For years, the President of the United States has told us that his main economic achievement has been the recovery of the stock market. In his state of the union address this year, President Obama told us, "Two years after the worst recession most of us have ever known, the stock market has come roaring back. The economy is growing again."
Then there's the real world, where the stock market has tumbled almost 2,000 points since July 21. President Obama has blamed, in order, the European economy, the "Arab Spring," the rise in oil prices and now, the Tea Party. On Tuesday, Obama explained that the problem was that Standard and Poor's, which downgraded America's debt from its normal triple-A rating, "doubted our political system's ability to act." Then Obama blustered, "No matter what some agency may say, we've always been and always will be a triple-A country."
Obama doesn't believe that. And he shouldn't. We may not always be a triple-A country. Not when our former Federal Reserve chairman, Alan Greenspan, says that our guarantee of our creditworthiness is that "we can always print money." Not when our GDP is now outstripped by our debt — and not when our debt-to-GDP ratio has rocketed up more than 40 percent since Obama's inauguration.
Obama's stunning unwillingness to seriously address the debt crisis means that America teeters on the brink. Our stock market has not nearly hit bottom yet. Fannie Mae and Freddie Mac were slapped with a credit downgrade, and yet President Obama has said nothing about raising interest rates or preventing further spendthrift lending by the agencies.
This means that real estate remains overvalued. We already know that our bonds are overvalued, since our spending endangers our creditworthiness. We also know that our stocks are overvalued, since President Obama has seen fit to infuse billions in cash to his corporate buddies.
The stock market isn't nearly done dropping yet. We may see a dead cat bounce in the next few days, but the chances of a significant rise are nowhere in sight — not when the GDP is stagnant; not when unemployment remains high; not when consumer confidence remains at staggering lows. We stand at the edge of ObamaCare, which will cripple the economy beyond all ability to recover. We balance on the precipice of tax increases at the end of next year as the Bush tax policies expire.
Obama's claim that the Tea Party is to blame for the latest stock market crash is idiotic. This market crash occurred for the same reasons as the last market crash: The market was built fraudulently, on smoke and mirrors. Only a true deflationary cycle can restore economic health. That will be painful and quick. Obama's alternative is painful and prolonged. Americans will suffer either way.
The question is whether we want FDR-style suffering for a decade followed by a major war, or Reagan-style suffering for a couple years. For America to become a triple-A country again, we need to start earning our grades.