Obama’s Dilemma — and Ours
Seventy-one years ago this spring, after the German army had broken through the French lines, British Prime Minister Winston Churchill flew to France to consult his embattled allies on how to stop the advance.
“Where is the strategic reserve?” Churchill urgently asked the French commander in chief, Gen. Maurice Gamelin, and then he repeated himself in French: “Ou est la masse de manoeuvre?”
“Aucune,” came Gamelin’s reply. “There is none.”
The French had no reserves to stop the Germans from overrunning their country. The Battle of France was lost.
The Obama administration, in its grand strategy to generate a rapid and strong recovery from the Great Recession, is at a similar pass. It has drawn and played all its cards: the $800 billion stimulus bill, three straight deficits averaging $1.4 trillion, the Federal Reserve’s mass purchases of bad paper from the world’s banks, and QE2, the monthly purchase of $100 billion in Treasury bills that ends June 30.
Yet, from the numbers that came in from May, Obama looks to be holding a losing hand. The anemic growth of the first quarter of 2011 seems to have stalled, and the prospect of a double-dip recession looms.
Though the administration anticipated perhaps a quarter-million new jobs in May, as April produced, May generated only 55,000. The unemployment rate ticked back up to 9.1 percent.
The rise in manufacturing employment went into reverse. Five thousand manufacturing jobs were lost. Consumer confidence sank.
Today 2 million homes remain vacant in the USA, putting immense downward pressure on housing prices. A fourth of U.S. homes are not worth the mortgages being paid upon them.
Says Federal Reserve Vice Chairwoman Janet Yellen, “Looking forward, I unfortunately can envision no quick or easy solutions for the problems still afflicting the housing market.” Recovery is going to be a “long, drawn-out process.”
A further decline in housing prices of 10 to 25 percent over the next five years, says Robert Shiller, the economist who invented the S&P/Case-Shiller index of property values, “wouldn’t surprise me at all.”
The economic malaise has now begun to affect the mood of the nation and its attitude toward the president.
Almost 90 percent of Americans think the U.S. economy is terrible or poor. Sixty percent think the nation is headed in the wrong direction. Forty-eight percent expect a second Great Depression next year. Fewer than 40 percent approve of Obama’s handling of the U.S. economy.
In one new poll, Mitt Romney leads the president 49-46 in a matchup in 2012.
The question Obama faces and, indeed, Congress and the nation face is: What do we do now?
Chairman Ben Bernanke of the Federal Reserve has signaled that there will be no QE3, no more Fed purchases of $100 billion a month in U.S. government paper. Buyers for that $1.2 trillion a year of U.S. debt will have to be found elsewhere.
And with the economy stagnant or sinking, the Democrats on Capitol Hill are starting to back away from any deep budget cuts, even as Republicans are now even less likely to sign on to any tax increases to reduce the $1.5 billion deficit.
Indeed, if the economy is stalled or sinking into recession, what economic theory is it that argues for austerity and tax hikes?
And the perceived economic stagnation not only diminishes the chance of a bipartisan budget deal but also points to deadlock on the debt ceiling.
Republicans are already holding out for $1 in spending cuts for every dollar increase in the debt ceiling. And the country seems to be behind the GOP position: If the Senate and White House don’t agree to $2 trillion in spending cuts, we don’t raise the debt ceiling by $2 trillion.
The U.S. government does not run out of money to pay its bills until August. But markets probably will be making judgments upon the likelihood of a U.S. default well before then.
How did we get here? How did the richest and strongest country in history, triumphant in World War II and the Cold War, approach so soon the condition of the late Spanish and British empires as they began their precipitous declines?
Answer: We overextended ourselves. We bankrupted ourselves.
We undertook the defense of nations all over the world having little to do with our vital national interests. We fought unnecessary wars. We doled out trillions in foreign aid to ingrates, incompetents, opportunists and thieves.
