Friday, November 9, 2012

The Obama Story: No One Left to Blame

I would like to share John Hinderaker’s optimism. I would like to believe that there’s some virtue in Barack Obama's inheriting the mess that Barack Obama created.

If so, then Obama would shoulder the blame for his own failings, and, if he were an honorable man, he would change direction in his second term.

That is what an honorable man does when there’s no one left to blame.

In Hinderaker’s words:

I can see only one good outcome from yesterday’s election: the fact that Barack Obama will be the president who inherits the mess left by Barack Obama. The economy is in awful shape; it won’t get much better given Obama’s policies, and may get worse. Many billions of dollars in capital that have been sitting on the sidelines, awaiting the outcome of this year’s election, will now give up on the United States and go elsewhere. Plants will be built in Korea and Brazil that would have been built here if the election had gone differently. The chronically unemployed–a group that is larger now than at any time since the Great Depression–aren’t going back to work. Nor are the millions who have signed up for permanent disability. Incomes will continue to stagnate. I don’t understand why anyone would vote for four more years of unemployment and poverty, but that is what the American people voted for, and that is what they are going to get.

Americans are a compassionate people. They are so compassionate, filled full of such deep feelings, that they just endorsed a failed presidency. Somehow or other they have been convinced that saying it's a success makes it a success.

In truth, Obama has never taken responsibility for anything that has gone wrong. The American people refuse to hold him accountable. A majority continues to blame our economic troubles on George Bush.

Last Tuesday America chose between success and failure. If you prefer, between a record of success and an empty narrative.

Mitt Romney had known some failures but he had largely been successful in the real world. Barack Obama had never succeeded at anything beyond winning elections and killing Osama bin Laden.

America did not vote for Obama enthusiastically. They did not rally to his cause. During the last days of the campaign Romney’s rallies were larger and more excited than Obama’s.

And yet, letting compassion get the better of their rational faculties, the American people voted for a failed president.

Some must have believed that, given more time, Obama would succeed. Or else, they might have known how brittle Obama was and didn’t have to heart to hurt his feelings.

Many of those who voted for Obama had not prospered during his presidency. Minority voters had seen their net worth plunge. They has absorbed the brunt of joblessness.

And yet, they found solace in the words of a demagogue who was one of their own. Had they admitted that Obama failed they would have had to accept that they had failed. At the least they would have had to admit that they had been conned by Barack Obama.

They prefer to think that life cheated them, that sinister forces rigged the game, and that they could exact revenge by taxing the rich.

However well we understand the psychology, the American people, especially those who are most likely to pay the price for their vote, have made a serious miscalculation. If you go to a doctor because you are in pain you should care more about whether he can cure what ails you, and less about whether he feels your pain.

Resenting people who are successful will make you less likely to emulate the good habits that brought them, and can bring you, success.

If you want to restore American pride and the can-do spirit you should vote for someone who has succeeded.

You can advance further in life by emulating those who have succeeded than by blaming them for your own shortcomings.

True enough, the Romney campaign was riddled with errors. I have not shied away from discussing them. Still, in the last analysis the American people made a very large mistake last Tuesday.

It is going to be a costly mistake.

If Hinderaker is right and Obama will no longer be able to say that he inherited the mess from George Bush, then, in the best of all possible worlds, he will take responsibility for his failings and change course.

I am considerably less hopeful on that point.

From Obama’s perspective, he has just succeeded. He has just won. The American people have just approved of his job performance. Why would he change the way he does his job?

Besides, as skilled a demagogue as Obama will always find someone to blame.

He will continue to blame the rich, blame Wall Street fat cats, blame rich white people like Mitt Romney, blame the Israelis, and especially, blame the Republican Congress.

Politically, it worked.

If Hinderaker is correct that our nation has just voted away its economic future, then the central political debate for the next four years will be: who is to blame?

A demagogue does not care what happens to the economy or the nation. He will do everything in his power to shield himself from blame and responsibility.

Paul Krugman laid down his marker this morning.

So President Obama has to make a decision, almost immediately, about how to deal with continuing Republican obstruction. How far should he go in accommodating the G.O.P.’s demands?

