As 2009 opened, three weeks before Barack Obama took office, the Dow Jones Industrial Average closed at 9034 on January 2, its highest level since the autumn panic. Yesterday the Dow fell another 4.24% to 6763, for an overall decline of 25% in two months and to its lowest level since 1997. The dismaying message here is that President Obama's policies have become part of the economy's problem.

Americans have welcomed the Obama era in the same spirit of hope the President campaigned on. But after five weeks in office, it's become clear that Mr. Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence -- and thus a longer period of recession or subpar growth.

The Democrats who now run Washington don't want to hear this, because they benefit from blaming all bad economic news on President Bush. And Mr. Obama has inherited an unusual recession deepened by credit problems, both of which will take time to climb out of. But it's also true that the economy has fallen far enough, and long enough, that much of the excess that led to recession is being worked off. Already 15 months old, the current recession will soon match the average length -- and average job loss -- of the last three postwar downturns. What goes down will come up -- unless destructive policies interfere with the sources of potential recovery.

And those sources have been forming for some time. The price of oil and other commodities have fallen by two-thirds since their 2008 summer peak, which has the effect of a major tax cut. The world is awash in liquidity, thanks to monetary ease by the Federal Reserve and other central banks. Monetary policy operates with a lag, but last year's easing will eventually stir economic activity.

Housing prices have fallen 27% from their Case-Shiller peak, or some two-thirds of the way back to their historical trend. While still high, credit spreads are far from their peaks during the panic, and corporate borrowers are again able to tap the credit markets. As equities were signaling with their late 2008 rally and January top, growth should under normal circumstances begin to appear in the second half of this year.

So what has happened in the last two months? The economy has received no great new outside shock. Exchange rates and other prices have been stable, and there are no security crises of note. The reality of a sharp recession has been known and built into stock prices since last year's fourth quarter.

What is new is the unveiling of Mr. Obama's agenda and his approach to governance. Every new President has a finite stock of capital -- financial and political -- to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his "stimulus" spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest.

His Treasury has been making a similar mistake with its financial bailout plans. The banking system needs to work through its losses, and one necessary use of public capital is to assist in burning down those bad assets as fast as possible. Yet most of Team Obama's ministrations so far have gone toward triage and life support, rather than repair and recovery.

AIG yesterday received its fourth "rescue," including $70 billion in Troubled Asset Relief Program cash, without any clear business direction. (See here.) Citigroup's restructuring last week added not a dollar of new capital, and also no clear direction. Perhaps the imminent Treasury "stress tests" will clear the decks, but until they do the banks are all living in fear of becoming the next AIG. All of this squanders public money that could better go toward burning down bank debt.

The market has notably plunged since Mr. Obama introduced his budget last week, and that should be no surprise. The document was a declaration of hostility toward capitalists across the economy. Health-care stocks have dived on fears of new government mandates and price controls. Private lenders to students have been told they're no longer wanted. Anyone who uses carbon energy has been warned to expect a huge tax increase from cap and trade. And every risk-taker and investor now knows that another tax increase will slam the economy in 2011, unless Mr. Obama lets Speaker Nancy Pelosi impose one even earlier.

Meanwhile, Congress demands more bank lending even as it assails lenders and threatens to let judges rewrite mortgage contracts. The powers in Congress -- unrebuked by Mr. Obama -- are ridiculing and punishing the very capitalists who are essential to a sustainable recovery. The result has been a capital strike, and the return of the fear from last year that we could face a far deeper downturn. This is no way to nurture a wounded economy back to health.

Listening to Mr. Obama and his chief of staff, Rahm Emanuel, on the weekend, we couldn't help but wonder if they appreciate any of this. They seem preoccupied with going to the barricades against Republicans who wield little power, or picking a fight with Rush Limbaugh, as if this is the kind of economic leadership Americans want.

Perhaps they're reading the polls and figure they have two or three years before voters stop blaming Republicans and Mr. Bush for the economy. Even if that's right in the long run, in the meantime their assault on business and investors is delaying a recovery and ensuring that the expansion will be weaker than it should be when it finally does arrive.

http://online.wsj.com/article/SB123604419092515347.html

I'm just guessing here but Beth I have a feeling that the reason Palin's entry into the race resonated with you is because she stood up and railed against Obama. She made outlandish claims from the podium. She was given her scripts and doggone it she stuck to it, day after day, venue after venue.

She didn't do well when she got called on some of the stuff she said, but no matter, she got to say it, right?

To me that was just icing on the cake. That was not at all what resonated with me. At that point, I really didn't know that much about him other than I would never vote for him because he's a democrat. But good guess. Wrong, but good try.

Hey Colorado, you didn't offend me at all. You were making a point - as was I.

You DO all understand that the money that the banks are working with is OUR money, don't you?

