy costs.

All compliments of Barry Soetoro Hussein Obama.

Is that enough not to reelect him? I hope so.

Aug 10, 2009 - 12:29 am 4. vivo:

Great article!

‘But the numbers will probably be good enough to enable President Obama to get re-elected.”

In other words, the Economy will improve.

I said this a long time ago to pessimists and quick-results advocates:

It ain’t over ’til the fat lady sings.

Aug 10, 2009 - 2:55 am 5. JFM:

Sorry, but trying to predict the state of the economy three and a half years from now is a wild guesss at best? And trying to predict voter’s recation _is wild guess squared.

Now my fear is that Obama is trying to make things go so bad now that a technical and short-lived recovery (like the technical recoveries for stock who has dropped like a stone for a couple days) in 2011,2012 will be seen (and sold like it by the MSM) as fruit of Obama’s action and will get him reelecyted.

In concrete terms have the GNP drop to 80 from 100 in 2008 so having it raise to 85 could be much better for Obama than drop to 90 annd staying there.

Aug 10, 2009 - 5:29 am 6. Wilf Nixon:

Let me begin by saying that I am not an economist. But I am an engineer. It seems to me that one factor may be missing in this analysis and that is a consideration of the impact of technology on hiring. To my (simplistic, engineering) world view, it seems that one purpose of a recession is to squeeze the excesses out of the system. Clearly, one excess we are squeezing at present is too high a valuation on housing – too many of us have in effect (or indeed in reality) been living on money obtained from unreal valuations of our houses, by way of home equity lines of credit and so forth. However, another excess lies in the fact that technology is continuing to take over many tasks that had previously been done by humans.
One of the reasons that we are seeing jobless recoveries is that many of those (college educated) folks who loose their jobs in the recession, have a skill set that is increasingly redundant as a result of technological advances. To give one (very outdated, but nonetheless true) example: it used to be that a key part of engineering practice was draftmanship – being a good engineer draftsman was a highly valued and important skill. That skill is now greatly diminished by computer based drafting – what used to be the arena of the highly skilled now simply requires someone who can learn a computer program (OK, it is a bit more complex than that, but not too much). Another example – much of what used to be the tasks of middle management is now easily done by spreadsheets, which is one reason why so many companies (and almost all, if not all, the successful ones) are much “flatter” than successful companies 20 years ago.
Analyses of the current recession and recovery therefrom that do not take the growing impact of technological advance into account will overestimate the rate at which unemployment will fall significantly. Further, they will miss the very negative impacts of overly restrictive government actions – the more government limits (in any of a variety of ways) new (and likely, small) business growth, the longer and harder the climb out of recession will be.
Just my two cents worth.

Aug 10, 2009 - 6:20 am 7. Mike2:

Good piece Mr. Kling and I believe you are spot on about inflation with one exception. I think the inflation rate will be much higher than you forecast, maybe around 7 to 8% or higher. The debt will have to be paid down and inflating the currency is a time honored way of doing just that, witness the late 70’s. But when millions of retired baby boomers find that they can barely exist on their fixed incomes the proverbial crap will hit the political fan just as it did in the election of 1980 and woe to the party in control when it happens.

Aug 10, 2009 - 6:28 am 8. syn:

I do not believe government’s 9.4% unemployment number is honest (I think unemployment is higher) however since you were involved in Freddie Mac, one of the financial entities more corrupt than Enron which helped to create the initial problem, ie., toxic assets created though Freddie-Frannie mortgage fraud, was it ever addressed or was it swept under the rug?

I know Goldman Sachs illegally doled out most of the TARP money to their friends in high places however what happened to all those toxic assets?

My other question for economic wizards, what sane entrepreneur would invest their personal capital in America today knowing the government will seize all their profits tomorrow?

Aug 10, 2009 - 6:33 am 9. Roger Godby:

Re syn:

I will invest in the US because (1) investing in Japan is potentially worse, (2) China has some gems but is overhyped, and (3) I trust big public US firms will start moving HQs overseas to escape America’s ridiculous corporate tax rate (only Japan’s is worse) and policy of taxing all income, no matter where earned, at the extortionate US rate.

Perhaps investing in Europe might not be so bad, but what developed country doesn’t have a Ponzi scheme for pensioners and terrible demographics? Precious few.

