Monday, March 9, 2009

Obama on Track

A Great Debate is taking place across the political spectrum of economists, financial analysts, and politicians over the several measures put in place by the Congress, the Federal Reserve Board, and the Treasury. The disputes center on whether the stimulus is too large or too small; whether the timing of its expenditures is correct or too late; whether the mix of spending and tax relief is most productive; whether the Federal Reserve Board is keeping up with or is behind the curve; whether Treasury secretary Tim Geithner is up to the job; and, whether and how many more stimulus, Treasury, and Fed packages are required.

A hundred schools of thought are contending to show the way forward, how to reduce the length and severity of the recession, and how best to foster a recovery with stable prices.

One might suppose that President Obama is having sleepless nights, trying to determine the best way out of the economic and financial mess created by years of cheap money and the manufacture of credit instruments that no one fully understood.

Despite strong rhetorical protestations, President Obama and most of his Democratic party are probably pleased with the shape of things. If the economy continues to decline and/or remains stagnant through 2009 and the first half of 2010, the government could end up owning a majority or controlling stake in the country’s leading financial institutions. So, too, for the insurance, auto, medical, and who knows which other sectors that request federal assistance. Democrats will be in no rush to return state-controlled enterprises to private hands nor will they be under pressure from their supporters to do so. Government ownership and control of key sectors, known in China as “Socialism with Chinese characteristics,” means a market economy with government control of leading sectors.

The flood of money released into the economy should begin to show a positive effect on jobs sometime in 2010. If so, Obama will attribute improving economic conditions to the stimulus package and other regulatory measures the Democrats put in place. Democrats will have the upper hand in the November 2010 Congressional elections, along with control of the flow of credit and leading industrial sectors. The “mixed economy” is a Democrat’s dream, completing Roosevelt’s economic transformation and bringing about another long period of Democratic governance.

No comments :