Friday, Nov. 19, 2010 | 2:05 a.m.
A business journalist with Fox Business Network told Southern Nevada executives that the election of Barack Obama as president and Democratic policies led to the deep recession, and the takeover of the House of Representatives by Republicans will lead to improved economic growth.
Stuart Varney, a Fox Business Network anchor, appearing at the annual luncheon of the Nevada Development Authority at the Bellagio, said the Great Recession started after the Bush Administration implemented the bank bailout and eased the panic on Wall Street about the financial system but didn’t blame Bush, even though the recession officially started a year earlier.
“The Great Recession began almost immediately just as the panic ended,” Varney said. “We went straight off the cliff and the election of Barack Obama happened no less than three weeks later. I think that panic had a lot to do with the election of President Obama. John McCain wasn’t the greatest of candidates, and he didn’t seem to know what he was doing. Obama stayed cool and aloof and appeared to be in charge and he got elected.”
Varney, a graduate of the London School of Economics who earned a Peabody Award for his reporting and analysis of the stock market crash while working for CNN in 1987, said the Great Recession resulted from the panic in that election, the $787 billion stimulus plan and record-setting budgets during the Obama Administration.
“It started with panic and unfolded to where we are now,” Varney said.
The Republican takeover of the House has shifted political power in Washington because all spending measures start there, Varney said. Because the House has control of the purse strings, Republicans will have a lot to say about economic policy going forward, he said.
“I think that will make an enormous difference for economic policy and to the performance our economy in the immediate future,” Varney said. “Can you imagine we are going to get a big trillion-dollar stimulus package. It’s not going to happen. Do you think cap and trade (will pass)? Do you think card check (making union formation easier) is going to happen? It’s not going to happen...The Bush tax cuts will probably be extended for everybody.”
Varney said the ability of Congress to block Democratic policies will improve confidence within the private sector.
“There is this magic thing called confidence,” Varney said. “I think we are already seeing some growth in the economy, and the shift in political power that we saw two weeks ago will enhance that growth. I think by the spring of next year, we are looking at 3 percent growth for the economy. That’s not fabulous and not as good as coming out of previous recessions.”
Varney predicted GDP will grow 4 percent by the summer and fall of 2011 and suggested that the jobless rate will fall to 9 percent. As hiring picks up and payroll increases, $1.8 trillion in cash that’s sitting on the sidelines will come back into the economy and expand it, he said.
“I think we are just in the beginning of an improvement of growth that you surely will feel it here in Nevada,” Varney said.
Varney said the policy in the Obama administration and Democratic Congress has been one of income redistribution and fairness when it comes to tax and regulation policies. He said the country needs to “grow its way out of this mess” and called for lower tax rates to do that and holding down the cost of entitlement programs such as Social Security and Medicare. There may also be need for a national consumption tax, which critics contends hurts lower income groups.
“Lower tax rates will stimulate growth and if the economy is growing at 3, 4 or 5 percent, you will have sharply lower deficits,” Varney said.