I would agree with you about government interference or bail outs. Except for the fact that it's the taxpayers who are hurt in this economic debacle. Everyone (that I know of) agrees that much of this happened because of absolutely no oversight.

Actually, as CC pointed out, and I have also mentioned previously, it was government interference which played a huge part in where we are now. Yes, we had greedy CEOs too, but it was exceptionally and adversely affected by government dictating who should be lended to. I blame them at least 70 percent for what happened.

And now the answer is MORE government to fix what the government screwed up?? Yeah, I don't think so.

Good job, Colorado. Thank you.

I would agree with you about government interference or bail outs. Except for the fact that it's the taxpayers who are hurt in this economic debacle. Everyone (that I know of) agrees that much of this happened because of absolutely no oversight.

It would be interesting to know if allowing chips to fall where they may, would have been a better solution. But this was affecting most countries and most Americans. It really seemed like it was time for someone to take the bull by the horns and wrestle it to the ground.

Guess we will learn something in this process. At least I hope so. I hate the idea of the bailouts. I just do not have a better plan to offer up and I'm afraid I have to disagree with you about bankruptcy being a reasonable plan for all these companies.

Either way our economy will rebound. It always does. I just do not want to have to use my hard earned money to bail out private business. The situation sucks no matter how you look at it. We can disagree on the process of getting out of this mess but I think we agree that we need to get out of it. Many people are hurting and that is a shame. I hope Obama can do it, I really do. I want our country to succeed. I am worried that it may be throwing our hard earned money away as the bailouts do not seem to be working but hopefully soon the credit markets will thaw. We are all in the same boat!!

Beth I wasn't being insulting. I know my posts must sound harsher than I am feeling since I get some pretty negative feedback sometimes.

I just know that you enjoy speaking your mind and that you undoubtedly appreciate another woman who is strong enough to get up and speak her mind in a no-nonsense way too.

My main quarrel with her is her right wingedness (yep, I made that up). She's way out on a limb as far as her politics and lifestyle are concerned - at least in my world. She's absolutely not the kind of person that I would want to see as my governor, much less my president. But I do understand her appeal to some people.

Hey Colorado, you didn't offend me at all. You were making a point - as was I.

You DO all understand that the money that the banks are working with is OUR money, don't you?

Good!

I do understand that it is my hard earned money and that is one of the reasons it REALLY pisses me off! I would like to kick the bunch of them in their collective balls. hahahaha

Either way our economy will rebound. It always does. I just do not want to have to use my hard earned money to bail out private business. The situation sucks no matter how you look at it. We can disagree on the process of getting out of this mess but I think we agree that we need to get out of it. Many people are hurting and that is a shame. I hope Obama can do it, I really do. I want our country to succeed. I am worried that it may be throwing our hard earned money away as the bailouts do not seem to be working but hopefully soon the credit markets will thaw. We are all in the same boat!!

I hope we can get out of this mess, but I guess for me I hope he does not succeed in this fashion. The problem is, once the government has its claws into something, it never lets go. I don't see us ever going back to true capitalism as it should be -- businesses run by people instead of government (greedy sheistering aside).

Beth I wasn't being insulting. I know my posts must sound harsher than I am feeling since I get some pretty negative feedback sometimes.

I just know that you enjoy speaking your mind and that you undoubtedly appreciate another woman who is strong enough to get up and speak her mind in a no-nonsense way too.

My main quarrel with her is her right wingedness (yep, I made that up). She's way out on a limb as far as her politics and lifestyle are concerned - at least in my world. She's absolutely not the kind of person that I would want to see as my governor, much less my president. But I do understand her appeal to some people.

Hehe, fair enough. Hey, I think we've been doing pretty well today. I'm sure we won't solve any of the world's ills, but still...

Okay, then my question to you is, what makes her right-wing in your book? I guess when I hear that term, I'm not exactly sure what it means to different people because of differing views of what makes on a "wing."

I'm pretty old and we haven't experienced a crisis of this magnitude in my lifetime. So I'm not so confident that given enough time, things would have worked themselves out.

But hell to the yeah! Ball kicking!!! Count me in!!! Yeah baby, knee to the groin, yee haw, now we're talking!

I hope we can get out of this mess, but I guess for me I hope he does not succeed in this fashion. The problem is, once the government has its claws into something, it never lets go. I don't see us ever going back to true capitalism as it should be -- businesses run by people instead of government (greedy sheistering aside).

I want him to succeed while keeping our current form of government. I do not mind careful regulation so this short of mortgage shenanigans does not happen again. But our government is the author of the current mortgage laws that got us into this mess in the first place. I am against long term nationalization of private business - that is the socialist slippery slope. Obama has stated publicly that he wishes to keep banking private - so until he proves otherwise I will keep him to his word.

I'm pretty old and we haven't experienced a crisis of this magnitude in my lifetime. So I'm not so confident that given enough time, things would have worked themselves out.