Aug 10, 2009 - 7:16 am 10. RebeccaH:

It really doesn’t matter if Obama gets reelected to a second term, as long as the Democrats and left-leaning Republicans are put out of power in 2010, so that the Obama socialist agenda is hamstrung. If it makes people feel good to keep him on until 2016, so be it, but I guarantee, unless he changes his tune, he will be in tatters by then. All the abuse Bush suffered during his eight years will look like a kid’s birthday party in comparison.

Aug 10, 2009 - 7:44 am 11. Rob Mandel:

Prof. Kling,

Are we back to Milton Friedman’s “we’re all Keynesians now”? “Stimulus” never does. The 9.4 (actually much higher) unemployment is a result of, not in spite of, the “stimulus”, bailouts, and takeovers. Business investment is in free fall. The dollar is becoming near worthless, the fed having doubled the monetary base the past couple of years. Demand will not, nor has it ever, sparked a recovery or economic growth. We simply cannot spend our way to prosperity. We will be facing double digit infaltion and persistent near 10% unemployment. The housing bubble diverted so much investment into non-productive ventures, and until firms feel even reasonably confident they’re not going to be penalize, taxed, and regulated to death, they simply won’t invest.

Also, take a peek at the current PPI situation. We’re already seeing rising prices in intermediate goods, commodities, and employment cost. That’s in the middle of a still deep downturn. We’re in for a very long and hard spell, that the current policies in fact (which are nothing but a continuation of, and extension of, Bush’s) are responsible for.

Aug 10, 2009 - 7:44 am 12. Mark Turner:

I think we will get a double-dip recession due to the expiration of the Bush tax cuts in 2011. I remember past studies saying the loss of those would cost the economy around 3.5% growth. It seems everybody forgets about those nowadays.

Wonderfully timed to hit the Obama adminsitration in the middle of a re-election campaign and there is no way idelogically he can support their renewal.

Quite a conumdrum the Donkeys have gotten themselves into, eh?

Aug 10, 2009 - 7:46 am 13. Duane Phinney:

You are correct about the unemployment numbers being bogus. They decided that 700,000 workers last month stopped looking for work, so they are no longer counted. The people that work the real numbers say it’s about 16.5% nationwide. In the cities it can run 29%+. For some reason, in this country people not working just don’t exist. If you are not drawing unemployment benefits, you don’t exist and are not counted.

Aug 10, 2009 - 7:51 am 14. Dave M.:

Mr. King, You are absolutley wrong when you say the “economy” does not know that the administration changed back in January. The “economy”, which is made up of the people who participate in it, know full well that Obama (Pelosi and Reid) is now in charge. And believe me, the “economy” is effected by his suicidal policies. Staggering debt, inflationary monetary policies, “cap and trade”, government run healthcare, oppressive regulation, government takeover of whole business sectors, the circumvention of bankruptcy laws, the coming income and capital gain tax increases, etc., etc., etc. Mr. King, if the rules were going to stay the same, your article might be insightful. However, the rules, if Obama gets his way, will be turned totally upside-down and will crush whatever recovery might have been. The people know this and, therefore, so does the “economy”.

Aug 10, 2009 - 8:00 am 15. Mike_K:

The engineer’s comments above are important and a corollary is that small business is where those laid off workers go. Many have ideas that will grow into a viable business and a good income if they are left alone. This administration will not leave them alone and that is why the economy will deteriorate until the people rebel and force the socialists out. I can only hope the tea parties are the early indications of such a movement.

Aug 10, 2009 - 8:27 am 16. willis:

One misleading aspect of the high degree of education of today’s workforce is the high degree of dilution that has been applied to that education. Undergraduate degrees in business, finance, marketing, etc. are basically introductory courses to the real education offered in the form of a MBA. And degrees in feel-good curricula, such as women’s studies, sociology, etc. are completely irrelevant to any occupation other than conning others into letting you teach the same material to them. The watered down undergraduate courses combined with the increased emphasis on preparing students for college at the secondary level has left a great deal of our work force even less educated than it was 40 years ago.

Aug 10, 2009 - 8:43 am 17. Sebastian Shaw:

Stagflation, which is inflation combined with high unemployment–will hatch from the rotten eggs already laid by President Obama by 2010-2012; therefore, his re-election chances are nil. President Obama’s thug tactics are backfiring right now. He’s toast. Arrogance can do that.

