From Scott Grannis at his blog, Calafia Beach Pundit Taking the measure of the our discontent:
If one thing stands out in these charts, it is the abruptness and the severity and the persistence of the divergence from long-term trends that began in 2008. Something REALLY BIG happened; what was it?
It was not demographics, since demographics change at glacial speed. The population didn’t suddenly got older and start to retireen masse in late 2008.
It was not monetary policy. The Fed was arguably slow to launch its QE efforts in late 2008, but since then they have been working overtime to make sure the economy is not starved of liquidity and interest rates are as low as possible. (I could be persuaded that the persistence of extremely low interest rates has been a problem for savers, and that this has led to weak investment, but corporate profits have been setting records throughout the recovery.)
The one thing that changed in a really big and durable way, starting in 2008, was fiscal policy. The Bush administration launched TARP in late 2008, and the Obama administration followed up with ARRA in 2009. Then came Obamacare in 2010, which purported to restructured fully one-sixth of the US economy within the space of a few years. Then came the Dodd-Frank super-regulation of the financial industry. Beginning in 2013, top marginal tax rates were increased.
The federal government borrowed $7.1 trillion over the course of five and a half years and handed most of the proceeds out in the form of various transfer payments. Our leaders in Washington did this in the belief that this would stimulate spending and that would convince businesses to create more jobs. The federal government restructured the entire healthcare industry in the belief that this would lower costs and give everyone healthcare insurance coverage. The federal government rewrote the rules for the entire financial industry, in the belief that a more-highly-regulated banking system and greater consumer protections would restore confidence and optimism. And to top it off, the federal government increased taxes on the rich, in the belief that this would benefit the middle class by more fairly distributing the fruits of progress. But it didn’t work. Spending wasn’t stimulated; job growth didn’t surge; healthcare costs continue to rise, the vast majority of the uninsured are still uninsured, and millions are now losing what coverage they used to have; banks are reluctant to lend and consumers are reluctant to borrow; consumer optimism remains relatively weak; and the middle class has taken it on the chin.
If anything, the massive growth of government intervention in the economy since 2008 looks to be the Occam’s Razor explanation for what caused the weakest recovery in history.
If there is a reason for widespread discontent, it is our federal government and its overbearing and intrusive ways. Thanks to all the government “help” that has been heaped upon us in the past six years, we have the weakest recovery in history. And the bill for all this is a staggering $1.7 trillion per year and counting.
An excellent and very brief view of why our economy is mired in the shits. It just seems so damn obvious.
The Fed has been in the business of baling out fiscal foolishness with monetary policy. With interest rates so low they are just about out of ammo.