To Sue on 3/7/09

My dear friend, you are most certainly correct that what is happening is frightening. And, more frightening is the fact that the fear is justified. I think the first thing that we in America must realize is that this is not a personal problem but rather an international crisis. Even China, now our selfish benefactor, is slipping. Other moderately and more heavily developed countries in Europe, Asia and the Americas are in the same boat. Significantly, they also are “throwing money” into their banks, infrastructure and markets. Now, this is not proof that this approach is the correct one since it could just be that everyone is wrong in choice of solution. Yet, I have to believe that the governments had sought their best available advice. So, it appears to me, that the real consensus is that governments are the only alternative for meaningful and necessary intervention. These are not just the so-called “socialist” countries of Western Europe. GDP’s have fallen across the board (even China) and so looking comparatively at spending as a percentage of GDP past and present is misleading at this time. I respectfully disagree that “every economist in the land” is seriously opposed to what is going on. And Cramer performs as an idiot. In the first place he is not an economist; like Rush (with no respect due to him) he is an entertainer. Cramer made his name on Wall Street as a practitioner during “bubbles.” Throughout the lead up to the crisis Cramer repeatedly screamed for investment and often urging investment in or contending the strength of corporations just prior to their collapse. There is enough on the internet, aside from Republican/Rush conservative sources, to see a broader picture.
Of course there is a great danger that such levels of government spending may create another inflationary crisis in the future. I think this is recognized by all including the Federal Reserve Chairman and the President. This concern is, I believe, the reason the President has announced a plan/intention/proposal to cut the federal deficit by something like a half within a stated time frame. The international community, which rightly still considers us the “strongest” economic entity, and our own market and banking communities need to have their confidence bolstered that the massive spending will have limits. I guess I have to mention the tax “increases” at this point since the lapse of the Bush cuts is a large part of the spending balance. Bush and the then Republican congress, on the verge of enormous expenditures for war, played the big “conservative” card that helped to push us from a negative national debt to the abyss we have today. No, though my exquisite manners and impeccable taste suggest that I am in the upper tax brackets, I fall far, far short. The “over $250,000” will suffer a return to tax levels of something like 39% rather than the present 37%. Actually, pre-Reagan I believe the rate was closer to 90%.
Please recall as well that the first ¾ trillion bailout late last year came at the urgent pleading of the Bush administration and the Fed; all this on top of the deficit of the Bush years. So, I find it quite disingenuous of Republican politicians to now scream about uncontrolled spending. Another tenet of the Republican Party has been the rejection of government interference, i.e. regulation, in business and Capitalism. So, quickly because I tend to ramble, let’s talk about the home mortgage crisis that was and is, by all accounts, a significant though not sole factor in the world-wide crisis. Here the Democrats and Republicans can take some blame, though each was motivated by different objectives, for pressing for expanded home ownership. So, “bad” loans were encouraged. Once these bad loans were in place they became subject to wholly unregulated (another joint mistake of the two Parties) derivatives. And imagination and greed piled more complex derivative upon complex derivative (all based upon the same bad or questionable loans). This was not simply the Fannie and Freddie situation though they were a part of it. Importantly, Fox, CNN, MSNBC, President Bush and Cramer, et al., were all advising and screaming spend, spend, spend. Recall that Bush said after 9/11 that all Americans need to get out and spend. So people, sheep that we are, pushed credit to the max, took out second mortgages, bought investment homes and used home equity to buy bling and gas guzzling trucks and vans. All the while input into the Treasury was cut substantially by the sacrosanct tax cuts. And the bubbles got bigger and bigger while warnings were ignored.
Now, in the first month, focus on that for a moment if you will – the first month, of this administration the Democratic House came up with a ridiculous, far-left package that reasonably was whittled down in the Senate. I accepted that Obama needed some time to assert his control over the congressional Democrats and that control is slowly becoming more evident though not complete by any means. It is significant, I believe, to recall those days long ago in November of last year when the majority of the American people repudiated the professed philosophy and expressed conduct of the conservative Republican Party. It can be argued that the vote for Obama was, to some measure, merely a rejection of the Bush cabal and not his Party values. And that may have some truth, however, it may also be correct that the Obama vote margin would be even greater in his favor, rejecting Republican values, except for the concern for Obama’s lack of experience.
I come from a generation raised with a belief in the reforms of the Roosevelt administration after the last Great Depression. Certainly, WW II changed the whole dynamic in bringing the world out of that depression but, as one example, unemployment dropped from some 25% to 10-12% before WWII based on such spending programs as the CCC’s and WPA. Roosevelt really was not the communist/socialist he is depicted as in some circles today. His policies were intended and did foster capitalism and business growth. I see Obama’s stated positions as similar. We need, in the context of vigorous debate, to give him some time. But, within that debate, ALL must recognize that a fundamental problem with our economy is a lack of confidence. A big part of the world’s problem is a corresponding lack of confidence in us. When our politicians vehemently reject and raise Armageddon as the necessary result of Obama’s policies it undercuts any positive effects of the programs. There must be a cautious balance in the public rhetoric. There will be ample opportunity to get back to the fear mongering of the Bush years during an election but for now they should cool it.
Substantively, I have absolutely no problem with the government spending (remember it is the ONLY source of recovery now) to increase jobs while repairing our roads, bridges and electrical grid (remember the falling bridges, failing dikes and blackouts due to antiquated structure); to enable and encourage start-up companies and entrepreneurs in developing new clean energy sources (rather than diminishing, polluting and foreign fossil fuels); to encourage and support educational opportunities for Americans in fields such as nursing and engineering so that we can BECOME AGAIN a competitive economic power (we now import nurses; high school dropout rates and our comparative (world)testing scores are abysmal); and revamp the medical system so that those companies that still pay or would pay a part of health care would not need to do so and their competitive outlook would be greater against the rest of the civilized world that has generally universal coverage and America would have a healthier work force (again our health care, as expensive as it is, is not as successful as in many other developed countries).
It is frightening and ANY alternative is a gamble based on too many probabilities as well as unintended consequences. The country picked a leader and he is putting out a plan. In combat, any plan may be modified prior to the assault to fit a changing situation and there will have to be adjustments – and there will be mistakes – in the administration plans. However, in combat, once the plan is being executed, even if it is not the optimum, if it is carried through with courage and vigor it can succeed.