new administration Archives - Where Is The Outrage?

Closing arguments – Why I Continue to Support Barack Obama, Economy

I continue to be amazed at how some Americans will believe just about anything. Barack Obama was born in Kenya. Barack Obama was born in Indonesia. Barack Obama is a Muslim. Barack Obama is a communist. Over the last five years, I have heard it all. I’m sure somewhere I read that Barack Obama is really a space alien from the planet Alpha Centurai.

President Barack Obama has led the country in truly trying times. It’s only been over the last 15 years or so in which our political discourse has deteriorated so much that it doesn’t matter what you say or how you say it. Fierce opposition will arise. Take, for example, a truly simple problem – the collapse of Chrysler and GM. This should have been an easy bipartisan fix. Sure, there are some folks on Capitol Hill who are the ultimate idealists and believe that government intervention is never the right answer. But there only a few of those true ideologues. There are some these idealists on both sides of the aisle. President Bush started the process of helping the auto industry by giving them a bridge loan until the new administration could take office. Barack Obama took this initiative and ran with it. Almost instantaneously Republicans were against it. From a truly economic standpoint, the collapse of GM and Chrysler would’ve been catastrophic to an ailing American economy. Instead of Americans being able to rally around one of our signature industries, this quickly dissolved into a huge fight. Suddenly we had the great big, huge government takeover of an industry. Barack Obama was painted by his opponents as a Marxist or a socialist because he did the sensible thing. GM, Chrysler and Ford are now back on the right track. Their loans are paid back. They’re more competitive than ever. Millions of Americans now have jobs because our government stepped up and stood up for the American people.

When Barack Obama took office our economy was shedding over 700,000 jobs per month. It was the worst economic nosedive since the Great Depression. For many Americans, the Great Recession came out of the blue. Most of us were unaware that our economic boom in 2005 and 2006 was standing on a very precarious foundation. The housing market collapsed. Millions were laid off. Great Wall Street firms were folding like a deck of cheap cards. First Bear Stearns. Then Lehman Brothers. Merrill Lynch, a household name, was pulled from the brink of extinction by Bank of America. The stock market was tanking. It was ugly. It’s only with 20/20 hindsight that can we step back and look at how close we came to a real, honest to goodness depression. In my opinion, we were this close to unemployment rates of 15%, 18% or even 20%.

Barack Obama decided we needed an economic stimulus. Many economists were talking about a stimulus that was somewhere in the neighborhood of 10% of GDP. That would’ve been $1.5 trillion. Christine Romer, chairman of the President’s Council of Economic Advisers, had $1.2 trillion as her starting point. By the time the plan bounced around the administration and before it got to Capitol Hill, the plan was trimmed to $800 billion. This price tag was simply too much for many conservatives in Congress. They went crazy. There’s no other way to describe their response. In order to win bipartisan support, the president and his advisers removed some of the stimulative projects and inserted tax cuts. They continued to insert tax cuts until they were able to get enough Republicans on board to pass the stimulus package. Let’s remember that not all government spending is going to stimulate the economy in the same way. In spite of the wrangling, the administration was able to get an economic stimulus passed. It wasn’t the best package, but it appeared to be enough to stop the economic free fall that we were in.

Over the last two years, our economy has been the little engine that could. Slowly but surely gaining momentum. Wages remain stagnant but we’ve seen an economy that has gained private sector jobs for 31 straight months. We’ve seen an economy that has gained over 100,000 jobs per month for the last eight months. Things are getting better. Consumer confidence is up. Home prices have stabilized and they are beginning to rise. New-home construction is improving. Things are getting better.

The reason I voted for Barack Obama (I voted early) is that, he has guided our economy from the depths of despair to today when all Americans can see that things are getting better.

AIG – the real scandal

I have talked about AIG before and the stupidity of Credit Default Swaps. Former Secretary of Labor Robert Reich has a few words (I have added links and emphasis).

The real scandal of AIG isn’t just that American taxpayers have so far committed $170 billion to the giant insurer because it is thought to be too big to fail — the most money ever funneled to a single company by a government since the dawn of capitalism — nor even that AIG’s notoriously failing executives, at the very unit responsible for the catastrophic credit-default swaps at the very center of the debacle, are planning to give themselves over $100 million in bonuses. The scandal is that even at this late date, even in a new administration dedicated to doing it all differently, Americans still have so little say over what is happening with our money.

The administration is said to have been outraged when it heard of the bonus plan last week. Apparently Secretary of the Treasury Tim Geithner told AIG’s chairman, Edward Liddy (who was installed at the insistence of the Treasury, in the first place) that the bonuses should not be paid. But it turns out that most will be paid anyway, because, according to AIG, the firm is legally obligated to pay them. The bonuses are part of employee contracts negotiated before the bailouts. And, in any event, Liddy explained, AIG needs to be able to retain talent.

AIG’s arguments are absurd on their face. Had AIG gone into chapter 11 bankruptcy or been liquidated, as it would have without government aid, no bonuses would ever be paid (they would have had a lower priority under bankruptcy law that AIG’s debts to other creditors); indeed, AIG’s executives would have long ago been on the street. And any mention of the word “talent” in the same sentence as “AIG” or “credit default swaps” would be laughable if laughing weren’t already so expensive.

This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that’s “too big to fail” and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. To whom should they be accountable? As long as taxpayers effectively own a large portion of them, they should be accountable to the government.

But if our very own Secretary of the Treasury doesn’t even learn of the bonuses until months after AIG has decided to pay them, and cannot make stick his decision that they should not be paid, AIG is not even accountable to the government. That means AIG’s executives — using $170 billion of our money, so far — are accountable to no one.

Congress is really, really not happy about the bonuses.
AIG pays big banks $93 billion with our bailout money.
Bernanke talks to 60 minutes about the bailout. See Video Below