Wednesday, April 8, 2009

Did the Democrats Cause the Recession?

A view contrarian to the typical 'blame Bush' mentality. Some reasons why the Democrats, who controlled Congress since January 2007 (well before the recession started), have major responsibility for the recession that we are now enduring:

- The Dems passed a minimum wage in 2007, and within 12 months job growth stopped and job losses started mounting.
- The Dems covered for Fannie Mae in 2005 when the issue of oversight in the loans they secured was raised; doing so enabled Fannie to gorge on sub-prime loans
- The Dems fought for restrictions on drilling offshore and they attacked oil co CEOS; it gave OPEC the green light to jack up oil prices via restricting supply, knowing we would do nothing about it except attack our own Oil cos with exploration-restricting higher taxes!
- The Dems signalled in 2007 that we would end the Bush tax cuts; That meant long-term investor sentiment would be worse; it meant a recession loomed and it was only a matter of time. This killed the bull market.
- The Dems pushed for phony "check-in-the-mail" stimulus in Dec 2007 and rejected pro-growth agenda items.
- The Dems increased spending rapidly in 2007 and 2008, overspending in every possible area and forcing Bush to veto multiple pork-filled bills; even despite the vetoes a huge number of earmarks and pork was passed. This gave the Fed less flexibility early on as they were worried about inflation and deficits.
- The Dems wanted failure at home and abroad to stick around bush’s neck so they constantly ‘talked down’ the economy, to the point where in June 2008 Sen Schumer caused a run on IndyMac bank with his comments, and it forced FDIC takeover of the bank. In October 2008, Sen Reid made similar dangerous comments about the insurance companies.
- Higher taxes on corporations, on hedge funds, on smokers, cutting back on ‘loopholes’ aka investment tax breaks, and of course the tax hikes targetting the oil industry - all together, it is harmful to economic activity and jobs; and as mentioned more tax hikes awaint around the corner and investors have trimmed sails in anticipation.
- the uncertainty the Dems created by pushing for ‘mortgage cramdowns’ has been damaging to the secondary market for mortgage securities, a key underlying problem that caused the financial crisis. When Barney Frank and others in 2008 decided to ‘bail out’ deadbeat mortgage holders, they threatened things that make the value of those CMO (collateralized mortgaged obligations) less certain. Markets hate uncertainty and the markets soured further.
- The october 2008 bailout included things, written by Dems Barney frank and Chris Dodd, that added to uncertainty and made the financial sector less secure and certain. The Dems are meddlers who took away with one hand what they were giving with another.
- They raised the ethanol mandate which set off a huge run on grain prices globally which in turn made beef and chicken go up in price. This also bankrupted at least one company, Pilgrims Pride (look it up) and damaged many other companies. The ethanol mandate and other feel-good Green subsidies created economic dislocation and inefficiencies.

Each thing the Dems did in 2007 and 2008 helped weaken the economy, an economy which was weak trying to digest the housing bubble bursting. taken together, the Democrats’ agenda was the ‘straw that broke the camels back’ that tipped us into Lehman bankrupcy and then unraveling of the financial markets.

Democrats in charge of Congress went about attacking business and corporations and the free market. As a result, the Democrats have created an environment that is hostile to job creation and economic growth. This recession has many causes, but the actions of the Democrats in Congress contributed and that should not be understated.

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