Aug 10, 2009 - 8:45 am 18. John "birther" Samford:

Mr. Kling appears to be an administration shill.
Let me offer a few corrections of his propaganda.
First, it is CONGRESS that should be held accountable for the state of the economy. That is because the Constitution charges Congress with control of the Federal budget. The President proposes, Congress disposes. On the average, the American people understand that. At least the ones out here in fly-over America do. Even if all those credentialed economists don’t.

Second, many times in the past a government has tried to stop a depression by printing money. It has NEVER worked. I doubt that it will work this time either. There is a technical term applied to all those that keep repeating the same actions in the same situations and expecting a different result. I won’t use that term for fear that it will be misconstrued as an ‘ad-hominem’ attack. There are a considerable number of people out there that see ANY attack as ‘ad-hominem’, which is wrong of course.
Historically, the only proven cure for a depression is war. If left alone a depression will eventually right itself as all those unseen hands work their way out of a hole. What this Administration and Congress are doing is digging faster.
That isn’t going to work, no matter what Mr. Kling thinks.
What we have now is the normal, many times seen leveling part. ALL depression have crashes, then leveling off parts. It is a cycle. Spiral is a better description, since cycles are closed loops that take you back to where you started, while what happens in a depression looks more like a tornado when you graph it. Each ‘crash’ is lower and each ‘level’ is lower too.
Mr Kling is also fudging his prediction by not defining what a recovery is. A sure sign of political direction and motivation (AKA Propaganda) in his writing.
Let me offer a defination of ‘recovery. WHEN the Dow and unemployment reach their pre-depression marks. That would be the numbers established before the October ‘08 stock market crsh that put the Usurper in office.

That won’t happen until 2024 or so.
As far as the current economy, things havn’t even gotten really bad yet. This (July August) leveling off period will end soon. September numbers will be even worse. In October the Market with give off it’s last death rattle before losing hslf it’s value. That is because inflation is peeking in the tent. Soon it’s nose will appear, followed shortly later by it’s ugly fangs.
The only way the Demonrats keep congress is if the Usurper cancelles elections. That is what the typical Socialist despot does. Only this is America and cancelling elections means a civil war.
ALL those people raising ‘ell at the town hall meets are only non-violent because they think there will be elections in ‘10. No ballots means lots of bullets.

Aug 10, 2009 - 8:50 am 19. Paul Milenkovic:

The Obama stimulus and other program (Health Care, Cap and Trade) may not effectively take place until 2010 or may not even take effect at all, depending on Congressional action.

But the effect of all these measures is immediate. Businesses and other employers make assessments regarding business climate here and now based on intuitions, judgements, and predictions of where the economy is going. The effect of the inaugaration of President Obama and the passage of the ARRA “stimulus bill” was immediate.

It is even argued that the uptic in the stock market reflects the view that the Health Care and Cap and Trade bills are in trouble. So paradoxically, the Obama Administration can succeed by failing.

Aug 10, 2009 - 9:00 am 20. David Thomson:

“Mr. King, You are absolutley wrong when you say the “economy” does not know that the administration changed back in January.”

Arnold Kling’s argument is senseless. The national economy is definitely responding to the fact that Barack Obama took over the presidency on January 20th. As matter of fact, it does so almost instantly! This is economics 101. The reason for Kling’s absurd assertion is probably due to the fact that he is a cultural leftist. At the end of the day, he wants the Democrats to remain in power.

Aug 10, 2009 - 9:00 am 21. sharonsj:

You cannot blame Obama for everything when, in fact, he is continuing many of Bush’s policies. Clinton gave us a surplus; Bush spent us into debt. We have two major problems in this country: (1) unemployment is probably 18% in reality, and those jobs are not coming back, and (2) Congress is doing the bidding of its corporate masters. You can misguidedly scream all you want about socialism, but the truth is that we are being turned into a banana republic by big business. Big business takes your money by manipulating the stock market, by outsourcing your jobs, and by bringing in foreigners who will work for a lot less. And then they lie about it in ways that make you support them. I used to wonder why people did things that were so detrimental to their own well-being. But watching the scream fest at the town halls shows me that facts mean nothing when you can spout Republican talking points. Nobody is out to kill Granny, and I should know since I am Granny: I’m on Medicare and I’ve actually read the supposedly criminal paragraph.

