This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
3/31/2009
Could it just fix itself?
In the news lately I am seeing a huge influx of information regarding approval polls of something. One of the latest is who is being blamed for the current economic crisis. Surprise that the banks are being blamed the most for it and then George Bush Jr. This is not a shocker considering they are highly suspect in the current economic crisis. With President Obama being elected only a handful of people are saying it’s his fault, in fact 42% of Americans are saying the country is on the right track. (Washington Post, March 31, 2009: Blame for Downturn Not Fixed on Obama) I was a huge fan of saying that once a new president is elected the economy would turn around. I believe that any change would have spurred the economy around, rather that people seeing change, make them change and would help to make things better. With history we have seen that all recessions have a trough, and that a lot of presidents loose elections because bad economic problems. But would all recessions end if we did nothing and let them run their course? Do we need to do anything at all, or would a simple change of thought help to pull us from despair.
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7 comments:
I don’t think change would have spurred the economy around. I believe the change with a new president gave people hope that the economy would turn around. I think Obama couldn’t have picked a better time to be president. I say that because if the economy turns around during his presidency it’s just going to solidify his reelection. And if the economy stays a disaster his excuse will be that he inherited the mess. Either way he has a good chance being president for the next eight years. Like the saying goes, “Doing nothing at all is better than doing too much.” I don’t understand or know exactly everything the Government is doing to help this recession, but I have a feeling they are doing too much. I have always been a firm believer that things will play out for a reason. So to your question, I believe things will fix on their own.
I agree with Chase. I think things will fix themselves for the most part. I don't think Obama's election made a huge difference or will in the future make a huge difference on the state of our economy. I do however think he might have made a small difference in the length of the recession. We have talked in class about how recessions are not infinite and how we seem to recover each time we face a recession. I believe that any president we have has a chance of having a recession during their term in office and that it is not their fault. They might be stupid but it still shouldn't be blamed on them.
I believe government help can speed up the recovery of a recession. But I also believe if it was left to run its course it would recover on its own. I think too much of our economy as a whole is run on emotion. If people feel good, they spend money. If people worry about the future, they cut back. While new presidents and government action can encourage people back into spending money and getting the economy rolling again, I think it would happen anyways.
I also agree that the economy is a self-correcting entity. I would like to add that I don't believe that a huge amount of government spending will be the best thing for long-term economic well being. If the government prints a whole lot of money as it is doing now, it will simply cause massive inflation, which further devalues the dollar.
Because the economy is, and has always been composed of people, its behavior is based mostly on individual's beliefs, habits, and actions that are driven by their perceptions of the current and future economic conditions. It is not based on government intervention and related forces, but it is influenced greatly by the media.
My philosophy is that if the government would stay out of the way, other than a few smaller relief programs here and there, the economy would self correct. The long term trends show evidence of the economy always moving back toward the trend growth line. In other words, booms and busts always move back toward the norm. I say, let the economy do its job naturally.
As Dr. Tufte has said numerous times in class, as well as in the SUU Macro Blog, there is little evidence of connection between presidents and economic performance. Many will associate the recession with Bush II and the recovery and turn-around with Obama, when in fact, if the economy does recover by late 2009, which it may, it could be attributed to Bush's stimulus in 2008 rather than Obama's stimulus this year. Many people need someone to blame for the difficult economic times and they turn to the current leaders. As Dr. Tufte mentioned, this is a classic case of "attribution error" but holds little water because of the lack of evidence between presidential agendas and policies and economic performance.
Remember how when Obama got elected the stock market plummeted the next day, and then when Obama took office the market plummeted again? The stock market is a leading indicator, which means pessimism ruled in response to the news. I do agree that very often a change in presidency is encouraging to the economy, but that didn't appear to be the case this time.
-1 on Landon for spelling errors.
This all seems sensible to me. I think a great thing about Obama is that he inspires confidence and warm feelings in many people. That warm fuzzy is an undervalued asset.
I also think that people wanted change, and getting it may help them perform better.
As to Anthony's point, he only has part of the story. Yes, stock markets do seem to be good leading indicators - but of the consequences of unexpected events. Reading anything into the market dropping when Obama was elected or inaugurated means assuming that the people who sold those days were too dumb to have sold the day before. I don't think they were. You need to look for other factors.
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