A few days ago, I posted a strong response to the view expressed widely in the blogosphere that President Obama "gets" the Federal Gov't's role in the economy. One of my points is that his administration was channeling FDR's solution to the Depression in strengthening Big Business and Big Labor, ignoring small business.
Yesterday, he validated reports from months ago that there would be a second "stimulus"in a speech tat the Brookings Institute. What do you know? He made nice to small business. Do policymakers read EBR?
In any case, the NYT reports on the speech:
“There has rarely been a less loved or more necessary emergency program than TARP,” Mr. Obama said, acknowledging widespread populist anger over the program. But “as galling as the assistance to banks may have been,” he added, it “indisputably helped prevent a collapse of the entire financial system.”
This week the Treasury Department released projections that taxpayers would get back most of the $700 billion budgeted for the program. Mr. Obama said the resulting savings could lower the deficit and “shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street.”
This is a bit disingenuous. TARP was supposed to make, not cost money. And a simple alternative was for bondholders of the troubled financial companies to do debt-for-equity swaps, and for shareholders if necessary to be wiped out. Private profits and dividends, private gains. As usual, Mr. Obama's assertions are not the whole truth. The whole truth was that TARP was a giveaway to the financial community.
The idea that this giveaway should now seamlessly go to "jobs" when Team O misread the severity of and the solution for the jobs problem is odd. The Government does not "have" the unspent TARP money. It borrows it and the Fed creates it, directly or indirectly. This is VERY different from the Great Depression, when the Feds had vast amounts of money (gold, that it) and negligible debt going into the downturn.
Jimmy Carter tried to "create" jobs and lost his job in large part because the end result of all the intervention in the economy and money-printing was high unemployment with rising consumer prices. Mr. Obama should simply do what this blog has advocated since inception, which is to let the free market create the goods and services that serve the needs and desires of the population in a way that it can afford.
One final note on road work and construction: it is antithetical to the global-warming and larger "green" movement to encourage more automobile driving by improving and rehabilitating roads. What the President should in my humble opinion do is provide a coherent vision of the future which involves less driving, less resource intensity, and more knowledge-based activities. Less is more. Small is beautiful. What he instead is doing is a melange of things, including resuming nothing-down house purchases (recent headline: house flipping is back). He has squandered the unbelievable publicity edge he had and because of his failings as a leader now is reported to have the lowest popularity rating of any President in modern times at an equivalent time into his Presidency.
This President has made sure that the aggregate level of debt in the economy relative to GDP has kept growing. This enriches those who market and trade the debt, so Wall Street loves that policy. But it's a high-wire act. If at the other end of the wire is not a lower-debt, less leveraged system, then all we're doing is setting ourselves up for a fall from a higher level. Those of an academic bent may enjoy scrolling through all the charts on Dr. Steve Keen's post at www.debtdeflation.com, 4 Years of Calling the GFC.
Copyright (C) Long Lake LLC 2009