Aug 10, 2009 - 9:04 am 22. David Thomson:

“You cannot blame Obama for everything when, in fact, he is continuing many of Bush’s policies”

You are half right. George W. Bush is our modern version of Herbert Hoover. I won’t deny it for a moment. Barack Obama, however, is Bush on steroids. Our current president is another Franklin D. Roosevelt. The previous Republican administration was bad enough. Obama’s Democrats are far worse. Ironically, both Kling and myself earlier praised Amity Shlaes’s The Forgotten Man. Somewhere along the line, he apparently changed his mind.

Aug 10, 2009 - 9:20 am 23. Bill Peschel:

Sharonsj: You have some good points, so let me add a few.

* The bogus stimulus package that Obama allowed Congress to push through. He essentially chose to step back and let them turn on the printing presses and churn money for their political supporters and fundraisers. He’s gotta take responsibility for that.

* There is a continuing depressive effect of his potential policies (cap-and-trade, health-care) on the economy. Businesses are not going to be willing to invest in new hiring and expansion plans until they see how these pan out. The longer they take, the slower the job recovery.

* We’re in the middle of a substantial trampoline effect. The housing bubble, caused in part by overbuilding to meet the demand of quick-flip investors, has created a counter-reaction in prices that will take awhile to sort out. In the meantime, there is nothing that can be done to put non-existent people into those houses and condos used as markers in a game of hot potato (profit from the rising values, but don’t be the one holding them when the music stops!).

* While the media is declaring the recession over, the job losses and fears are very much present. People are still afraid of losing their jobs, and seeing the media parading the sunny line while they’re worried about their futures doesn’t help their credibility one bit.

Aug 10, 2009 - 9:26 am 24. Wells:

I largely agree with Mr. Kling’s forecast.

As bad as the Obama policies are, and as much damage as they will do, an extended depression simply does not appear to be in the cards. A weakened recovery is the most likely consequence of the Obama/Pelosi/Reid policies. I agree with Mr. Kling that even that is likely to be a “sugar rush”: a short-lived boost in growth of little lasting value, followed by an extended period of stagflation.

No matter who is running things, recessions tend to come every 7-10 years, last about a year or so, and then are supplanted by growth periods. A politician, even an extremely good one, can’t prevent the weather, they can only influence the duration and intensity of the boom or bust.

Reagan’s period of growth lasted a very long time and was very strong; the recession that ended it was inevitable, but thanks to Reagan-era policies, was brief and mild. Clinton, for all his flaws, got an eight year run that was quite respectable, followed by a moderate but brief bust. President Bush, inheriting a foreign policy mess with attendant drag on the economy, nevertheless had his own seven year boom.

Recessions and booms aren’t the product of some kind of brilliant political elite; for the most part, the cycle of economic growth is the result of the genius of millions of individuals acting on their own. That’s why smart statesmen foster economic growth by standing back and letting those individuals do their job.

Aug 10, 2009 - 9:29 am 25. whitehall:

Frankly, I have little agreement with Professor Kling’s predictions.

Recessions do happen as a result of inherent corrective reactions within a maket economy. They smart a bit but clean out the bad ideas and bad actors.

However, it takes politicians to make a depression. The policies of the current administration and the Democratic congress seem designed to worsten the economy.

First, the uncertainty of future policies and laws will deter investment. Second, increased regulation of major sectors will stiffle innovation, reduce flexibility, and increase costs.

Even worst is the almost certain wave of inflation as the value of the dollar erodes.

We need to ask ourselves, just what sector will lead us out of the economy by providing new jobs and enhanced productivity gains? Citizens are rediscovering the virtures of frugality so personal spending is an unlikely candidate, even for those with jobs. Housing still has unsold inventory and declining prices will blunt speculative ventures.

The best I can offer is energy but it is sensitive to both interest rates and future demand projections.

Of course, government jobs and jobs subsidized with government taxes will grow, but only at the expense of productive, private sector jobs.

Sorry, but I’m much gloomier than Kling.

