Wednesday, January 27, 2010

Obama Seems Confused (pre-SOTU)

 ... particularly on his economic message.

The bank tax and the mini-Glass-Steagall are less than impressive policies.  While some sort of FDIC-like counter-cyclical bailout insurance kitty funded by the financial sector cannot be categorically dismissed, the timing and the rhetoric of these announcements were unwelcome.  With respect to the timing, Obama seems to have forgotten that there was a reason TARP was passed --  several major banks were failing, and if one or two had fallen they all probably would have.  With the Federal Reserve still officially worried about deflation, knee-capping the major mechanism for stabilizing the money supply seems ill-informed.  Specifics of the implementation aside, the bank tax should have been rolled out at least a year from now rather than, conveniently, as a distraction from the Democrats' loss of the Massachusetts Senate seat.  Regarding the mini-Glass-Steagall, the Chancellor of the Exchequer for the UK (which is for the moment still held by Labour) thinks Obama's proposals would not have prevented the crisis had they been in place (and would therefore not preclude future crises), and undermine the effort at a global regulatory consensus.  That's Smart Power for ya.

Rhetorically, Obama chose to go Lefty rather than centrist when rolling out the bank tax.  There's actually a reasonable, calm, centrist justification for some sort of insurance fund for too-big-to-fail institutions.  Obama didn't go there.  Instead, he railed about getting our money back from the bankers.  However, the banks he's taxing are mostly ones that have already paid back the TARP money --with interest.  Remember that extra "profit" from TARP that Uncle Sam made?  The money the Congress was looking to turn into their own personal "Main Street" slush fund for "jobs"?  The banks that paid back that money, some of whom didn't want bailed out in the first place, are the ones Obama chose to target with his left-populism.  When are we going to get our money back from General Motors and Chrysler, the corporate hosts for the parasitic UAW?  About a quarter 'til never, that's when.

The optical justification for this seems to be twofold - (1) Make the Republicans defend the unpopular banks, and (2) appear angry.  Appearing angry is important insofar as David Plouffe et al think anger qua anger is the essential catalyst that propelled Scott Brown to victory, no matter the object of that anger.  Besides being a substantive policy error, I don't even think this was a smart political move.  Obama is an increasingly polarizing figure who could use a little centrist mojo.  Mr. Calm-and-Cerebral was the man who made Christopher Buckley's and David Brooks' nether regions tingle, not Mr. Angry-Retributive-Bank-Basher.

Grasping at straws, Obama leaked a plan to freeze non-Defense discretionary spending. Check that, "non-Security" discretionary spending.  (Recall that Obama mocked such freezes in a 2008 debate.  Despite his flaws, McCain looks better and better all the time.)  While this is a much larger rhetorical concession than a substantive one, this policy reveals a fundamental confusion about the official economic religion, Keynesianism, or at the very least, a willingness to commit Keynesian heresy for electoral purposes.  The last thing a Keynesian should do in a recession is trim government spending, and the Left has gone apoplectic.  Maddow continues to bark about Herbert Hoover with unintended irony.

[I didn't know political appointees received bonuses.  For what reason?  How would such a bonus be calculated, or on what performance basis would one be awarded?]

I expect to hear more muddle about a new-found sense of fiscal responsibility tonight.  But I also expect to hear about more poorly informed interventionism to "create jobs" that will have the opposite effect.  (Why is it a good idea to subsidize those who "choose public service", i.e. bureaucrats?  Government already employs more than the manufacturing sector.)  Even the Schumer-Hatch payroll tax compromise is not without its perverse incentives to fire current employees and hire the unemployed (making sure to have a net increase in employees). 

There's too much confusion - I can't get no relief.

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