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Financial Times: Why US voters are suing Dr Obama

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Martin Wolf, Chief Economics writer for the Financial Times, voices his opinion on why the American public is misledPresident Obama and the U.S. economy and how the Republicans are fostering that misleading idea.

Published: October 26 2010 22:28 | Last updated: October 26 2010 22:28

An ambulance stops by the roadside to help a man suffering from a heart attack. After desperate measures, the patient survives. Brought into hospital, he then makes a protracted and partial recovery. Then, two years later, far from feeling grateful, he sues the paramedics and doctors. If it were not for their interference, he insists, he would be as good as new. As for the heart attack, it was a minor event. He would have been far better off if he had been left alone.

That is the situation in which Dr Barack Obama finds himself. A large part of the American public has long since forgotten the gravity of the financial heart attack that hit the US in the autumn of 2008. The Republicans have convinced many voters that the intervention by the Democrats, not the catastrophe George W.Bush bequeathed, explains the malaise. It is a propaganda coup.

Does President Obama deserve blame for this outcome? No and yes. No, because his treatment was right, in principle; yes, because it was too cautious, in practice.

It is essential to remember the context. Large financial crises do long-lasting damage. As the University of Maryland’s Carmen Reinhart and Harvard University’s Kenneth Rogoff note in an update of previous work: “More often than not, the aftermath of severe financial crises shares three characteristics. First, asset market collapses are deep and prolonged … Second, [it] is associated with profound declines in output and employment … Third, the real value of government debt tends to explode.” As ever, the risks built up, disregarded, in the boom and materialised in the bust.

Click here to listen to Martin Wolf.


Written by Valerie Curl

October 27, 2010 at 5:05 PM

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