Every discussion about the economy by President Obama or Treasury Secretary Geithner begins with the phrase "the mess that we inherited", and includes a vague commitment to eventual prudence. Their hope is that the public won't figure out the game until they have been able to get their agenda through Congress - particularly crushingly expensive public healthcare and "cap and trade" energy programs. The game is best understood in three parts:
1. Inherited. The deep recession, which they really did inherit. A great politician, Obama has avoided debate about who caused the severity of the recession, and there are plenty of culprits on both sides of the aisle. The closest to an assessment has been implicit in the proposal for regulatory reform - which includes the politically popular component of an agency to protect consumers (voters), but does not deal with the rating agencies who called the toxic assets AAA, Barney Frank's Fannie Mae /Freddie Mac who financed it (and whose standards he is again seeking to undermine), the need to again separate the commercial and investment banks which were allowed to be combined in 1999, or the intertwined global financial industry which makes a singular US regulatory system impossible.
2. Shared. The stimulus plans that have come from his administration - $787 billion dollars of bailouts and incentives (which are largely not yet spent); the billions for the auto industry. This will be a two or three year program, and despite the oft-mentioned "green shoots", most financial data is still only showing a slower rate of decline, and we haven't yet seen the impact of state insolvencies (such as California) or resurgent oil prices. Consumers have apparently received the message that they have to save, and most will for awhile.
3. Obama's. Obama's long term projected trillion dollar deficits - which should be the focus of discussion as the Congress debates a healthcare plan which will cover 50 million "uninsured" (including at least 10 million "non-citizens") and result in taxing employer-paid insurance for 160 million people. The political calculus is to focus on the extra benefits to be given to millions by the benificent administration, with a later discussion of the cost and who is to pay it. But, this is what the Chinese/Russian/Indian/Brazilian call for a new global currency is about - the Baby Boomer generation has always felt that it deserved a second home at the lake, an SUV, and comfortable early retirement, and Obama is telling us that nobody has to pay the bill - except for those few elusive rich folks. There are a few billion folks on the planet who understand that isn't the way that economics works. Hopefully, there will be a few hundred in Congress who understand the disasterous effects of his healthcare and energy proposals - and will have the courage to act accordingly.
This week's You Tube is an interview with the fiance of Neda Agha Soltan, who was killed by Iranian security forces at a protest in Tehran this week. The more graphic images which have been widely distributed require a You Tube sign in. While many have been killed and arrested, she will be the face of Iran for the world. Our government's reaction? - our embassy in Tehran cancelled some invitations to the July 4 celebration party.
Bill Bowen - 6/27/09