Why the economy is so bad. And why Obama should be trusted to fix it.
Happy New Year. I hope all my readers had a safe and happy holiday. A friend of mine asked me recently about my “Lists” of reasons not to vote for any of the Republican candidates for president, wondering if perhaps “someone other than Obama might do a better job” at fixing the economy? The big question though: “Why are things so bad?” To answer that, we have to go back a few years.
As I’ve pointed out here on M.R.S. many MANY times before, oil was selling for a mere $37.83 a barrel (currently over $100/barrel) the week before the invasion of Iraq… roughly within 50% of where it had been for the prior 20 years. As long as I could remember, gasoline had always hovered around the “$1-and-change” mark for years. I remember in 2000… Bill Clinton’s final year in office… independent truckers threatened to go on strike when the price of diesel fuel went up to an “intolerable” $1.49/gal, complaining that the cost of fuel was destroying their take-home income. But it was an election year and Bush & Cheney were doing their best to talk the economy into a recession. The economy had been going gang-busters up until then and the Stock Market hit a record high of 11,722 in January of that year. Then the economy started to tank as Bush & Cheney kept repeating at every campaign stop that “the economy isn’t as good as they’re saying” in order to downplay the Clinton economy and prevent Al Gore from being elected. People started to save their money and spend less. The economy contracted and the claim of a bad economy became a self-fulfilling prophecy. By the time they took office in January of 2001, the DOW had fallen over 1,000 points (to 10,678) and Bush & Cheney were telling everyone how they had “inherited a recession”. One of Bush’s first actions as president was a massive tax cut tilted heavily in favor of the wealthy (the “job creators”) in order to spur job growth. On September 10th, the economy was already in the toilet, with the DOW closing down 1073 points lower than the day Bush took office. And you know what happened next.
But the price of oil still remained in that mid-30′s sweet-spot for the next year, and the price of gasoline only rose slightly, hitting a record high of only $1.72/gallon the week before the invasion of Iraq.
As the war dragged on and the economy continued to tank, gasoline prices broke the $2.00, $3.00, $4.00 a gallon thresholds, sucking TRILLIONS out of the economy. Things people might otherwise of been spending their money on were now going to pay for gas. And to make matters worse, higher gas prices meant the cost of manufacturing went up, as did the cost of shipping those goods to the store, so prices had to go up to compensate. So not only did people have less money to spend on goods & services, but they were buying less when they did. And when people buy less, companies need fewer employees, so they start laying people off. People out of work buy even less, resulting in a vicious cycle.
To make matters worse, with rapidly rising unemployment, suddenly people couldn’t afford to make their mortgage payments anymore, so people started defaulting on their mortgages left & right. And more people HAD mortgages than ever before thanks to a “housing bubble” resulting from the Bush Administration cutting interest rates to zero in order to encourage spending to boost the economy after 9/11. Everyone was investing in real estate as home prices soared. People were “flipping homes” (buying cheap properties, fixing them up and reselling them) to make quick cash. So when people started defaulting and the housing bubble popped, it took the BANKS down with it. And here we are.
The problem has improved only slightly because the very thing we need the government to do to fix the economy… which is SPEND, SPEND, SPEND to inject money into the economy and give businesses a reason to start hiring again… Republicans won’t let President Obama do, citing the rapid growth of “the Deficit” (note they NEVER say “the DEBT“) as “bankrupting our economy”. (President Bush tried to do the same thing by giving everyone $250 “Stimulus checks” to “spend, spend, spend”, but instead, they paid off old debts and saved the rest, doing nothing to help the economy while ballooning the Debt.) Funny, Republicans didn’t seem to mind when President Bush nearly DOUBLED the National Debt in just six years (before Democrats retook Congress) thanks to cutting taxes at the same time we were spending Billions fighting two wars (last I checked, up until last month, we were STILL fighting “TWO wars”. So why was it okay for Bush to spend like a drunken sailor to fight two wars, but Obama is “bankrupting the country”?)
Gas prices are still up over $3.00 a gallon… money consumers could be spending elsewhere. And it’ll take a very long time for the economy to adjust to gas prices being that high. Republicans would have us believe that this supports their argument that we must “drill MORE” to bring down the price of gas/oil. The problems with that ridiculously simplistic “solution” are: 1) If you started drilling today, any oil you find wouldn’t reach our gas tanks for TEN YEARS, doing nothing to improve our economy NOW. 2) Any amount of oil that we find here would automatically go into the WORLD MARKET, knocking no more than one percent [ibid] off the per-barrel price of oil. 3) EVEN IF we found a huge oil reserve, OPEC would simply cut their own production to keep the amount of oil in the Market (and prices) at the same level, and 4) There just isn’t that much oil left to be found in our country. Even the most optimistic estimates for drilling in ANWR: the Arctic National Wildlife Refuge (and now talk of Canadian Tarsands and the Keystone-XL Pipeline) would only produce TWO years worth of oil… and that’s if we didn’t sell it on the world market… which we would.
No, the solution to high gas prices is to make gasoline less necessary… not to make us EVEN MORE dependent by drilling for more. And the benefits of needing less gasoline would be felt FAR faster than the benefits from increased drilling temporarily increasing the world’s supply of oil several years from now. If we increased the gas mileage of every new car, replaced oil-burning electricity generators with wind, solar, tidal and geothermal generators, not only would the global price of oil plummet as demand plunged, but we wouldn’t need to import a drop of oil from countries that hate us. And it’s a long term solution, not a temporary fix (not to mention good for the environment.)
President Obama knows all this (or at least should, and if he doesn’t, would be receptive to the idea), while ALL the current GOP candidates think the solutions to our economic ills are to give Millionaires & Billionaires more & even bigger tax cuts (because the tax cuts of the past eleven years have worked so well) and to “Drill Baby, drill!”
That’s a recipe for disaster, not economic revival. That’s how we got here, and why you don’t vote Republican in November.
Sign my petition for GREEN JOBS TOMORROW fast & cheap. Use those $4 Billion in oil subsidies to put Solar Panels on the roofs of 40,000 government buildings, or order 100,000 hybrid mail-trucks. Not only would this INSTANTLY CREATE JOBS, it would spark ENTIRE INDUSTRIES with a future, reduce our dependency on oil, reduce greenhouse emissions, and quickly pay for itself (and cut future expenses) with the energy savings. We need 5,000 signatures by
December 20th(extended to January 20th).
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