Whither the Dow and the Polls
Obama’s ahead in the polls and the Dow closed down 189 at about 9250. The Dow is in the process of discounting the Obama presidency. It is discounting the high probability of a high tax, high inflation, high spending and high regulation environment that will greet the American economy this January. Further, the markets have a long memory. Like the Great Depression, the correct answer is gearing policy towards economic growth. See President Barack Hoover.
700 billion dollar bail out or no, the costs of Sallie and Freddie corruption comes with a price and will be paid. If not paid through economic growth, then in higher taxes, inflation or unemployment. The markets clearly see that the former will not be the preferred manner of dealing with this financial melt down.
People like to make comparisons with the crash of 1929 and the Great Depression. Two facts stand out. First, FDR did not inherit the depression until 1932. It was Hoover’s baby from 1929 to 1932. Herein lies the trap for Obama, since his potential ascendency to the presidency in January 2009 will be contemporaneous with this economic downturn. It will be his recession or depression. Even as we speak, Bush is a memory.
The second fact, more ominously for long term economic recovery, was FDR never solved the Great Depression. He and his socialist “social engineers” used the crisis to have a field day in implementing all sort of programs that spun off great PR and for the short term enhancement of Democratic political power. The New Deal was just a program of rationing privation.
But, when faced with a must-win war, FDR knew, for the long term viability of the Democratic Party, that he could not trust his egg-head intellectoids. War was a matter that could only be entrusted to the private sector. In doing so, he won the war and solved the Great Depression. Obviously, FDR could have done the same thing eight years earlier. But, he didn’t for political calculation.
What will Obama, Pelosi and Reid do? Or, should I say Pelosi and Reid since they’re going to be running Obama. Very likely, the want to run another New Deal for as long as they can. Which means instead of trying to get the economy up and running as fast as possible, we can expect them to milk this crisis for as much political gain as possible.
This economic crisis is their ticket for power in the legislative and executive branches of government. And, the ticket to expand the reach of government into more areas of what was once a matter of private choice. And, it probably makes no difference to the likes of Pelosi and her fellow travelers as to the long term implications of any new spending and entitlement programs they may try to piggy back on to the current financial crisis.