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Learning to say no
President Obama delivers a speech on Wall Street today. The main thrust of it will be his vision for regulating the financial markets, but equally important is the administration's strategy for getting out of American business.
The government has gotten so involved in the economy, it may be difficult to back out. Today, the Treasury said "the process of exit will be prudent, not hasty."
Check out these numbers from the New York Times:
Between financial rescue missions and the economic stimulus program, government spending accounts for a bigger share of the nation's economy -- 26 percent -- than at any time since World War II. The government is financing 9 out of 10 new mortgages in the United States. If you buy a car from General Motors, you are buying from a company that is 60 percent owned by the government.
If you take out a car loan or run up your credit card, the chances are good that the government is financing both your debt and that of your bank.
President Obama uses the term "reluctant shareholder" to describe the government's involvement in companies. Perhaps GM, AIG, etc are reluctant dependents. Either way, there's a provider-dependent relationship. You know how those usually turn out. Until the provider says "there won't be a next time" and means it, the dependent rarely changes:
"This crisis, whether it's because of the Fed or the Treasury or Congress, has created a lot of new moral hazards," said Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia. "Once you have done this once, even though it was in a severe crisis, the temptation will be for people to figure that in the next crisis you'll do it again. You've got to figure out a way to say no."
Obama seems to think that he was elected to a speaking post, he makes speeches about financial reform while providing $13 trillion to “systemically important†banks that he only proposes to regulate more carefully. As Stiglitz points out “the U.S. government is wary of challenging the financial industry because it is politically difficult.†http://www.bloomberg.com/apps/news?pid=20601109&sid=aSbIT8GZjdKI
All this means is that such banks are one of the main sources of campaign contributions in a declining American economy. The medical insurance and products companies being another great source of money, and another area in which Obama prefers rhetoric to action.
The rhetoric / spin of the Obama regime implies the same sentiment as the Reagan regime: government is the problem because it is a more inefficient or perhaps a threatening way (Hayek, Friedman) of doing the same thing. “…but equally important is the administration’s strategy for getting out of American business.†And “The government has gotten so involved in the economy, it may be difficult to back out.†Taken literally this makes no sense because without governments (laws, regulations) there would be no business because there would either be chaos or a few mega-businesses would control the economy like Standard Oil once nearly did and effectively function as a de facto government. The sentiment of Reagan (Bush 1, Clinton, Bush 2 and now Obama) is simply a ruse to facilitate massive accumulations of private wealth that is protected at public expense. The private and fraudulent gains of the large bankers over two decades are not being clawed back despite having distorted allocations of factors of production and created a false sense of economic growth. On the contrary, their losses have been and continue to be socialized. Apparently, that kind of government involvement is perfectly okay, “the proper balance between the public and the private sectors†as the beneficiaries so euphemistically used to express it.
What’s needed to boost the economy for most Americans is a shift to more spending on public goods and much less directed to seeing how wealthy the upper few percent can become. Yet changing it by our current political process seems doomed to failure. Little objection, much less outrage, is raised over a political system in which vested interests “go to the mat to fight any provision that might hurt [self-interest]†(as Alan Blinder recently put it). This as opposed to quaint notion of preeminently considering what is best for America as a whole. Americans are still in thrall of the perverted notion that fundamentally characterized Reagonomics and which was paraded as a virtue: that if everyone pursues his own self-interest that the commonweal will be optimized.
