posted on Sep, 25 2018 @ 10:01 PM
The simple fact is that Obama's economic policies were Keynesian based. He apparently didn't understand the nature of Keynesian economics.
Keynes states in his theory that the government has a inherent role to play in stabilizing the economy. He further states that when an economy is
growing too fast, the most effective way to slow growth is through taxation. When the economy is growing too slowly, the most effective way to
stimulate the economy is through government spending. All that is true, to a point.
Keynesian economics only works while taxation/spending is within a certain range. Outside of that range, Keynesian economics fails, for obvious
reasons. Every economy changes; every economy has ups and downs. If every time the economy moves down, government spending increases, and every time
the economy moves up, taxation increases, there will come a point where taxation is so great that individual contributions to the economy are
negligent and government spending is the sole source of economic stimulus. That leads to a stagnant economy, because even the financial might of the
US government pales in comparison to the economic might of 300+ million enterprising Americans.
Another aspect of Keynesian economics is that the spending effects are assumed to be beneficial to the country's economy where the spending takes
place. Excessive regulation destroys this assumption, since larger companies have the financial means to move their operations to other countries.
When this happens, the stimulus provided by government spending is diluted because the benefits are going to other economies.
The recession Bush created was a direct result of a semi-crash, colloquially referred to as a "bubble." Bubbles are a direct consequence of Keynesian
theory being applied along the boundary of applicability. They result from too many individuals competing too tightly in an industry that cannot
sustain them all. In the "dot com" bubble, Internet companies became too appealing for the average person to ignore; the low overhead, low investment,
and potential high returns sounded too good to be true. It was. So many companies were started online that the market was stretched too thin to
support them, and the resulting competition, combined with poor business practices (I remember getting a ton of free stuff back then just for visiting
websites I had no intention of ordering from) resulted in most of these online businesses failing along a short time frame. That is the definition of
a bubble burst.
The 2008 recession was the result of a similar bubble bursting, but this particular bubble was actually created by the use of Keynesian theory outside
applicable boundaries. Government increased spending by proxy via guarantees and incentives to banks to loan money to people who were incapable of
repaying the loans. The first hurdle these people encountered then resulted in home foreclosures. These home foreclosures then over-saturated the
housing market and drove prices down. At the same time, the lenders, saddled with these bad debts, tried to move them out of their inventory through
bundling, leading to many investors losing their investment as well. It didn't take long until an entire industry, housing, ground to a standstill.
The bubble burst, and as so many people were affected by either the loss of a home and credit rating or suffering losses due to housing investments,
the rest of the economy began to tank as well.
At that point, we had two options: use Keynesian theory and try to stimulate the economy through direct government spending (which was Obama's
approach) or revert to classical economic theory and stimulate via lower taxation and regulation. Had we reverted to classical theory, the recovery
would have been fairly swift, but continuing to depend solely on Keynesian theory did not allow the economy to grow. Instead, combined with the
regulation overload, companies moved out of the US economy and took the benefits that were intended for the American economy with them.
I will give Obama this: he was trapped. Bush created the recession and Obama inherited it. There was going to be a short period of economic pain no
matter what he did. He could have passed a tax cut and suffered through the short term to become an economic hero to the American public, but he chose
to continue using Keynesian theory and supplement it with social programs (which the US could not afford) for political gain.
Trump came along after the economy had stabilized at much lower levels than it should have. As a businessman, Trump understood the problem and
immediately went to work trying to promote the US as a business-friendly environment. He used the regulation cuts to entice businesses to open inside
the US, and used promises of future benefits to try and lure others back home. As soon as he could get Congress to act, he implemented tax cuts to
stimulate the economy... the most important cuts were indeed to business, but individuals got a tax cut as well. That gave the economy a dual boost: a
weekly bonus for individuals to use and an enhanced ability for businesses to expand to meet that new demand. The result was that US businesses were
able to do what they should have been able to do within two years of Obama's administration.
That's what happened. Partisan identity politics be damned. Obama dropped the ball and kept the US in a stagnant state for 8 years, when he could have
reversed the trend in two. Trump made the hard decisions and took the political heat, turning the economy around. There is still much to be done, but
we now have an expanding base with which to work from... because of Donald Trump and in spite of Barrack Obama.