Aug 10, 2009 - 10:00 am 26. Dan H.:

I would agree with Arnold Kling’s assessment, with the following caveats:

1. The Fed doesn’t further expand the money supply under pressure from the White House.

2. There are no more shocks to the economy (and there are plenty of candidates out there – a melt-down in China, another terrorist attack, a drastic rise in protectionism, more hostilities breaking out in eastern Europe, a sharp uptick in violence in Iraq, Afghanistan, Pakistan, etc)

3. Cap and Trade stays dead.

4. The Health Care bill dies.

5. The Democrats don’t come up with some other hare-brained scheme to ‘manage’ the economy.

The future I see as of today is an economy that grows slowly, with inflation growing along with it. In 2011 the Bush tax cuts expire, which will possibly cause a milder double-dip recession. As the economy recovers from that, inflation starts to tick up again. The fed raises interest rates, which curbs growth.

It’s looking like the 1970’s all over again. Structural unemployment 2-4% higher than the average of the last 20 years, low growth, higher inflation and higher interest rates. The U.S. will look more like Europe looks today. The difference is that this time the population is older, government entitlement costs are exploding, and the structural debt is much higher. That’s going to give the government a lot less manoevering room to correct the major flaws in the economy. The prognosis for the longer-term U.S. economy is not good.

If you’re looking to invest money, I’d suggest Canada. At the end of Obama’s first administration, Canada will have lower overall taxes, a flatter tax system, a smaller government as a percentage of GDP, business taxes that are 1/3 of the U.S’s, capital gains and dividend taxes that are half the U.S’s, and no estate tax. Canada has almost no debt and once the economy recovers Canada will be running budget surpluses again. Canada is also full of the resources most likely to be in demand in the coming decades. Canada is poised to be a big winner in the first half of the 21st century.

Aug 10, 2009 - 10:13 am 27. Avitar:

I have to disagree with the contiention that the current recession is much deeper that the one that George Bush inherited. Robert Novak documented after the fact that the Clinton administration cooked the books during the last two years. Mr. Novak documented that Corporate profits were a third less than the Clinton’s were reporting and that the country probably rolled into recession late in 1999.

The Democrat congress is more inclined to run off in the wrong direction and Obama is a much poorer economist than George Bush but the recession is only worse than 2000 because the Democrats who were elected in 2006 were trying to wreck the economy to make the Republicans look bad but once elected last fall, They Have Not Stoped!

If the Congress would stop trying to sabatage the economy the recession would end and the economy would start to recover.

Aug 10, 2009 - 10:36 am 28. luagha:

Clinton did not give us a surplus.

Clinton received the tech boom which increased revenue at the same time that he had a Republican Congress fighting him on spending. Sine the Republicans managed to keep the budget from growing faster than the money came in, he ended up with a projected surplus.

Aug 10, 2009 - 10:45 am 29. syn:

Roger Godby

Great, you can pay the hefty tax tab so that I won’t have to.

Thanks, invest all your personal capital in America and America will reward you by seizing everything you earned to pay for the world’s free health care.

Smart, really smart.

Aug 10, 2009 - 10:52 am 30. David Thomson:

“Clinton did not give us a surplus.”

The American economy thrived during the Bill Clinton administration—only because his economic policies were rejected by the Republican Congress. He essentially lost the battle. The same may eventually true of the current administration. Rush Limbaugh is right when hoping Obama is a failure. God help us if he is successful in turning our country into a socialist republic.

Aug 10, 2009 - 10:59 am 31. Marc Malone:

Ridiculous article. What drives the economy and recovery is none of the things he listed. The business climate drives the economy. Governmental policies have their effect on this area, for good or ill.

Clear, simple regulatory safeguards are good. Burdensome ones are bad. A jackpot court lottery system is bad. Lack of consequences would also be bad. Extortionist tactics by government is horrid. Confiscatory taxes are dreadful. Debasing the currency is self-destructive to an economy, as is deficit-spending.

Worst of all is the demonization of those who create the wealth. Those demonized react by hunkering down in their bunkers awaiting sunnier conditions. One doesn’t go out into a blizzard unless one absolutely must, and then only for a brief time. Small business types are going Galt and shall stay there until the demonization stops. Limited small business means limited new-job creation. Stagnant job creation combined with inflation from deficits and currency debasement means stagflation. Again.

Aug 10, 2009 - 11:04 am 32. syn:

Obama is basically promising ‘95% of working American’ will be able enjoy a $2,000,000 per year lifestyle on $20,000 per year income.

How in the heck can any economy survive extreme spending rates without having enough income to pay for the spending spree?

