The increasing consensus that we are entering a "double dip" recession is seeping into the conventional wisdom, posing a further obstacle to Obama's attempts to keep control of Congress. Even when the conventional wisdom was that the economy was slowly emerging from recession, the president was having his problems keeping Congress. But now that all indicators -- from employment to housing to consumer confidence to the Dow ---are trending downward, the task is likely to become even harder.
The days are fading when George W. Bush could be blamed for the economic problems we are facing as a nation. The passage of time and, interestingly, the very perception that things had been getting better earlier in the year both make this second dip the Obama dip rather than just a continuation of the "Bush recession."
The facts are that we have likely never emerged from the recession at all. The Economic Conference Board has not yet declared the recession over, since so much (or even all) of the anemic but still somewhat positive growth recorded in the past three quarters stems directly from public sector cash transfer payments. These transfusions may mask the symptoms of recession, but they are no indication of emerging prosperity.
We are now coping with the damage not of the original recession that started in 2007, but with the cures administered by Obama when he took office in 2009. His big spending, big borrowing and his looming tax increases in 2011 are driving the economy down.
History will probably record the Obama administration of 2009-2013 (hopefully his only time in office) as one long recession-depression, just as we see the Hoover administration of 1929-1933.We make no allowances for the "false dawn" of rising markets that engendered a great deal of hope in 1930-1931 before these expectations were crushed by the Hoover tax increases of late 1931 and the Federal Reserve Board's increase of interest rates that same year. In retrospect, we will see the slight uptick of the early months of 2010 as our own "false dawn" interrupting but not punctuating our four-year recession.
As the debt crisis that started in Greece spreads to Europe and across the ocean, the United States' high level of deficit spending makes us particularly vulnerable. It was recognition of that weakness that led Europeans to reduce their deficits and cut back their spending, oblivious to Obama's request that they increase their outlays. But Obama continues his big spending and big borrowing ways in the U.S.
To this we need to add the climate of uncertainty that the president's changes have engendered. The prospect of big tax hikes ahead in 2011 (beyond just the simple repeal of the upper income Bush tax cuts), the uncertainty in the credit markets due to the passage of the financial regulation bill and the questions raised by possible cap-and-trade legislation all militate against new investment or borrowing and are inducing corporations and banks to hoard cash that might, otherwise, have stimulated economic growth.
If the GOP picks up the seats it is likely to win, it will control the Senate by 52-48. And, in the House, the likelihood of a Republican victory is even more significant.
The Rev. Wright famously said that Sept. 11 represented America's "chickens coming home to roost." He was wrong. But the double dip recession, and its political consequence, is clearly an instance of Obama's spending policies making the same journey.