Republican Recession

Republicans are quick to declare that President Obama “owns” this recession. However, were it not for three very crucial decisions by REPUBLICANS before Mr. Obama took office, this recession would never have happened and it has been prolonged by two actions taken by Republicans since the beginning of the President’s term.

The financial melt-down which peaked on September 16, 2008 was caused by the collapse of mortgage-backed securities traded by the banks which issued the mortgages and then sold them off in bundles to other financial institutions. With the deregulation of banking effected by the repeal of the Glass-Steagall Act in 1999, banks issuing mortgages no longer had to worry about the risk in issuing the mortgage; they could just pass it on to someone else. Standard and Poor’s, who recently downgraded the Federal debt from AAA to AA+, as well as other ratings firms, inaccurately rated these investments much higher than they should have. The result was the collapse of the market for these instruments which, in turn, led to the financial meltdown of September 2008. This was the direct result of the passage of the Republicans’ Gramm-Leach-Bliley Act in November 1999 which removed the firewall between commercial and investment banking and de-regulated the banking industry. None of the abuses in the mortgage-lending collapse of the 2000’s would have occurred if the Republican Congress hadn’t passed the repeal of Glass-Steagal in 1999.

The second Republican decision leading to the Great Republican Recession was the decision by President Bush and the Republican Congress in 2001 to blow the budget surplus that President Clinton had left them on the Bush Tax Cuts in the mistaken belief that lower taxes would result in an expanded economy and greater government revenue. The Reagan years should have shown them that lower taxes have less of an effect on the economy than low interest rates and low energy costs. Combined with the Republicans third decision, to fight two unfunded trillion-dollar wars, the options left to President Obama to fight the Republican Recession were limited. When he sought to stimulate the economy though large infusions of cash, the Republicans put limitations on how much and where he could do so.

Today, when jobs are obviously the most important short-term issue facing the country, the Republicans, through their politically-motivated and absolutely manufactured debt ceiling crisis, have completely tied the President’s hands to stimulate the economy. They have ignored the recession in favor of debt reduction, which is indeed a serious problem, but one which could be better fought with a stronger economy, which could come about if they would allow some short-term spending stimulus.

To be perfectly honest, I believe the leadership of the Congressional Republicans know this, though the dozens of Tea Party newbies have demonstrated their ignorance of basic economics time and again. I believe that Boehner and McConnell are willing to allow millions of Americans to lose their jobs or remain unemployed in order to defeat President Obama in 2012. Remember, Mitch McConnell declared in 2009 that the primary legislative goal of Congressional Republicans was to defeat President Obama, not his policies, but the man personally.

The Republicans created this recession and they are the prime impediments to recovery.


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August 2011

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