100 days: Mr. Obama Overthrows Reagan’s Government-Bad Dogma to Rescue Market

[TWiley]

Mr. Obama Overthrows Reagan’s Government-Bad Dogma to Rescue Market

By Rich Miller and Matthew Benjamin

April 27 (Bloomberg) -- Ronald Reagan used to joke that the nine most terrifying words in the English language were “I’m from the government and I’m here to help.” Barack Obama is making those words welcome.

As he approaches his 100th day in office, Obama is rolling back the Reagan Revolution and restoring government to a central role in the economy. He has passed the biggest budget stimulus ever, prepared the way for an overhaul of the U.S. automobile and banking industries and proposed a $634 billion government- funded expansion of health-care benefits.

“It’s profound,” says presidential historian Richard Norton Smith of George Mason University in Fairfax, Virginia. “There are very clearly taking place some long-term, even transforming shifts in priorities and resources.”

The ultimate consequences of rebalancing the roles of government and capital are far from clear. In the short run, though, Obama has managed to dissipate some of the doom-and- gloom talk that the U.S. was headed for a depression.

The Standard & Poor’s 500 Index has surged more than 25 percent since March 9, with shares of banks that have taken government money soaring three times as much. Rates on 30-year mortgages have fallen below 5 percent, the lowest in records going back to 1971, as strains in credit markets have eased. Consumer confidence is up and a plunge in retail sales is abating.

“The system is beginning to stabilize as the grip of fear is starting to ease,” former Federal Reserve Chairman Alan Greenspan said in an April 21 interview. At the same time, the 83-year-old Greenspan, a Reagan appointee, said he’s concerned that the Obama administration has “taken on too much” with its long-term budget proposals.

Necessity and Ideology

Obama’s shift toward a bigger role for government in the economy has been born of both necessity and ideology. To combat the credit crisis, the 47-year-old president has put forward a variety of programs, including help for homeowners and battered banks.

“In a financial crisis, the biggest mistake that a government can make is to do too little, not too much,” Treasury Secretary Timothy Geithner said in an interview April 21.

In the longer run Obama has proposed a 10-year budget plan, including $3.55 trillion for 2010 alone, to pay for his proposals to expand government’s role in such areas as health care and education.

The White House programs would leave federal spending in 2012 and after at around 22 percent of the U.S. economy or higher, up from a 40-year average of 20.6 percent.

Stronger Economy

“These investments will boost productivity and growth, and build a stronger, more resilient and competitive economy,” Geithner said.

Story: http://www.bloomberg.com/apps/news?pid=20601109&sid=ael_MGD0whns&refer=home