We promised all our seniors Social Security and subsidized medical care for the rest of their lives and failed to put the money away to pay for it. We dropped half of U.S. wage earners off the tax rolls while creating a mammoth welfare state to dwarf anything Norman Thomas and his Socialists dreamed of in the 1930s.
Not only for the United States but also for the West, the days of wine and roses are over.
Radical first step: Let’s show the truth, thus unfooling the people!
Two severe asset overpricings:
http://homepage.mac.com/ttsmyf/RHandRD.html
Two severe overconsumings (see second chart):
http://homepage.mac.com/ttsmyf/RD_RJShomes_PSav.html
‘Solution’ so far does ‘Shafting the Kids’:
http://homepage.mac.com/ttsmyf/debtGDP_whys.gif
“Not only for the United States but also for the West, the days of wine and roses are over.”
In America, private jobs are in decline, because any job that can be off-shored has been sent overseas. As a result, corporate profits have increased along with unemployment of Americans.
Foreign-born workers on various employment visas are being brought everyday to fill high-paying tech jobs in America.
Both State and Federal jobs are paying higher and higher salaries along with job security and all kinds of benefits.
President, cabinet members, members of Congress, members of Judicial branches, and other government employees are earning ever increasing salaries in America.
To pay huge salaries in government jobs requires higher taxes on private sectors. But, Republicans reduced taxes on private sectors to the minimal.
Consequently, government borrows and inflates dollars to pay for government jobs.
For high-earning government officials in America, days of wine and roses may be over, but days of wine and cheese are to come.
Anyone that thinks Mitt Romney will solve our problems is seriously delusional. If this is our “choice” come 2012, we might as well stick with the clown we have now and go off the cliff together.
Got gold?
So our national purpose is to imitate the lemming?
If I might say three words when stringed together might put me on trial for obscenity–
THE WASHINGTON POST
There, I wrote it down, now remind me to wash my hands, and probably for thinking this, my brain
but that, THAT newspaper reported earlier this week, that perhaps what is needed, maybe not as even more evil than the three words in caps above, is
INDUSTRIAL POLICY.
I don’t know how I am going to live with myself. (I have to go back now and brush up on the lemming)
@ Ed
Re: The third link
Please expound to us readers about the significance of the graph, comparing #1 [government debt as % of GDP] with #2 [personal debt as % of income]. I noticed that #1 was high, yet #2 was low during the end of World War II. Whereas today, both (#1 & #2) are high simultaneously.
From what I understand, the personal savings rate was high during World War II, thus mitigating the horrid government debt. Whereas today, with both government debt and personal debt being high, we might wind up like Greece.
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@ Pat Buchanan
“We promised all our seniors Social Security and subsidized medical care for the rest of their lives and failed to put the money away to pay for it.”
So true!
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@ Majumder
Those bullet points are succinct.
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@ Steve H.
http://kellyrek.blogspot.com/2011/06/anyone-but-mitt.html
I’m going to vote for Ron Paul. I may have many differences with Dr. Paul but at least the man is honest and my conscience will be clean in voting for such a man.
Is America out of bullets?
No!
Provide a business environment that gives an competitive economic advantage to American businesses that hire American workers on American soil.
Right now, government policy is to give a competitive economic advantage to foreign and ex-patriot businesses to import products and services.
How do we provide a competitive aeconomic dvantage to American businesses on American soil?
Lower the corporate tax on American corporations’ enterprises on American soil and impose a revenue tariff on imports.
Right now, a corporation that makes profits overseas by outsourcing and offshoring does NOT pay taxes on that profit until it brings the money back to America.
But these corporations don’t bring the money back so the profits ends up being TAX FREE.
So, any American company which is confined to American soil is placed at a tremendous disadvantage vis-a-vis transnational corporations who hold their profits overseas.
That begs additional outsourcing and offshoring of American jobs to stay competitive with those corporations already offshore.
It’s a reckless and dangerous policy the U. S. government has now imposed for over a decade — the results are in — it’s a disaster for the American Nation and it doesn’t have to be that way.
It is a conscious policy choice — and it’s killing America.