Either we will be taxes into massive poverty or we will collapse altogether.

Many economists and investors seem to be operating on a conventional level yet everything happening today is unconventional; we have never gone this far over the cliff.

Aug 10, 2009 - 11:05 am 33. Koblog:

Kling states: “The short news cycle means that pundits are already speaking of this as the Obama economy, even though it is too early for any of his policies to have an effect.”

One of the greatest PR fallacies the MSM has foisted upon us is that our current economic problems are because of George Bush. This as George Bush was branded an ineffective lame duck for at least his last year in office and perhaps earlier.

Every dollar of every budget since January 2007 has been approved by the Democrat-dominated House and Senate.

Not to mention the Barney Frank/Chris Dodd Fannie Mae and Freddie Mac “economic policies” that led the way of foolishness.

The Democrats own this economy have done so for a full 2-1/2 years.

Obama is simply pouring fuel onto the fire lit by Democrats.

It’s not the “short news cycle” that lays our problems at Obama’s feet: it’s that Pelosi and Reid held the reins for years before Obama completed this Trifecta Of Disaster.

Aug 10, 2009 - 11:08 am 34. syn:

“during the Bill Clinton administration”

the economy was built upon a plastic-fantastic dot.com bubble which offered no real value and a slashed defense budget.

That recession in 1999 was bad however not as horrid as the endless recession we have today.

But invest, invest, invest in the shiny happy bubble so we can start all over again after the next market crash.

Aug 10, 2009 - 11:11 am 35. goy:

No surprise vivo is cheering this article. It’s nonsense.

- … pundits are already speaking of this as the Obama economy, even though it is too early for any of his policies to have an effect.

Wrong. BHO’s policies are simply an amplification of the Democrat Congress’ policies, which have been in effect going on three years now. Forget we had a Congress? It’s a common error.

- The economy does not know that the administration changed in January.
The economy does not “know”??? This is patent nonsense. The economy is not some amorphous entity that moves independently, like some lumbering, mindless beast.

The economy is small and large business owners, employers, investors, venture capitalists and consumers. ALL of these took notice when Congress changed hands in October of 2006. All of them took notice again last November. Democrat policies are inherently antagonistic to business, and the downturn in the economy following the 2006 midterms reflected that fact. It was exacerbated by the skyrocketing price of oil, which the Democrats refused to address, and which took an Executive Order by President Bush to turn around. The economy was then decimated by Democrat social engineering in the form of CRA and the fallout from millions of unqualified borrowers polluting the credit market. Too many people know these facts. That is – the “economy” knows these facts.

- Like a large ship, the economy takes a long time to turn.
Not if last fall is any indication. And what does this have to do with the economy not “knowing” something? These statements are pure silliness. Was this piece ghost-written by Rick Moran?

Whether or not BHO is re-elected hinges on getting his policies passed. So far his effort to seize control of the health care industry is not going well, and America is not happy with the federal government’s takeover of GM and Chrysler – not to mention strong-arming the financial sector. Cap-and-tax will further erode BHO’s credibility unless the media and the federal snitch program are successful at completely staunching all discussion on the subject. Global warming is a scam, and too many people now know it. The economy “knows” it.

BHO’s approval rating trend has been consistently negative since the day he took office, and there’s no reason at this point to believe that will change.

The worm will finish turning when it comes time to pay the piper for the Democrats’ spending sprees, which they can’t seem to get enough of. At some point the American Taxpayer is just going to say “No”. That point will likely come when Congress and BHO are forced to break the one campaign pledge he dares not violate: raising taxes on the middle class. Federal revenue has already done a fatal-looking turnabout from the record levels being collected under the previous administration’s enlightened policies. After multiplying “Bush’s” deficit by an unprecedented factor, that’s simply not going to fly. There is nowhere else to turn but to squeeze the electorate, and Clinton learned the hard way what happens when a President does that – he loses his pet Congress.

With all that, one single terrorist attack on U.S. soil will seal BHO’s fate. And a serious one will have the People screaming for his head on a platter. That’s all assuming some enterprising, Pulitzer-seeking journalist doesn’t uncover something damning in the reams of school records, CAC records, birth records and other documentation that has been locked away to hide BHO’s past from public view.

