Happy Thanksgiving! A 2010 flashback… the more things change, the more they stay the same. Alas in more recent years, the Federal Reserve has become the primary purchaser of U.S. debt, having surpassed China; otherwise, the following piece on many levels still rings true. - J.M.H. (11-27-2014)
Populism is Not the Problem….
By J.M. Hamilton (2-8-10)
Populism, as decried in the New Yorker article, is not the problem….
Perhaps, populism is sometimes, a little misguided, yes, but in fact, it’s the solution. As usual the instincts of the American people are, in fact, highly accurate. And any politician, who wants to survive and navigate these troubled times would do well to heed, get out in front of, and attempt to steer public opinion. Such is the calling of President Obama, the second coming of the Great Communicator, leading up to these mid-term elections!
As for the populist rallying cry of the Tea-Bag crowd, “cut taxes,” this originates from the public’s inherent fear of big government and rising fiscal deficits. Obama was elected on a platform of change, and what his administration gave the nation was not change, but a redux of the Clinton’s first years in office. The bill that was about to be passed by Congress, was NOT healthcare reform (or healthcare cost management), but rather, a serious power grab and an expansion of the welfare state.
And hence, the Massachusetts’ miracle, or debacle, depending upon one’s views!
What Mr. Obama really should have spent his first year doing, instead, was giving the nation real change, by addressing the public’s need for jobs, and shearing Wall Street, and cutting it down to size, via the Volcker Rule and much, much more. In brief, the taxpayer owned banks should have already been broken up, which – allegedly (per the banks anyway) – creates dis-economies of scale, and hence, by definition, more jobs, via greater inefficiencies. Breaking up the banks into their core constituent parts would also go a very long way towards eliminating systematic risk; and breaking them up would help prevent the next financial melt-down…. A financial meltdown that this nation can ill afford.
President Obama would have been perceived as a real agent of change had he taken on Wall Street, and given government support to the people, instead of government support/welfare to Wall Street. Instead enormous piles of the President’s political capital were wasted on millionaires and billionaires.
And what has it got the President?
The banks are now lobbying against real reform, and they are planning Obama’s overthrow, by biding their time, and NOT lending to small and mid-sized businesses. As we read in today’s NY Times, the banks are in fact getting ready to back the very same Republican party that ran this nation into the ground. That’s right, the Republican party that has ran record, annual, budget deficits, since Reagan, and unleashed today’s financial crisis, via soft money policies and bank deregulation. Okay, the Democrats were not exactly absent for the last thirty years – but rarely were they in charge of the executive branch, except for Clinton – who actually ran budget surpluses.
In fairness to President Obama, Mr. Paulson, Goldman Sachs Alum, did set up the President, by attaching little or no strings to TARP lending. But I digress…. It was Mr. Obama who brought Tim Geithner on board.
Had this administration spent its first year reining in Wall Street’s worst tendencies, and had the President done more to stimulate the economy and create jobs (instead of giving hand outs, on top of hand outs, to the banks)…. One wonders if the Tea-Bag movement would have ever gotten off the ground? But what we got instead was not change, but business as usual in Washington: finger pointing, half measures, and stalemate. Exactly, what the Republican party delivered for the last eight years.
As for the populist….it’s important for all of us to remember that tax cuts are always nice, but unless they are coupled with reductions in government spending, they are no better than government spending that is not supported by tax revenue (borrow and spend). In short, tax cuts w/out corresponding reductions in government spending (Republicans) are no better than increased government spending which is unsupported by an increase in government tax receipts (Democrats), because they both lead to …What?…. greater government borrowing, greater dependence upon our enemy, China, and an ever rising national debt to GDP ratio.
It would be grand to emulate the great supply-siders of the 20th Century: Kennedy and Reagan! (Kennedy proposed reducing the top individual tax rate from 91% to 65%... no your eyes do not deceive you, and the corporate tax rate from 52% to 47%. Who knew JFK was a radical?)
However, our National Debt no longer allows such extravagances. Instead, it is this President’s challenge, to create jobs and spur economic growth through means other than government spending. And what better way to create jobs than to break up the banks, and insist that any foreign banks – operating on U.S. soil – also adhere to U.S. bank law (Volcker Rule, Et Al.), and also be cut down to their proper size. Otherwise, foreign banks who do not adhere – good-bye.
President Obama was very wise to embrace Messrs. Volcker and King’ counsel, post Massachusetts. Healthcare reform – real cost containment – can wait for another day, like when the unemployment is below 6% again (for two consecutive quarters), and the banks are made to heel!
The President has to do all this with both governmental arms tied behind his back, that would be the House of Representatives and the Senate. Let us all pray for President Obama’s success! Obama’s success is our country’s success. Given the incompetence of the U.S. Congress, the President truly will need divine intervention, and truly deserves our best wishes. Time for Obama to channel, not only Reagan optimism, but the trust busting courage of Teddy Roosevelt.
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