Playing Politics versus Real Life Problems

As the politicians snipe at each other and the media focuses on the insults and pithy barbs, the American people are paying the price.

A sluggish economy, high unemployment, a volatile stock market and rumors of a “double-dip” recession live in tandem with some seriously positive pockets of vitality in certain segments and companies. There are many firms out there doing quite well, thank you.

A recent report stated there were 3.2 million job OPENINGS across the country. How can this be, with 14 million people presumably looking for work? The CEO’s will tell you that finding QUALIFIED workers is the problem. America’s education system is churning out young people unable to hold the jobs now available.

How did we get into this mess? More importantly, how do we get out?

Following the sequence of events, tell me-------which of the following is NOT true?

1) Lack of regulation/oversight and/or enforcement of banks and financial institutions created an environment where risky mortgages, derivatives, suspect financial instruments and bundling of debt and sell-offs to other financial institutions reached a fever pitch. The deposit to loan ratios were skirted or ignored. It was a shell game---with no referee. TRUE?

2) When capacity exceeded demand and housing values started to fall, the house of cards caved in. As all bubbles must, this one burst. TRUE?


3) The “too-big-to-fail” institutions teetered on the brink of collapse—and both Democrats and Republicans supported the bailout, citing impending economic collapse as the reason to intercede. Both parties vowed that such unfettered and unregulated business practices leading to the crisis must “never happen again” Much of this was done in front of TV cameras for the folks back home. TRUE?

4) Once rescued, the large banks and financial institutions rebounded, but little “trickle-down” to the American consumer was evident, from the difficulty in acquiring a car loan to getting a mortgage. The little guy’s world was largely unchanged. Those whose homes were in foreclosure saw little or no relief, re-structuring or re-financing. TRUE?


5) Legislation designed to prevent a repeat performance—introduced by Democrats—was universally trashed by Republicans as excessive government control of private institutions. TRUE?

6) The government bailout of General Motors—largely decried by conservative Republicans (except in Michigan) has been proven the correct move. More than 1.2 million jobs were saved—in direct and related industries. Further, the U.S. Treasury is being paid back, in much the same manner as the Chrysler bailout decades ago. TRUE?

Are any of the above statements NOT true?

Whether we like it or not, there are indeed financial entities that are too big to fail. In dealing with these institutions, one of two things must happen:

1) We must either break them up into smaller, unrelated entities—much like the Standard Oil monopoly or…

2) They must be officially designated as “too big to fail”---thereby agreeing to a tradeoff whereby they accept a higher level of government scrutiny and regulation in return for the security of a government bailout.

As the protesters gather on Wall Street—and high above them in their glass & steel cathedrals of finance, the captains of capitalism look down on these scraggly demonstrators with disdain, there is an inescapable irony:

These Wall Street-types, who are almost universally conservative and vote the straight Republican ticket-------are largely still in business BECAUSE of Democratic party efforts to bail them out—the same “big government” strategy that they condemn may be the sole reason they still exist.

Conversely,

Democratic efforts to save these institutions are done with the “little guy” in mind. Not caring a whit about the millionaires, it is the potential effect on the working man and woman that motivates these liberals to bail out the fat cats. How disappointing it must be to look back and see that your vote to save a mega-firm seems to only help those same millionaires.

The American people demand political action to reverse the economy. This plays directly into the Democratic ideology that government intervention—in the form of tax breaks, job programs and such—can have an immediate effect. The downside is that they may largely be temporary and artificial.

Republicans are left in a politically more vulnerable position. Their “hands-off” approach centers on lifting the very regulations whose absence contributed to the melt-down, cutting spending (including some of the safety net and social programs) and giving further tax breaks to corporations. Their assertion is that “Obamacare” is the root cause of the hiring drought—and that it’s repeal will “stimulate” the economy.

Not only will these moves take a lot of time to work (if they do at all), but each component exacts harm to the middle class in the short term and extends further relief to big business. The Republican’s adamant stance against increasing tax rates on the wealthiest Americans will further alienate them from a huge segment of the electorate.

For a country that demands action, anything that looks like more pain is not a saleable strategy in an election year.

Over 60% of Americans are in favor of the President’s Jobs Bill—and yet it will die at the hands of Republicans. In 2012, it will be easy to convince voters that a Congress held hostage by Republican intransigence is keeping the country from moving forward.

The Democratic storyline goes like this:

1) George Bush and the Republicans created the economic meltdown of 2008
2) President Obama saved GM and tens of thousands of other jobs, thus averting the second Great Depression
3) Republicans in Congress are defending the wealthy and obstructing Democratic efforts to create jobs and turn the economy around.


The Republican storyline looks a bit different:

1) Obama made a bad situation worse
2) Government spending and “Obamacare” are the reason why the economy has not recovered.
3) Recovery turns on drastic cuts in federal spending and retreat from excessive regulations that hinder business.

Both sides have their points to make, but I’d hate to be the Republican nominee—on the campaign trail defending a non-proactive approach. The Democrats need only refer to the failed Bush tax cuts---designed at the time to stimulate the economy—as evidence that market forces alone cannot solve the problem in a timely manner.


What do you think?

To get this blog in your e-mail, just let me know and I’ll add you to the list: tim.moore@cumulus.com