No worries the government will “create” jobs and “stimulate” economy
Than Obama will go again to middle America to tell them that their jobs are gone and will not be coming back
They have to become highly innovative software engineers or perish
Than he will hire Immelt to create jobs and advise
Immelt will create jobs in China as he did in last 15 years and advise
that big corporations are burdened with 0 $ tax they pay for billion profits
Finally Obama will extend another tax credit to GE in exchange for millions in campaign donations (not easy to reach billion goal)
As Leibnirz said this is the best of all possible worlds
We are all waiting for new Voltaire to write Candide
“We undertook the defense of nations all over the world”.
We have not engaged in defense of any nations in decades, not even our own. The only defense has been of corporate profits, and the transfer of costs to the taxpayer, destroying the free market in the process. We’ve been paying $10 a gallon for gas for a long, long time. Just not at the pump.
Where to cut without harming the domestic economy? Obviously- defence spending overseas including reducing the consumption of foreign produced fuels. Get out of Iraq as quickly as possible. Bring the entire surge force home from Afghanistan now. Close the bases in England, Spain, Romania, Italy and Japan.
The following will cause some pain in the US but must be done: Cut F-35 procurement by 50%. Cancel the USAF manned bomber, Army Future Combat Systems and USMC expeditionary assault vehicle programs. Cut all military aid to the Middle East. Reduce through attrition, the size of the active army and air force by 25%. Do not increase Tri-are coverage.
The above should save about $ 400 billion per year for the next decade.
The whole idea of the New World was so we could excuse ourselves from the problems of the Old World. I have no problem intervening to protect Western Civilization in Europe as needed, but the tyrants of the 20th century have been dispatched for many decades now, and I don’t see any similar threats on the horizon.
I’d be happy with focusing any foreign aid we can spare on Mexico, because that actually helps us and them. With Canada to the north, a peaceful and more prosperous Mexico to the south, and two big oceans, we don’t need a gigantic national defense apparatus except for a big honkin’ Navy
It isn’t the President’s fault that we are in this mess. It is important to note that he inherited the mother of all meltdowns, and had only one tool left in the shed which was a keynesian stimulus. Also 2 wars that were off of the budget. Unfortunately, we were so broke by this point that we simply could not afford a sufficient stimulus plan. So Obama was doomed to fail. It is important to note where we were only 10 years ago. At the end of the Cilnton era, we were essentially at peace around the world, the budget (thanks to both Clinton with his tax increases and Gingrich’s spending discipline) was running a small surplus. Clinton’s wars were in the nature of “drive by shootings”. We were adhering to the “Powell Doctrine” which was get in and get out quickly. There were problems all right, such as a Wall street bubble fueled by irrational exuberance. But the situation was not dire. If we could only have stayed on this fiscal track for the next 10 years….
And then came George Bush. We got tax cuts aimed at his rich pals. We got war. We got a housing boom fueled by cutting interest rates to nearly zero. We got loans called NINJAs, which stands for No Income, No Jobs, No Assetts, being made to uncreditworthy people. So at the end of this Republican administration, the National debt had doubled in only 8 years. The Wall Street banks had collapsed. The Housing industry (the only real source of growth in 8 years) had collapsed. And we had 2 wars on our hands. Some of us haven’t forgotten that only 10 years ago, the Republican mantra was summed up by Dick Cheney as “deficits don’t matter”.
I have no doubt that in 50 years or so, History books will record that the beginning of the end of the American Empire began in January 2001 with the Inaugeration of George W Bush. Obama may or may not go down as a bad president. But George W Bush’s place in history is secure. He will be remembered as the worst president since James Buchanon in 1860.
@ Kelly Rek
I’ll ask you to start with the second chart here:
http://homepage.mac.com/ttsmyf/RD_RJShomes_PSav.html
I write:
“The two traces of annual data serve to show
progressions to recent levels that are very extreme relative to
history before the mid-1980′s.”
(Evident excess ‘living off the future’.)
