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

Oh, I see now. Ok, gotcha.

Obama has been willing to step up to the plate and give it the ole college try. He is sure taking his lumps for it and he may wind up being wrong. But his is the only plan that is viable that has been put forth.

Agree. Republicans are sitting on their thumbs. When they criticize without having another option, they look like a bunch of asses.

I believe that the jury is still out and I also believe that raising cain and accusing Obama of being a socialist is fruitless.

Well, I think that statements of dis-satisfaction are allowable, especially if one is unhappy with the direction the country is going. I happily agreed with the rights of the Bush bashers to express their opinions (even if I challenged the validity of said opinions, they sure had the right to say it. Heck, they're saying it even now, right BJean?). To offer emotional babble ("Obama is the antichrist!") is fruitless.

I asked you once when your taxes have been raised since Obama took office and you ignored my question.

Personally, my taxes weren't raised. I don't make enough money. But just because I don't fall into that bracket doesn't mean that I don't see the basic unfairness of bearing down on the rich.

I also asked on other threads when he said he wanted to take away people's guns.

It was Obama's attorney general Eric Holder that said he and the president were mulling over certain gun control measures (specifically banning assault rifles.....BTW, I can provide links for all the stuff I post. If you want me to, just ask).

And when has he said that he doesn't want the border laws enforced? Much of what people (not necessarily you) are yelling about just isn't what's on the agenda right now - they just ain't happening.

Of course he doesn't want to get tough on illegal immigration. That would take away the votes of America's fastest-growing minority group. Although I will give Obama credit because I think he'll send some troops to police the border (not to "tighten up" the border, but because Mexican crime is out of control and seeping over the border)

i see both sides of this coin. i worked in high tech sales, and i had a contract that said every qtr, my bonus was XXXX in addition to my commissions. i expected that to be fulfilled, like others in that same spot now.....

So you can see better than most how wrong it is for Congress to go after those AIG bonuses.....because if they can go after them, they can go after yours.

Oh I almost forgot to ask - and this is a serious question because I do not have the answer - how many businesses has Obama snatched up? How many corporate CEOs has he fired?

I could dig and get an exact number of companies that have taken TARP money, if you want an exact number. But Obama has lead the government in buying large shares of stock in finance (Bank of America, Citigroup, AIG,etc), the automobile industry (GM and Chrysler), housing (Fannie Mae and Freddie Mac), and life insurance (Hartford, Prudential, etc).

Obama has so far fired one CEO - Richard Wagoner.

And from what I'm reading and hearing, he is forcing either a merger between Chrysler and Fiat OR a bankruptcy of Chrysler. He said today that "WE decided this needed to be done." I know who "WE" is.

Aren't you saying, plain, that Congress voted to give Bush the authority to bomb Iraq, not that Congress voted to allow Bush to bomb Iraq? To me it isn't the same thing. It was a gross error on the part of Congress to give Bush free reign to make a decision like that - and Bush was very manipulative to get them to agree to it. And many people who did vote to give Bush that power were very sorry that they did.

Since the Congress is normally directly involved in any decision to declare war, I do not feel that America declared war on Iraq; George Bush declared war on Iraq. And the term "shock and awe" was used over and over and over, ad nausem, by Dubya. Before he coined the phrase, most Americans were relatively unfamiliar with it. The author is irrelevant. It was just a tool.

So plain, you must be one of the people who believes that you shouldn't pay taxes, eh?

If you agree that they're a necessary evil, then why in the world would you support a policy that allows the wealthiest Americans to get big tax breaks? If you say that it makes sense because it will benefit the economy for the rich folks to get richer, that has been proven to be totally ineffective in helping most Americans.

Furthermore, the proposed increase in taxes for the wealthiest Americans is a rate that is still less than what they paid under President Reagan.

The propaganda that is being put out that rich folks are being taken advantage of and gouged is B.S. And if you believe that taxes are necessary, then you should understand that the proposed tax increase for the top very small percentage of Americans is exactly what is fair to mainstream Americans. The rich folks have for some time now had practically a free ride.

BJean, you can try to rework it any way you wish, but Congress gave Bush the authority to bomb Iraq, 77 to 23.

Beth, do you disagree that many people who voted for giving him that power later regretted it?

Beth, do you disagree that many people who voted for giving him that power later regretted it?

What does that have to do with the fact that they voted for it? They gave him the power to do what he did. Regret doesn't unring the bell, they GAVE him the power.

So plain, you must be one of the people who believes that you shouldn't pay taxes, eh?

If you agree that they're a necessary evil, then why in the world would you support a policy that allows the wealthiest Americans to get big tax breaks? If you say that it makes sense because it will benefit the economy for the rich folks to get richer, that has been proven to be totally ineffective in helping most Americans.

Furthermore, the proposed increase in taxes for the wealthiest Americans is a rate that is still less than what they paid under President Reagan.

The propaganda that is being put out that rich folks are being taken advantage of and gouged is B.S. And if you believe that taxes are necessary, then you should understand that the proposed tax increase for the top very small percentage of Americans is exactly what is fair to mainstream Americans. The rich folks have for some time now had practically a free ride.

BJean, the ONLY folks getting a free ride are the 32 percent who pay ZERO taxes, yet somehow get a "tax break" or "tax return."

If ALL people paid their fair share, I would be just fine. FLAT TAX is the way to go. Everybody pays a set percentage, not a floating percentage based on income, essentially rewarding some and punishing others. ALL pay.

When people regret something, it is a sure indication that they wish they hadn't done it. Hopefully Congress, and America, understands why the law was put into effect that doesn't allow a single person to make the decision to go to war and they won't make the same mistake again.

But Beth, with all the tax breaks and incentives that rich folks and corporations have enjoyed for the last decade, THEY sure aren't paying their fair share.

How many really wealthy folks do you know personally? Have you asked them how much they pay in taxes every year - the bottom line amount?

But Beth, with all the tax breaks and incentives that rich folks and corporations have enjoyed for the last decade, THEY sure aren't paying their fair share.

How many really wealthy folks do you know personally? Have you asked them how much they pay in taxes every year - the bottom line amount?

I know they pay a helluva lot more than WE do.

How can you complain about certain tax breaks for people when 32 percent of others pay no taxes whatsoever? Let's get them paying something first and see what happens. It's likely we wouldn't have to require more of the "rich" if one-third of this country would pay to be here like the rest of us do.

When people regret something, it is a sure indication that they wish they hadn't done it. Hopefully Congress, and America, understands why the law was put into effect that doesn't allow a single person to make the decision to go to war and they won't make the same mistake again.

And the law was used properly -- a single person did not make the decision to go to war.

Regret or no, they still voted for it, and their vote is what put it into action.

So you can see better than most how wrong it is for Congress to go after those AIG bonuses.....because if they can go after them, they can go after yours..

yes i can -

i'm not sure about corporate bankruptcy (maybe cc can chime in) but i don't believe employee compensation can be included in restructuring the debt of 'said company'.

i understand that the "who" gets their money first is:

bank

unsecured creditors

share holders

many times, these "bonuses" are elevated due to a lower comission or salary plan taken. i know i worked it that way. because we pay our taxes qtrly, that nut was earmarked for what portion uncle sam wanted out of us that qtr.

i have no "smart" answer or one for that matter - that makes sense on how to handle the bail out situation.....and really i've yet to hear a single one. this is a big issue in our home - DH is what i would call a libertarian, he is socially liberal, believes in a strong military & is ALL about free enterprise and gov't out of his ass in doing so.

our diner parties are SO entertaining:)