Obama, the economy, and the difficulties of prediction

[nancylebov]

I've noticed that people who are pro-Obama tend towards "the financial crisis was a really hard problem, and besides, it was Bush's fault". People who are anti-Obama tend towards "It's been four years, and if Obama were a good president, he would have made things a lot better already."

There are some other standard moves-- for example, saying that Obama would have made things better if the Republicans hadn't blocked most of what he tried to do.

However, the question I'm interested in is what do you think are reasonable predictions for recovery under various conditions?

In an interview, Nate Silver (author of FiveThirtyEight and The Signal and the Noise-- Why So Many Predictions Fail But Some Don't) said that this a particularly hard sort of recession to recover from because there's so much fraud and confusion. He predicted the presidential outcome in 49 out of fifty states and the winners in all 35 senate races. Besides, he says that you can't have a good statistical model without understanding what's going on, so I'm very fond of him.

On the other hand, I don't have a timeline for how fast recovery ought to be. What do you think?

Comments

[houseboatonstyx.livejournal.com]

My first reaction is to look at how long it took for Bill Clinton to clean up after Bush I. However, Bill Clinton himself addressed that recently, saying what Obama inherited was worse, so this recovery must be slower.

We might look at FDR cleaning up from Hoover. I hope we won't need a WWIII.

[redneckgaijin.livejournal.com]

Until and unless those responsible for the previous bust are held accountable and the mechanisms that enabled the bust are abolished, there won't be a recovery. At best we'll have another bubble and bust, just like we did regularly through the unregulated 19th century.

Obama has deliberately blocked any serious criminal investigation of the too-big-to-fail banks, especially Goldman Sachs. Dodd-Frank leaves credit default swaps and other financial derivatives essentially unregulated. Nothing of substance has been done to stop 2008 from happening again- so it will.

[celandine13.livejournal.com]

I'm betting we won't get back up to 3% GDP growth (a rough benchmark for "normal") for six more years. Under either possible president. But I haven't been following news in depth.

[whswhs.livejournal.com]

I don't actually base my view of Obama very much on the current economic troubles. I do think the bailouts were a profoundly bad idea, but then the bailouts were Bush's proposal before Obama adopted them. I do consider the economic issues of some weight, and I disagree profoundly with Obama's economic ideas and policies—after all, my view is that although Ryan's economic proposals are an improvement both over Obama's policies and over how things were before Obama, they're still more socialistic than I really feel comfortable with. But for me the real issues are constitutional rather than economic. And so far as the constitutional issues are concerned, I'm sorry the Republicans weren't far more effective as a roadblock in Obama's way.

Conversely, though I think it's time Obama was thrown out, I expect that putting Romney in will mean that I'll find it a relief if the Republicans don't have a filibuster-proof majority in the Senate. Romney doesn't have nearly enough commitment to the Constitution; he's more a technocratic pragmatist, which makes it impossible for me to trust him.

[avram]

You can't dump this entirely on either Bush's or Obama's shoulders. There's blame enough to cover every president back to (and including) Reagan. The ruling class has been hollowing out our economy for three decades.

You can blame Obama for the fact that his Justice Department hasn't bothered prosecuting any of the fraud.

[st-rev.livejournal.com]

I don't have a clue, and neither does anyone else.

[processdue.livejournal.com]

I doubt that there will ever be anything that can be called a recovery. The government, directly and indirectly, consumes or impedes the use of far too many resources; the unfunded liabilities are astronomical; and there are major infrastructure issues that are not budgeted for. We should expect a sick economy for a couple of decades. After that, we'll see some sort of major upheaval, and either a disintegration of society or a descent into outright dictatorship.

[kiya]

The Great Depression lasted ten, fifteen years.

[subnumine.livejournal.com]

Eleven, at most.

But the recovery of 1935-6, which explains FDR's monumental defeat of Landon, was weak, like our present recovery, and was aborted by austerity in 1937; this is one principal reason for avoiding Romney, even for those who assume that he means what he is saying this month rather than what he said last month.

The enormous government spending on armament of 1940-1943 produced a boom which ended it permanently.

