Obama's Deceptive Dalliance

I have already pointed out that I was disappointed and confused when, at his address to the Congress, Obama told us we were facing an economic catastrophe, a credit and financial tsunami of epic proportions, if we did not act boldly. He then laid out a plan that failed to address the riskiest aspects of the economy at all, in any real terms. Since then, he has proposed a budget that does not address the economy except as an afterthought, and his economic gurus are still pondering, not von Hayek or even Keynes, but the shotgun approach. What I am pretty sure of is, whatever caused the catastrophe-in-waiting, it was not our healthcare system, or our carbon footprint, or our lack of education. Yet his budgets propose to spend trillions on these issues, without waiting even a minute to see if any of his economic machinations have any chance of working.

Obama paints a target on the face of anyone upper-middle class or above, or anyone who might otherwise have been an investor, with his tax proposals to pay for these programs. He undercuts charitable giving, signalling likely mass layoffs in non-profits; kills mortgage interest deductions, thus weakening already weak support for home valuations; seeks higher marginal and capital gains rates, thus removing investment capital and incentives from the markets, which were in desperate need of capital; reduces the incentive to explore and drill for oil, thus making us even less energy independent than we were; imposes carbon taxes that will increase the energy and manufacturing costs of all of us, just when we need it least; he proposes deficit spending of magnificent (and irresponsible) proportions, but employs revenue-negative means to pay for it; and all without any coherent plan to deal with all those toxic assets and bankrupt institutions that, if allowed to fail, will create the very tsunami he predicted.

And what of those toxic assets, now packaged and sold world-wide as derivatives? Well, if either player in a derivative arrangement is a major player, and goes belly-up, that default could create a landslide of other defaults, and as the World Bank continues to warn us, could bring down the entire world financial system. The US can't borrow or print enough money to stop it, because our combined GDP and money supply is only about $30 trillion, while the risk associated with derivatives is more like (to avoid numbers no one understands) $1000 trillion.

My point is that, in his haste to build a European social state by pushing through massive new programs that do not address the real cause of our catastrophe, he is risking his entire Presidency on a single bet - that his legacy will be judged by his three new programs - rather than turning his attention, and that of his entire cabinet and staff, to developing and executing a plan to shore up the incalculable risk hanging over the world's head from the derivative market. How is he different from Nero, fiddling while Rome burned? This inexplicable lack of attention, for now almost six months since his election, makes one wonder if he even understands the problem. Perhaps his vaunted intelligence is not what we thought, or he didn't rub elbows with enough of the world's top economists while strolling around campus at the University of Chicago. Unlike Rush, though, I kind of hope this guy is lucky, even if he ain't good. The alternative is a nightmare I can't contemplate.