The thing that helps me sleep at night is the knowledge that all this is keeping BHO awake at night, and making him more irritable, ornery, imperious and careless with each passing day. At some point the mask will completely slip. At just about the time most folks realize that the so-called “stimulus” had nothing to do with stimulating the economy and everything to do with stimulating socialism through permanent Democrat rule of the U.S., BHO is going to crack the way David Scott cracked under pressure from his constituents. And the game will be over.

Aug 10, 2009 - 2:41 pm 36. jack:

I am a small business owner. I have many ideas for future business ventures. I will sit tight right now and wait. The economy will stall again.

Do not use the Dow Jones as a barometer. The first freefall had many factors. The economy was bloated with bad mortgages. Then the media and the Dems stuck the knife in the jugular and killed it. They created a heightened fear and then continued to twist the knife.

Then with some votes by congress they pass the biggest bloated pile of crap known to man. Democrats rejoice, and then some Obama bed fellows from Wall Street start pumping blood into the markets and the Dow rises

Remember one thing. The market right now is not much different than when the Big O was sworn in. The fiscal year end is around the corner and the wolves on wall street will be licking their lips as the market rises. They will dump, and the market will fall. This process will repeat at least three times. Each time the bottom will be slightly higher than the last. But each time it rises we will be discussing this same topic.

If we want to find the true bottom and then find sound fiscal recovery then we must pass new taxation laws.
1. Change our system to a flat tax
2. Make all classes pay some taxes. If the Dems want tax increases, then they can tax the poor also. Every man and woman should contribute.
3. The Rebublicans should come together and publish this agenda in layman terms so all americans could see. (I believe if every person had to be accountable then the agenda of wasteful spending would be over. Everyone would want less goverment)
4. Change the Capital gains tax as follows
All investments- real estate,stocks,bonds, etc are taxed on an equal basis.
For computation lets just say 40%
Your capital gains would be reduced by the amount of years multiplied by an inflationary rate (lets say 2.5%)
Example 1: Joe buys investment house for $400,000 in 1998 and sold it in 2008 for $600,000
Thats a $200,000 gain less 10 years x 2.5% or 25% which = 15% capital gains tax
Example 2: Joe bought $400,000 in stock in 1998 and sold in 2008 for $600,000
The same result would happen

Example 3 : Joe buys $400,000 of stock in 2006 but sells it in 2008 for $600,000
The gain is $200,000 minus 2 years x 2.5% or 5% which = 35% capital gains
tax

This would slow the jugular cut throat behavior of big money movers.
I love capitalism but even the field .

Lets get this knuckle head out of office and really change the system to a reward for work program.

Stop this socialistic attitude

Everyone has equal rights and abilities ( stop the cryin about racial inequality)
I was a poor white boy growing up. The white powerful man did nothing for me. My wife and me made our way from a 22 year old father on Wick to a uppermiddle class family. I was racially scorned by affirmative action in the eighties. The white powerful man did not help me. I helped myself.

Its called reward for work. Or as Nike says “Just Do It!)

Aug 10, 2009 - 9:04 pm 37. peter jackson:

Since our betters in power seem absolutely hellbent on turning the US into Europe, Jr., we can pretty much expect to see our economy perform as theirs did under similar policies. Don’t like 10% unemployment? Too bad, it’s the new “normal.” High interest rates will reappear before the next Presidential election, as will double-digit inflation.

But there’s one big factor that Professor Kling fails to mention that seriously threatens his prediction of recovery: fuel prices. What pushed us into last year’s recession wasn’t the credit crisis, it was the world economy bouncing off of the gas ceiling. High fuel prices drive up the cost of almost everything. If the economy does manage to grow a little during the next year, it will only be until we hit the upper limits of our fuel refining capacity, and then we will find ourselves again with a flat-lining or diving economy. Wash, rinse, repeat, until we finally get a Congress with the economic literacy to remove the arbitrary restrictions the US government has placed on energy development.

Aug 10, 2009 - 9:23 pm 38. Anonymous:

6. Wilf Nixon:

“One of the reasons that we are seeing jobless recoveries is that many of those (college educated) folks who loose their jobs in the recession, have a skill set that is increasingly redundant as a result of technological advances.”

Good analysis and very realistic, I mean everything you wrote.

8. syn:

“I do not believe government’s 9.4% unemployment number is honest”

It’s always like double. Many people are no including in this calculation.

