Tic Toc

Posted: July 25, 2009, 8:09AM

The crisis clock is ticking, tic toc, tic toc, tic toc . . .

Our current recession, accepted among economists as a rare combination of a financial crisis and a highly synchronized global recession, is now in its 19thmonth dating back to December 2007.

Excluding the current recession there have been two other financial crisis and highly synchronized global recessions in the past 50 years, 1975 and 1980.

While some economists argue that the 1992 recession falls into this category, unlike the current recession and the 1975 and 1980 recessions the United States still grew as a whole and most of Europe and Japan were not as hard hit.  The 1992 recession was triggered mostly by the residual panic of the 1987 stock market crash that preceded the looming Savings and Loan crisis.

Financial crisis and highly synchronized global recessions take longer to recover than do average recessions.  The 1975 and 1980 recessions lasted 16 months.  The 1992 recession lasted 8 months.  It should be noted that the monetary policies necessary to control massive inflation from the late 70s that carried over to the 80s lead to the 1980 recession.

As the crisis clock continues ticking, tic toc, tic toc, tic toc, economists, scholars, armchair pundits, politicians and every-day citizens try to convince everyone that they have the answers.

President Obama believes that a countercyclical Keynesian policy is our way to the promise land.  That certainly makes sense from his perspective as a scholar of radical liberal principles.

But while macroeconomic fiscal stimulus in certain episodes may offer short-term, temporary relief to a clogged financial sector, particularly when economic agents face tighter liquidity constraints, even proponents of fiscal policy concede that in economies experiencing massive debt, government spending and taxation do not result in a lasting recovery, rather they delay it.

Historically, limited deficit spending can be managed and it can be healthy.  President Bush controlled a moderate deficit throughout the majority of his presidency while funding two wars and managing a recession.

By cutting taxes and implementing a version of Reaganomics, or supply-side economics, President Bush created sustained and solid economic growth for the majority of the decade following the recession of 2000 which was caused by the dot com bubble, 9/11 and the accounting scandals.  The recession only lasted 8 months.

If President Obama believes in Keynesian fiscal policy and with his teleprompter professes daily his expertise and confidence in this “only-government-can-solve-this-crisis” philosophy, why then does he not demonstrate fiscal spending discipline so as to avoid economic debt that would render this already destructive policy useless from the start?

In fact, it is reasonable to conclude that the President does not even realize he is spending us into massive debt or that his own out-of-control spending is directly counterproductive to his fiscal policy approach to recovery.

Otherwise, how would he justify his comments in Rio Rancho, New Mexico on May 14 when he said that current deficit spending is “unsustainable” and warned of skyrocketing interest rates if the U.S. continues to finance government by borrowing from other countries?

The paradox is made clear when it is understood that President Obama's fiscal policy is inheritantly flawed by virtue of his ideology.  Simply, you don’t spend your way out of debt.  You don’t take money out of peoples’ pockets while asking them to spend more.  You don’t siphon your gas tank when you need gas.

As the crisis clock continues ticking, tic toc, tic toc, tic toc, and everyone is trying to figure out what to do and who to blame, and while President Obama's cult following are still waiting for Obama Magic to just happen, the undeniable, proven solution that will end this mess has been with us all along.

Historical perspective is very powerful.  President Obama is demonstrating flawed historical perspective by choosing 20th century Keynesian economics over free market capitalism based on his grounded principles of radical liberalism and socialism.

However, if President Obama would go back a couple of hundred more years he would find proven, time-tested principles that when applied to conservative policy has spawned tremendous prosperity throughout our history, and it will again halt this recession as it has many others and begin taking us down the road to a lasting recovery as it has done every time it has been tried.

Better yet, rather than applying disastrous economic principles from the turn of the century that do not work and are in direct contrast to the Constitution, President Obama need only go back 25 years to witness the brilliance behind the Founders' conservative vision.

President Reagan inherited a recession and an economic crisis far worse than what President Obama inherited.  There is no comparison.  However, if President Obama continues down this destructive path of central planning and government occupation of the private sector that he calls “investing” which is anything but, then we will soon find our economy in a far worse condition than it was in 1980.

In 16 months President Reagan led us out of what truly was the worst recession since the Great Depression.  Obama's recession, which is coming close to matching Reagan's recession, is now in its 19th month with no end in sight.

The media and President Obama wants us to believe  that this is the worst recession since the Great Depression.  It is not.  However, since the time President Obama immaculately appeared from nowhere and has occupied the White House, he has certainly done enough to take us that way.

President Reagan unleashed the power of the American people. He brought us supply-side economics.  He reduced business taxes to free more of their capital to re-tool themselves and grow.

The four pillars of President Reagan’s 1981 Program for Economic Recovery as described in William A. Niskanen’s, Reaganomics are, 1) reduce the growth of government spending, 2) reduce the marginal tax rates on income from both labor and capital, 3) reduce regulation, and 4) reduce inflation by controlling the growth of the money supply.

The result is documented and historic.  Thirty million jobs were created under President Reagan and the economic boom carried over into the Clinton years. President Reagan created a 27-year economic explosion never before seen in the history of our country or anywhere in the developed world.

President Reagan believed in the founding principles of this country and he governed under the conservative vision of our Founding Fathers.  He applied conservative solutions in every area of government from domestic to foreign, and in every step of the way he respected our God-given right to freedom and the entrepreneurial spirit while recognizing the Declaration of Independence as the foundation to everything he did.

While this recession is not yet the worst recession since the Great Depression, it is the worst since 1980.  We are at a serious crossroad now in our history not seen since 1980.

This time we do not have a President who believes in the power of the individual and the entrepreneurial spirit that lifted us out of the 1980 recession, rather he is threatened by it.  This time we do not have a President who honors and believes in our Constitution, the Declaration of Independence and our right to life, liberty and the pursuit of happiness.

The recipe to recovery has been available to us for over 200 years.  It is proven and it can be implemented right now.  Instead of doing that President Obama has chosen to spend his time at the podium romancing socialism to his adoring audience while painting a grim future for America knowing that a wary, hopeless and demoralized public will say yes to anything he does.

With the help of his accomplices in the media, President Obama has created a platform for himself that now makes him the most powerful radical and reckless liberal the world has ever known.  That is a ticking time bomb for any struggling economy.

Tic toc, tic toc, tic toc, tic toc . . .

Chuck

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