"Catastrophe" seems to be one of Barack Obama's favorite words lately. But I figure that it's a short hop from "catastrophe" to "end times" and I expect Barack Obama will soon make that leap. His job is to convince Americans that his billion dollar Porkulus program, combined with a smaller billion dollar Stimulus Plan, is absolutely necessary to kick the economy into gear. You don't believe in the Obama administration fix for the economy? You'd better. Here we are at the "end times." Proof of it is what already didn't work.
The 2008 Stimulus Plan in which people received amounts ranging from zero to 1200 bucks didn't work. Thank you, George Bush and Senate Democrats. We enjoyed our $1200 bucks and did what we were supposed to do as patriotic Americans. We spent some of the windfall on a $700 flat screen TV. I have no clue what we did with the rest...it seems to have evaporated somehow into our negatively inclined balance sheet.
$350 billion spent by Hank Paulsen to shore up the credit markets didn't work either. Not only that, but no one has any clue as to where those billions went. If they did, there would have been no need to call Bank Executives onto the carpet at a Senate Hearing yesterday. The Senate Banking Committee hearings provided an opportunity for a public flogging and a great opportunity for stagecraft for Barney Franks and Chris Dodd, among others. I don't how it is in your family, but in our family, we do enjoy a public flogging on occasion except in those cases where the floggers should have been the floggees. WTF was the "Banking Committee" when we needed it most? Pushing sub-prime loans at Fanny Mae and Freddie Mac or getting special loans from Friends of Angelo Mozilo at the bankrupt Countrywide Bank?
Tim Geithner announced a new flim-flam plan(rhymes)on Tuesday for the spending of the second tranche(French, for "slice.") of the 750 billion already apportioned for freeing up the credit markets. The stock market responded to Geithner's "reassurances" with a nearly 400 point drop, after a previous week of decline. This new "tranche" money will disappear like the first shot of monetary policy adrenaline as banks engage in that favorite buzzword of euphemistically inclined economists: "de-leveraging." "Deleveraging" means holding on to the money you got from the government with your hot little hands and using it to prop up your balance sheet.
"De-leveraging" is not a French word like "tranche" but the French probably have a name for it that doesn't bear repeating. Perhaps the famous French proverb will do: "Plus ca change, plus ce le meme chose!" No need to translate this--you already know even if you don't speak a word of French.
Yesterday, Congress passed the American Recovery and Reinvestment Act to the tune of close to a trillion conveniently not counting interest to be paid by future generations. There's lots of what NJ Governor Corzine called "good stuff" (CNBC's Squawk Box) in the bill but so little of it qualifies as "stimulus." Most economists define "stimulus" as money which flows into the economy in the current year, not years into the future. I like the name of Obama's stimulus plan, though: American Recovery and Reinvestment Act. Not only does it sound hopeful, but it has none of the cynicism of the poisonous card check bill being prepared like a punji pit in the House. The card check legislation goes by the hearty euphemism "Employee Free Choice Act," an appellation which implies the Bill is exactly what it is not. You have to have done a stretch on a truck loading dock in below zero weather,with both Teamster Union and operations management goons prowling the dock trying to influence your vote, to truly appreciate the "Employee Free Choice Act." That was "back in the day," though, and I'm sure that modern union-management adversaries no longer carry guns as insurance of their own safety. Just drive by any blue-collar pier, oil rig, or truck loading dock or similar environment these days and you'll surely see Union and Management officials sitting around cheerfully holding hands and singing "Kumbaya."
But hey, I am no Cassandra and can't see any farther into the future than anyone else. I think a little common sense will go a long way here, though,and I'd like to close my rant on an optimistic note. There's no way that these times, in spite of the massive and heartbreaking job losses, can compare to the sufferings of the Great Depression. I expect that America will be going back to the seventies, though, when the economy was stagnant and contracting: there were gasoline lines and sky-high interest rates. In the 70s, the unemployment rate was higher than it is now and there were thousands upon thousands of unemployed Vietnam war veterans looking for jobs.
A "bright note of our "progressive" era is that returning Iraq and Afghanistan veterans may face financial and social hardships but not the shameless treatment to which Vietnam veterans were subjected. The economy is cyclical and dynamic as people are free, in this country, to devote themselves to the pursuits of life, liberty and happiness. That means bank and automotive executives as much as it means those of us who will benefit from extended benefits on the unemployment line. The worst damage sustained by the credit crisis originated within an inflated housing "bubble" and we are still waiting to hear the Geithner remedy for that.
The Obama administration has been criticized recently by left, center, and right for having feet of clay in response to the economic crisis. America being what it is, the economy will most certainly rebound. The trick, for the Obama administration, is not to get too much in the way or too heavily mortgage the future by creating false bottoms which undermine the confidence people need to feel about the future. That way, Obama can claim his stimulus package caused the rebound which is certain to occur within the four years of his first term.
The question people will be asking themselves then will be familiar: "Was doing something at the risk of doing harm to the future economy better than doing nothing now?"