Upcoming Struggles

by on September 4, 2013 in Economics

My Obama watch antenna are unusually sensitive right now. We are headed into another round of semi-gridlock politically inept infighting down in Washington. As usual we the people will be, by and large, bystanders, while our erstwhile leadership goes through another round of bruising she-said he-said so-called dialog and policy making.

There are two issues of particular note:

One is the obvious continuing floundering of our economy. We are in a sideways drift that, under more healthy political conditions, would be considered an embarrassment. Our economy has oodles of under-utilized resources, pernicious long term unemployment, and gaping regulatory problems in banking, none of which will be high on anyone’s list this fall. Instead we will watch as we are forced through another round of brinkmanship by our extreme right wing Congressional Republicans.

Their focus – for the umpteenth and counting times – is Obamacare. Oh, and the debt ceiling. They have decided that they will combine the two and fight one more last stand against creeping socialism by refusing to raise the debt ceiling unless Obama shoots himself defunds his signature legislative victory. Since there isn’t a hope in hell of him actually acquiescing with the defunding of his own legislation, we have to assume that either we hit the debt ceiling and default on our debt, or that the Republicans cave in.

Now, there are a few Republicans of a slightly less rabid nature who see these two possible endings and would like to avoid both. So they are trying, not yet successfully, to disentangle the toxic weave being spin by their more extremist brethren. These efforts at sensibility merely incite the extremists to greater heights of end-of-the-world invective, and expose the ‘moderates’ to attack in next year’s election cycle. America’s perpetual elections mean that there is no longish period during which temperatures can fall and sanity re-assert itself. Instead we face yet another year of Tea Party activism aimed at weeding out those few – very, very few – Republicans who would like to govern rather than overturn government.

I am not the first to note that our current gridlock stems precisely and exclusively from the extremist drift in the Republican party. That part of the party willing to reach out and compromise rather than object and take hostages is so severely diminished that the entire nation is now stymied in its efforts to reflate the economy and enjoy a full recovery. It is both obnoxious and delusional to assert that, somehow, the Democrats are equally to blame. They are not. The simple fact is that the Republicans have no intention of compromising and wish only to force through their own agenda via various congressional tactics and stonewalling. They do not negotiate they simply submit sets of demands. Then they try to divert the blame onto everyone else when nothing gets done.

This is an epic struggle and one which Obama is not well equipped . His bureaucratic mindset and centrist tendency makes him a poor defender of those who would suffer most from the enactment of the extremist agenda. His rhetoric belies his weakness, but his action – or more often his inaction – make him the most likely moving part in the story line being played out.

So I wait with trepidation as he fumbles about and tries to pretend America is governable. Which is why this is an Obama watch and not a Washington watch.

The second issue where I fear Obama’s poor leadership skills is on the nomination for a replacement for Ben Bernanke at the Federal Reserve Board. All the latest rumblings suggest that Obama wants to nominate Larry Summers. Quite why I don’t know. Well, that’s not quite true, we do know: Summers was part of the White House inner circle during the 2009 policy making process that came up with Obama’s crisis solution. The story seems to be that the White House is so satisfied with the so-called success of its crisis response that those associated with it have a sort of saintly aura these four to five years later. Summers is one of those benefiting from this aura and is thus trusted. He is an insider for a president who relies overly on insiders. Thus Summers is the hot favorite for the Fed. He is also a very bad choice. Very bad.

First monetary policy is not Summer’s strong suit. I realize that someone with a vaulting ego the size of Summer’s acknowledges no weak suit, but let’s just say that money and banking are lower on the list of his strengths than some other aspects of economics. Second, that renowned ego and sense of self-importance means that Summer’s interpersonal skills are closer to those of Attila the Hun than those of Mother Theresa. In these days of gridlock and policy division a modicum of tact seems a useful attribute, especially at a Fed riven through with doubt about its own policies. Then, third, there’s the little matter of Summer’s regulatory record. He is a friend, putting it mildly, of Wall Street. Indeed he just made quite a fortune in finance. His record on banking and finance regulation is appalling. He is one of the legendary gang – along with Robert Rubin his mentor and Alan Greenspan – who foisted the failed bank deregulation on us with all its subsequent disastrous consequences. He has never, publicly, stepped back from that deregulatory stance. He thus remains a Wall Street advocate.

But Obama likes his buddies and their elitist credibility. He seems intent, as of now, to press for Summers. Let’s hope the growing tide of opposition forces him to change his mind

Meanwhile Obama watch shifts into high gear.


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