My answer is, not far at all. Mr. Obama should hang tough, declaring himself willing, if necessary, to hold his ground even at the cost of letting his opponents inflict damage on a still-shaky economy. And this is definitely no time to negotiate a “grand bargain” on the budget that snatches defeat from the jaws of victory.

After all, if you have gotten half the way toward turning the country into Argentina, why not hold out for complete victory.

It is fair to say that many Republicans are not in a very conciliatory mood today. Having been tarred with every imaginable slander they find themselves in a position where they cannot compromise with Obama lest they appear to be accepting the slander.

For the past month the Obamaphile press was filled with optimism about the economy and the world.

Yesterday, Tyler Durden analyzed the nation’s economy and projected what it might look like with another four years of Obama’s policies.

In Durden’s words:

The next four years in the economy will most likely look a whole lot like the last two.  Sluggish growth, lots of political infighting, and continued weak employment as business remain on the defensive.

For investors it will be a continued period of volatility, lower market returns, a falling dollar and continued artificial interventions by the Federal Reserve to suppress interest rates.  The Fed's ability to push asset prices has most likely come to an end as prices have been stretched well above underlying valuation metrics particularly as the weakening global economy weighs on revenues and profitability.

Furthermore, the issue of the "fiscal cliff" by the end of the year puts the markets at risk of a sharp correction as positions are sold to lock in capital gains at lower tax rates.  Dividend yielding stocks, due to the income chase, are trading at extremely high valuations and are set up for a sharp correction as well.  

Lastly, the onset of a recession in 2013, will impact stock prices by at least 30% if not more.  That correction will come swiftly and as discussed in"Recession Probability: 100%" it is "...understanding when a recession has begun is hugely important to investors.  The table below, which uses monthly S&P 500 data, shows the price declines during recessionary periods going back to 1873.   The average drawdown to investor's portfolios is a little more than 30%.  During recent recessions the damage has been far worse. "

Overall, the set up going forward looks like it has in the past couple of years.  It is unlikely that Obama will move to the center and be more of a politician with the best interest of the economy at heart.   It is also just as unlikely that the Republicans will back down and begin to cooperate with the Senate.  I could be wrong, of course, and if I am then I will chance my investment posture accordingly.  However, the weight of evidence is stacked in favor of "more of the same" which means less for you and me.

Knowing that it is no longer necessary to cover up Obama’s failures, CNBC now reports that there is a good possibility that the economy is heading for a recession:

As the financial world puts Tuesday's presidential election behind it, the light in the tunnel could be an economic freight train.

Slowing corporate profits, the remnants of Superstorm Sandy and the ramifications of the "fiscal cliff" in Washington are expected to result in at least two quarters of slow or no growth that could make investing even trickier than it was during the ups and downs of 2012.

"The other overriding problem is we never really gained true escape velocity this cycle," David Rosenberg, economist and strategist at Gluskin Sheff in Toronto, told CNBC.

That "escape velocity" refers to the strength an economy shows in which it catapults itself out of a tight range of growth and can withstand shocks such as those posed in the U.S.


Anonymous said...

The macro guy at work was sure this sumer we had already double-dipped


Terry Lohrenz said...

Make it clear that Obama now fully owns this train wreck.

Sam L. said...

Well, sure, an honorable man would. Barack ain't. Who knew BUSH!!!!11!! was so powerful?

Barack's feelings should not trump his failures, many they be.

Katielee4211 said...

Love this! Thank for the [slightly] snarky analysis---as usual. I have to say I'm going to be very happy to let these....voter's take ownership of their actions when it hits them in the face, if they can even connect the dots. I'm out of charitable forgiveness with them. Unfortunately, most will rationalize, deny and defend to protect themselves. And I will admit, I will enjoy it. I am that disgusted.

Obama will continue to blame Bush. It was SUCH A HUGE MESS it will take more time, maybe another term. In Obama's vision, the Constitution will be completely discarded.

Argentina isn't so far removed from the truth.

Katielee4211 said...

I meant thank-you for the analysis. As usual it was insightful,. But I enjoyed the snark.