16. willis:

“One misleading aspect of the high degree of education of today’s workforce is the high degree of dilution that has been applied to that education.”

I agree.

35. goy:

“No surprise vivo is cheering this article. It’s nonsense.”

Many of your friends disagree with you, count them.

Aug 11, 2009 - 3:23 am 39. Weblinks for August 11 « Thinking Beyond Competition:

[...] Is the recession over? Over at the Becker-Posner blog, Becker offers one view while Posner offers another. Krugman is already congratulating the Obama administration, while Arnold Kling offers an interesting perspective. [...]

Aug 11, 2009 - 7:44 am 40. John "birther" Samford:

The fun part about economics is there are no facts, just theories. The best theory is Adam’s Smith’s “An Inquiry into the Nature and Causes of the Wealth of Nations “.

EVERY theory since Adam’s is just a way of guiding the unseen hand.

The not fun part of economics is the misery attempts to manipulate it cause.
Those attempts come about because politicians are control freaks. Voters vote their wallets more often then not. A control freak that depends on votes for power would want control of the source of most votes.
So that is why politicians that aren’t worried about losing control produce the best economies.
Bush was more worried about war, so he left the American citizens to do what they would. That turned out to be prosper, so there was a good economy.
Clinton never had a chance to control the economy, Congress wouldn’t let him. Ronnie wasn’t worried about the economy. He would have but it interfered with his naps.
Clinton’s ideas of economy never evolved past how much money the Saudi’s were slipping him under the table.
The US economy always works better when the politicians leave it alone.
That is why Biden would make a good President. He would spend his days joy riding in Air Force One and let the citizens take care of the economy.

Aug 11, 2009 - 10:31 am 41. Nightly Ramble: the “Outdoor Advertising” Edition | BitsBlog:

[...] [...]

Aug 11, 2009 - 1:03 pm 42. vivo:

#38 should read ‘vivo’

Aug 12, 2009 - 3:03 am 43. goy:

38. vivo, pretending to be Anonymous: – Many of your friends disagree with you, …

Your argumentum ad populum fallacy is straining your six remaining brain cells, count them.

Aug 12, 2009 - 5:43 pm 44. Bill Carson:

“The short news cycle means that pundits are already speaking of this as the Obama economy, even though it is too early for any of his policies to have an effect.”

Nonsense. Obama spends trillions and proposes spending many trillion more. So business IMMEDIATELY stop expansion knowing that radical tax increases and a slowing economy will result.

I wouldn’t say this is “Obama’s economy”, but it’s increasingly Obama’s lack of recovery.

Aug 13, 2009 - 9:58 am 45. misanthopicus:

Not so fast, Arnold, not so fast!
Why you’re talking about Barry’s re-election when it’s quite likely that we’ll have Joe Biden in the office at that time – Barry having been marched out from the office for long for being an illegitimate president.

By the way, it’s amazing how the birthirs’ cause is helped by liberals – check on Politico, they just posted a video with Barrack’s aunt Zeituni Onyanga vauching for his legitimacy. It’s soooooo good!
One more supportive cameo of this sort and the WND petition will burst the One million signatures ceiling in a matter of weeks – if I were a liberal I’d intently hate Politico.
But I am not – so I throughly enjoyed it and disseminiate it.

Man! If I were a liberal I’d

Aug 13, 2009 - 4:24 pm 46. General Washington:

The Bank for International Settlements (BIS), the world’s most prestigious financial body, has warned that years of loose monetary policy has fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than generally understood. The BIS, the ultimate bank of central bankers, has said that the stimulus packages are ultimately going to cause more damage than they prevented, simply delaying the inevitable and making the inevitable that much worse. Given the previous BIS warnings of a Great Depression, the stimulus packages around the world have simply delayed the coming depression, and by adding significant numbers to the massive debt bubbles of the world’s nations, will ultimately make the depression worse than had governments not injected massive amounts of money into the economy.

Loose credit, easy spending and massive debt is what has led the world to the current economic crisis, spending is not the way out. The world has been functioning on a debt based global economy. This debt based monetary system, controlled and operated by the global central banking system, of which the apex is the Bank for International Settlements, is unsustainable. This is the real bubble, the debt bubble. When it bursts, and it will burst, the world will enter into the Greatest Depression in world history.

Sep 3, 2009 - 6:53 pm

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