But hell to the yeah! Ball kicking!!! Count me in!!! Yeah baby, knee to the groin, yee haw, now we're talking!

Good, something we can all do in unison!

Good night BJean and Beth! It was fun chatting but I have to get up in about 5 hours to work! toodles!

I know Beth. I'm not sure that I completely understand people's perception of left-wing nuts either.

First of all, she's not into making sure that her off-spring have birth control methods in place before they engage in sex. She believes that telling them to abstain is the right approach to raising a child. Yeah, how's that working for her?

She's totally against a woman's right to choose an abortion if she finds it necessary. I believe she was against stem cell research. I am strongly (as strongly as I can possibly be) for women's right to choose and I support stem cell research.

Next, she's into creationism. I'm not.

She's like many of you, she doesn't think people should pay taxes. That's one of the things her other half has been very involved in. Timothy McVeigh was also a proponent of refusing to pay taxes. Those people scare me. They want to (and have) form a militia and if I thought they were into fairness and peace that wouldn't scare me. But they are not into those things.

She's into the whole home schooling thing and I believe people opting out of the system is contributing to our schools' decline. I believe in a strong public school system. I believe we owe a good education to our children and I believe that only if we have well-educated children should we expect to continue to be the strongest, best nation on earth.

She's into killing animals. I could never do that. I'm a carnivore so I can eat them, but I don't want to actively participate in their deaths. I would also wear fur because I believe that natural products are preferable to synthetic ones.

She said some very harsh things from the platform - things that could have incited, and actually did, some very negative behavior and attitudes. I found that irresponsible and reprehensible.

She was for the war. I was against it. She is proud to send her son over there and I would have been devastated if my son had to fight in a senseless war like that.

I could go on but I think you probably have read it all before.

Nite ya'll. Btw, Colorado, I used to live in Chantilly, VA and I love Leesburg and surrounding area. Thinking about it makes me miss it!

Well, at the risk of creating a long post, I will try to address these issues as you raise them.

First of all, she's not into making sure that her off-spring have birth control methods in place before they engage in sex. She believes that telling them to abstain is the right approach to raising a child. Yeah, how's that working for her?

I don't think that's entirely fair. More babies are born to children who have everything there for their using and probably have never heard the word "abstinance" ever. To call her on the carpet for what her 17-year-old daughter did is pretty low, in my opinion.

She's totally against a woman's right to choose an abortion if she finds it necessary. I believe she was against stem cell research. I am strongly (as strongly as I can possibly be) for women's right to choose and I support stem cell research.

Okay, so she's rigid on abortion. As for stem cells, it's been proven numerous times that there are more and better stem cells in umbical cord blood than in an aborted fetus.

Next, she's into creationism. I'm not.

Okay, but does that make one a winger?

She's like many of you, she doesn't think people should pay taxes. That's one of the things her other half has been very involved in. Timothy McVeigh was also a proponent of refusing to pay taxes. Those people scare me. They want to (and have) form a militia and if I thought they were into fairness and peace that wouldn't scare me. But they are not into those things.

I don't know that she believes people shouldn't pay taxes (did she say that anywhere that can be linked?), but I DO have a problem paying taxes to a government that squanders it so badly. Not only are we paying out TRILLIONS to reward bad behavior, there were also BILLIONS in bullcrap earmarks and perks. I can't even say how long it's been since we have had a fiscally responsible government, but I doubt it's been in MY lifetime. So while the rest of us do without, the government continues to party like it's 1999.

She's into the whole home schooling thing and I believe people opting out of the system is contributing to our schools' decline. I believe in a strong public school system. I believe we owe a good education to our children and I believe that only if we have well-educated children should we expect to continue to be the strongest, best nation on earth.

But those are her children, and that choice is her right. The handful of homeschooled children is not the cause of the crappy school system we have, GOVERNMENT is. Waste is. Teachers' unions are. People with agendas (regardless of which side) are. Johnny can't read or write, but he can put a condom on a banana and can tell you what's in our landfill. Plus, it's been statistically proven that homeschooled children run circles around public school kids.

She's into killing animals. I could never do that. I'm a carnivore so I can eat them, but I don't want to actively participate in their deaths. I would also wear fur because I believe that natural products are preferable to synthetic ones.

But that makes her a winger? I know a TON of liberals who also kill animals.

She said some very harsh things from the platform - things that could have incited, and actually did, some very negative behavior and attitudes. I found that irresponsible and reprehensible.

But I could say that about every single upper level liberal senator and congressperson still alive, and some that no longer are.

She was for the war. I was against it. She is proud to send her son over there and I would have been devastated if my son had to fight in a senseless war like that.

But congress voted to give the president the power to go to war, and they were hugely liberal.

I could go on but I think you probably have read it all before.

True, I have. But let me ask you, if she is a winger because she believes in "X," are you not also a winger for being completely on the opposite side as her? Just food for thought...