US STOCKS-Massive rout spells trouble for Wall Street | Reuters.
Well, that’s not surprising, seeing as the debt-ceiling hostage crisis “resolution” stuck another dagger into the chest of this fragile recovery.
Short term, we need *more* government spending: More work, more jobs. And to make them real investments: Education (which got cut); transportation (which got cut); clean energy (which almost certainly will get cut).
Even our Galtian overlords are saying this deal is no good for the economy:
“We’re out of the woods in the sense that we will avert this real threat of the technical default,” Mr. El-Erian sys. “However if you judge it in terms of the broader objectives, which is to put the country on the path of medium-term growth and medium-term fiscal viability, we may have made things worse rather than better.”
High, persistent unemployment, sluggish growth, balance sheet issues and the failure of politicians to deal with deep, structural problems in the economy were among the reasons he cited for the darkened outlook. Mr. El-Erian expressed the concern over the debt overhang in Europe and the continent’s inability to grow its way out.
“There was recognition in Washington that this was an artificial crisis,” Mr. El-Erian said. “And that’s why we didn’t get the outcome that we as a society deserve in terms of addressing our structural impediments.”
I don’t blame Obama — not mostly. You can if you want, but a fat lot of good it will do you. We’ve got to win 2012 — for us.
doubleman says
I think Obama deserves a lot of blame for this fake crisis. And if blaming Obama and putting pressure on him to change course works, then it is worth it. He can change, start fighting for the middle class, and still win in 2012.
If he doesn’t change, I think we all lose in 2012, no matter who gets elected.
I don’t understand why he should get a pass simply because the alternative is worse. Accepting his leadership over the last two years makes no sense to me, unless you are a hedge fund manager.
I don’t expect him to change in any way, and I also don’t expect to be voting for him in 2012, but I’m not giving up by writing him off. And I don’t think anyone else should give up by blindly professing their allegiance.
kbusch says
I wish we knew what would cause Obama to course correct. As Krugman ably summarizes:
It doesn’t seem as if he’s learning from experience. He certainly isn’t learning from protests from the Left. Every liberal I know is pissed off at him.
So what indeed does that leave?
Wish I knew.
sabutai says
Courtesy of Bill Clinton: “The American people prefer strong and wrong over weak and right.” Obama at this point is acting so weak that it’s starting to be irrelevant if he’s right.
JimC says
We’re a society, not an economy.
sabutai says
Now we’re not so much an economy as a mutually agreed upon conception of reality composed by high finance and credit rating agencies. Because a world where Hong Kong has a better credit rating than the US makes a whole lot of sense.
Christopher says
It makes perfect sense that the markets/Wall Street would get nervous over a possible default. The most common explanation for GOP behavior seems to me that they serve their corporate masters. It seems said corporate masters should have been the source of sanity here, screaming as loudly as they could to their GOP clients that they were playing with fire over this debt ceiling thing. What am I missing here?
kbusch says
I’d like to see an explanation for that.
Mark L. Bail says
It fights for abstractions. The deficit isn’t harming
This GOP doesn’t fight for people, it fights for abstractions. Government is too big. Markets lack confidence. Their policies constantly subordinate the quality of peoples’ lives to abstractions. To freedom. To the sanctity of life. To family values. To the market. To the defense of marriage.
Obama may not have been able to execute a policy that put people to work, he may not have been able to win the debt ceiling issue, but he has not even tried to make an argument for such policies. The debt ceiling is going to cost jobs, stunt economic growth, and thus make it harder to pay off our debts.
Most Americans are too ignorant to realize that what Obama and Congress have just done is cut billions of federal dollars that come to our states. Massachusetts is projected to lose $1.2 billion in federal funds in the next two years. Yeah, we’re reducing the deficit. By passing the buck to the states which then pass it on to communities and social services. If you thought this year’s budget was tough, wait until next year.
seascraper says
The Democratic plan for Keynesian stimulus was punished in 2010. That ship has sailed.
The Democratic plan for high-tax austerity was just defeated in favor of low-tax austerity, a position I do not support and I don’t think the markets support either. But if the markets are simply hoping for more tax transfer into huge government contractors such as populate the DJIA then maybe they need a reset too.
The Democrats need to force the Republicans into coming up with growth plans by having a good plan themselves.
fenway49 says
the Democratic failure to enact a sufficient plan for Keynesian stimulus was punished in 2010. It was simple: do it right the first time by passing something big enough to fill the hole in private sector investment. Get unemployment down, win electoral landslide.
Instead they did it this way: start out with something less than half the needed size, compromise away even more, pass something woefully inadequate, say it’s great and trust that people will ignore their own experience.
2010 = failure to lower unemployment + failure to respond with sufficient force to shameless GOP demagoguery on Medicare. Interesting that the GOP plan, once the election was over, was to save Medicare by eliminating it altogether.