[houseboatonstyx.livejournal.com]

One near-constant factor has been a powerful Republican force in Congress, which both Clinton and Obama had to compromise with.

[pickledginger.livejournal.com]

It took the nation's economy a couple of decades to recover from the Great Depression, even with the help of the CCC and WPA. I don't see any reason to ecpect this recovery to be any swifter. If anything, given the ground the US is losing to developing nations, I would expect it to be slower and less complete.

[pickledginger.livejournal.com]

Is there anybody who actually trusts Romney -- and if so, could you point out a few of them to me? I have this car in need of a buyer ...
;-)

[pickledginger.livejournal.com]

Yes, I consider the decision not to prosecute to be one of several bad calls made in the name of bipartisanship and/or looking to the future rather than the past. To me, that looks more like building our future on a foundation of sand.

[nancylebov.livejournal.com]

They exist. I have a few of them as facebook friends because I think it's better for my mental health to not live in an echo chamber, even if I think they live in echo chambers.

[pickledginger.livejournal.com]

I converse with people from a pretty wide spectrum, but hadn't encountered anyone of that stripe in a while.

[nancylebov.livejournal.com]

To be fair, it may be more that they hate Obama, but only mistrust Romney.

[papersky.livejournal.com]

Have you been looking at Iceland?

[nancylebov.livejournal.com]

Not really, so I checked this article. Importing less/exporting more doesn't seem like a strategy which could work for everyone at the same time. What's your angle on Iceland?

It's interesting that inflating a currency (shades of Jane Jacobs, who thought that moderately local currencies led to economies which were more sensitive to local conditions) leads to better results than austerity (less capital) even though both are about lowering incomes.

I don't know how important it was to let banks do most of the suffering, though it somewhat matches my theory that part of why they haven't been lending in the US is that they were panicking-- which I should probably modify to say that they were left free to just panic instead of thinking about what they needed to do next. Damn, this model begins to look like government aid causing dependency.

[pickledginger.livejournal.com]

Ah, that I hear quite often, with variants wishing for different alternative GOP candidates.

[whswhs.livejournal.com]

I would say not "hate" but "detest." But otherwise, yes. I've wavered between thinking that Romney is no better than Obama (whereas the other Republicans were actually worse) and thinking that Romney actually could be better than Obama. But I observe that whatever my opinion of Romney personally, I am cheered by the news of his doing better, as it increases the chances of my seeing the last of Obama, which I have been hoping for since about six months after I voted for him.

[whswhs.livejournal.com]

I would trace the problems back at least to Hoover. That's the economic problems, of course; the constitutional problems go back to Wilson, Roosevelt, and Holmes, among others.

[subnumine.livejournal.com]

One reason the Great Depression continued getting worse for so long (three to four years in the United States, longer in Britain and Canada) is that all the Powers, including the US, tried importing less/exporting more simultaneously. No, it didn't work; it cut global GDP.

The major manifestion of this in the US was Hawley-Smoot; but the efforts continued on into the Roosevelt administration. This is why FDR was willing to torpedo the London trade talks of 1933, and why the one initiative the Hundred Days could not pass was low tariffs: the Democratic Congressmen did not want to fulfill the Democratic platform at the price of disappointing their local industries. (FDR got around this eventually by trade agreements.)

The US banks have been dependent on the Government since 1792; I can go into this more if you like, but start with the Wikipedia articles on the various incarnations of the Bank of the United States.

[subnumine.livejournal.com]

Inflation doesn't lower income; it transfers income. The same hands and machines exist - and they produce the same corn, electronics, and SF novels in the year. (I simplify slightly, ignoring secondary effects.)

People who have cash (or fixed-income securities) get 5% less stuff - or whatever the inflation rate is; but commodity traders operating on margin get much more income.

Whereas austerity cuts income directly - and indirectly. If the government isn't building bridges, contractors get less income. This is not even partially compensated for by a tax cut.

[subnumine.livejournal.com]

And Ezra Klein does comparisons here (http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/10/15/the-obama-economy-this-time-was-different/). We are about on course with the crises of 1873, 1892, and 1906; much better than 1929.