Is It Obama's Fault the Dow Is Tanking?
Debate-o-Matic: How the president fared this week on housing, the stock market, and the war in Afghanistan.
Barack Obama spent most of his week outside of Washington. He traveled to Denver to sign his stimulus bill, for which he's getting good marks—a new CNN poll says 60 percent of the country favors it. On Wednesday he traveled to Phoenix to unveil his $275 billion plan to slow home foreclosures. Much more quietly he authorized 17,000 new troops for Afghanistan. On Thursday, he was in Canada reiterating his commitment to free trade and admitting that he'd never watched a hockey game. Next week is budget week. The president will host a fiscal responsibility summit Monday, talk to Congress about his budget priorities Tuesday. and release a budget blueprint on Thursday.
To help you keep up with the debates swirling around the Obama presidency as it heads into its second month, Slate offers this guide to the issues of the week. Here is where the arguments stand on a few key topics.
Home Foreclosure Plan
Great idea: If the government doesn't do something, we'll all suffer. You may not like that your neighbor will get bailed out for his risky behavior, but if his home is foreclosed on, it will lower the value of your home. This plan is also geared toward helping people who have played by the rules and haven't missed even one payment—it's not as if it's helping real estate speculators who bet wrong.
Bad idea: It's unfair to offer a special deal to people who made bad decisions either by getting in over their heads in the first place or by taking out huge home-equity loans. Those who were prudent and didn't rush to buy a house are being rewarded by having their taxes help people stay in homes they can't afford. Furthermore, the plan encourages consumers to act recklessly in the future because they know the government will bail them out. It also might work against homeowner interests in the long term as lenders charge higher mortgage spreads to guard against bankruptcy judges that might force banks to lower the cost of loans.
Stock Market Decline
It's an Obama bear market: After Obama's inauguration, the Dow Jones industrial average dropped 332 points. It tanked again last week after Treasury Secretary Timothy Geithner announced his plan for bailing out the banks and tanked some more this week after Obama announced his housing plan—an 800-point slide in a month. By the end of the week, the market was at its lowest level in six years. Even if you think the business cycle is responsible for much of this, weren't Obama's policies—the stimulus bill, the bank bailout, and the housing plan—supposed to do something positive?
Obama's not to blame: The market is reacting to long-term economic conditions. If you want someone to blame, it should be George Bush. The conditions are the result of his policies. Or, if you don't want to blame an administration, just look at the financial sector—a big component of the Dow Jones industrial average. Two years ago it accounted for a third of total corporate profits. This year it has no profits and its share prices are cratering, hence the Dow is down. Bank stocks may trade based on what Obama has been proposing, but those have lost so much value they're not responsible for throwing off the entire Dow. Sure, Obama's policies may not have convinced the market that recovery is around the corner, but they haven't even been put into practice yet.
It's Obama's war: The president has said Afghanistan is the central front in the war on terrorism, and he backed up his rhetoric this week by sending 17,000 new troops there, half again as many as the 36,000 American troops already in the country. Gen. David McKiernan, who commands U.S. and NATO troops there, has asked for a total of 30,000 additional troops because the country is falling apart and the Taliban is resurgent. Obama is not likely to ignore his generals in the country he says is so pivotal, because it borders Pakistan, the other emerging hot spot in the region.
It's just an interim step: Obama has asked for a 60- day review of strategy. After that review is over, he'll make his determination. He hasn't passed the point of no return. This troop increase is merely necessary to help provide a secure environment for elections in August. Obama and Secretary of Defense Robert Gates have already been lowering expectations about what is possible for the country, which could easily be the precursor to an orderly withdrawal.