Groundhog Day and Presidents

America looked to Punxsutawney Phil today. No shadow means spring’s near. If he sees his shadow, then we get six more weeks of winter. That’s an absolutely dreadful thought considering how much snow I already have. It’s about three feet deep in my yard, with snowbanks of six feet or higher near the driveway and roads. Historically, the groundhog’s accuracy is over 50%. Groundhog Day is also my dad’s favorite holiday. I’ll share his enthusiasm if the little guy proves right that spring’s coming soon.

“Groundhog Day” was also a movie starring Bill Murray. He relived Groundhog Day over and over again, repeating the same basic series of events over and over, as though it was on an endless loop. Not exactly Bill Murray’s finest movie, but it sets the stages perfectly for the transition from Punxsutawney Phil to Barack Obama, Jimmy Carter, and FDR.

What do Phil and Groundhog Day have to do with three democrat presidents? I’ve long held the belief that history repeats itself and, as Pearl Jam sang in “Nothingman”, “He who forgets is destined to remember.”

Barack Obama’s presidency feels like a replay of a bad blend of Carter’s foreign policy debacles and FDR’s economic missteps. I’ve had that feeling before. However, because of the recent flare-ups in the Middle East and Africa and because Carter had his own economic issues, a comparison of Carter and Obama now has more legitimacy. I wasn’t alive during Carter’s presidency from 1977-1981, so I’m going off accounts from history books and people who lived it.

The mainstream media has beaten to death the comparison of Carter’s Iran versus Obama’s Egypt. I mentioned that if America mishandles Hosni Mubarak’s (expected) departure from power in Egypt and events don’t go favorably for us, Obama could have his own Iran debacle like Carter had with the Shah and Ayatollah Khomeini. In general, beyond Egypt and Iran (and especially with Russia), I also view the foreign policy of both Obama and Carter as weak and timid. I remarked in my State of the Union review that, for some reason, I can’t take Obama seriously when he tries to sound tough on foreign policy. FDR’s foreign policy wasn’t exactly perfect, but his shortcomings were different, due to tariffs rather than revolutions.

Second, each president had less than ideal economic conditions to work with and neither deserves credit for properly addressing them. Also, though I’d argue that the economic climate Obama inherited from Junior Bush is more like what FDR inherited from Herbert Hoover rather than what Carter inherited from Gerald Ford, all three inherited weak/deteriorating economies. I’d add that it was strong Federal Reserve leadership, not White House leadership, that saved the day for both Carter and Obama. In FDR’s case, I’d credit World War 2 and Truman’s post-war leadership for ending the Great Depression, rather than FDR’s New Deal. Hopefully, I won’t be crediting World War 3 and someone else’s leadership for snapping us out of the Great Recession.

Back to Carter, who had stagflation in his time. This combination of stagnant growth and powerful inflation is an economic killer. Prior to Paul Volcker becoming chairman of the Federal Reserve in 1979, the government let inflation spiral out of control, and it was Volcker who broke the back of inflation by jacking the Fed rates to nearly 20% over the next couple years, setting the stage for a new wave of prosperity for America.

We were in dire straits when Obama took over, as the financial crisis was pretty much full speed ahead. As with Carter, it was the chairman of the Federal Reserve, this time Ben Bernanke, who was the mastermind behind pulling America out of the economic death spiral. Bernanke was slow to react to the crisis, something I was critical of him for at the time and in reflection, but once he woke up, he pulled out all the stops and deserves the credit. Ironically enough, Obama pulled Volcker out of retirement to act as an economic advisor.

In all fairness, I can’t criticize either president for not solving those specific crises because it took central bank policy, not executive policy, to do it. Also, I can’t blame them for the troubles they inherited. I can, however, criticize them for implementing policies that were headwinds rather than tailwinds for recovery. That and the strong Federal Reserve leadership saving the day are the main parallels I see between Obama’s and Carter’s presidencies on economic matters.

Happy Groundhog Day.