With the Republican Party being relegated to backbencher status since the 2008 General Election, there has been heavy snipping from free market conservatives that with Democrats in control of the White House and both chambers of Congress the economy will fall off the cliff. According to a piece on CNNMoney.com, the Blue Chip stocks have moved into positive territory for the first time since January. While the market has been mixed over the last few weeks and there have been modest gains, the Dow Jones Industrial has been in positive territory for 12 out of the last 14 weeks of this year, an increase of 33%. This is the best stretch since March of 1975.
While I don’t see this a total vindication for Democratic Party economic policy, the Republicans and free market conservatives are finding it harder to point to examples of where the Obama Administration and the Democratic controlled Congress are making thing worse than what was handed over to them. Indications of a turnaround are starting to increase, with first-time unemployment claims falling sharply and a slight uptick in consumer sales showing that some confidence is starting to creep back into the overall economy. There is still a long way to go, but we have to keep in mind that the current Congress and the Obama Administration has only been in control since January and the economy started its collapse back in August/September of 2008. Housing sales started to tail-off in 2007. There is still a glut of houses still on the market and new home construction, while there has been a small increase, is nowhere near the level it was prior to 2007.
What does all this mean? It means that when free market conservatives removed barriers and did away with financial regulations that allowed Adjustable Rate Mortgages, Interest Only Mortgages, allowing traditional Banks to operate as Brokerage Houses and Brokerage Houses operate like traditional Banks (Derivatives), the stage was set for the economic situation we are in now. This happened during a Republican Administration and during the bulk of time that Republicans were in control of Congress up to the 2006 mid-term Congressional Elections. The voting public is showing signs that the turnaround isn’t happening fast enough and there are still millions of people out of work, with unemployment hitting 9.4%. President Obama’s approval of how he is handling the economy has now slipped under 50% for the first time since his inauguration. Republicans, like Senate Minority Leader Mitch McConnell, see this as their opportunity to get back on track, charging that the President’s economic plan and handling of the budget deficit isn’t working.
One thing that we need to keep in mind, back before President Roosevelt came into office in 1933, Free Market Conservatives had won another four years of control of the White House and Congress. The 1929 Stock Market crashed and they made the decision to just let the market work itself out. Those moves and decisions helped to move the economy from a deep recession to mild depression to the Great Depression. The Roosevelt Administration tried lots of things to get the economy moving and put people back to work. The same charges that Republicans like Mitch McConnell are leveling where also thrown at President Roosevelt. The difference now, a lot of the moves to address the crisis where started by the Bush Administration and have been either carried over or modified by the Obama Administration. Cleaning up a mess like this, that can effectively be argued started back during the deficit spending of the Regan Administration, is going to take a long time. There are signs that things are turning around, but we still have a long way to go.
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