Both trends broke after 2007. AND to continue excess ‘living off the future’, we did a large increment of governments’ debt — your #1 here:
http://homepage.mac.com/ttsmyf/debtGDP_whys.gif
(I went looking for the your #1 data, after supposing a possible coincidence with the ‘both trends broke after 2007’.)
The recent debt increment is well above half of that for WWII — an appalling surprise to me.
I try to make evident the ‘past shown soundly’ — that’s more or less the opposite of the status quo. We got here via overpricings and overconsumings — then and still kept very-little-apparent.
“As long as you
vote for me/
buy many goods&services/
listen, repeat/
I don’t care where you have your head.”
@ Dmitry Aleksandrovich
Not only is Ron Paul an honest man, his ideas really make sense. Please check out the website “Campaign for Liberty” and read the following article.
http://www.campaignforliberty.com/article.php?view=1458
Let’s face the facts, the bankers Greenspan, Summers, Rubin, Bernanke, Geithner, Blankfein, and Diamond have screwed America. They have sucked the middle class dry – they continue to do it today – they will do it tomorrow. Our congress is incapable of stopping them – and the media will not charge them with their economic crimes.
The problem goes beyond anything you and I can do – our democratic institutions have been neutered. Eventually something very bad is going to happen. “We the people” do not rule – they do.
@Kelly Rek
FYI:
http://www.zerohedge.com/article/guest-post-its-debt-dummy
Well, as long as the Republicans in Congress are determined to fulfill McConnell’s Mandate—deny Obama a second term and to Hell with the country—there will BE no progress. I hope everyone here has a prescription for anti-DEPRESSION.
The U.S. spent more on transfer payments in 2010 than it spent on the entire Iraq war 2003-2009. Defense is bloated but is far from the primary culprit in our fiscal morass. Shortsighted calls to slash defense have been made many times in our past. They have resulted in the payment of a much larger price shortly in the future. EVERY time. Neutering our ability to deter and react to threats will result in disaster. The big stick is an absolute necessity, and resting more of the burden on Europe at this point in time is begging a truly costly war.
The idea that a large navy can protect this country in an age of modern weaponry is farcical, not to mention an extremely expensive proposition in its own right.
Corporatism, transfer payments, and the protection of financiers from their own greed is what has brought this nation to the brink. Those are the programs that need to be slashed. There will be short term pain, but we finally need to take it in order to mend the system.
As much as the financial and political elites have been the enemies of the working and middle class of America. The fact is the working and middle classes have been accessories before during and after the fact. From mindlessly supporting American militarism, greedily tolerating domestic dole programs and clamoring for NIMBY laws. When we look at our hands we shall all see blood and I fear only a deluge could wash it away.
“…We promised all our seniors Social Security and subsidized medical care for the rest of their lives and failed to put the money away to pay for it….”
If by “failed to put the money away for it”, you mean “used the money to pay for the operations of government while giving huge tax breaks to the rich, then yes. Yes indeedy.
……………………….Content Warning…………………….
Angry white male under 65……..
IMO; we are screwed. Its going to take 30 years to fix this mess the baby boomers got us into. Thats right, I blame the baby boomers. Thank a flower child today.
Picture a cartoon where the fire hose is turned on: That bubble in the hose that travels with the burst of water…that is the baby boomer generation to me.
I lived my entire life right behind that bubble and the doors have been slamming shut since day one.
Not greatful? No, with few exceptions like the veterans and first responders for one example…..NASA is another.
I blame the baby boomers for their lack of leadership, their blunders, selffishness, vanity and their acute idolatry.
Every time you see an older person (65+) with a job, that is a job that could be given to a younger person with a family. Enough already, retire, go away, go fishing.
Too many VORTEX partys where you had to strip naked, take acid and roll in the mud. You baby boomers have been taking away my freedoms, to protect me from myself, adding countless new laws to protect us from ourselves, laws that you did not have to follow. You treated your own Vietnam veterans like shit when they came home. You were still on the street corners; protesting in 2008.
You have been the pain in my neck my entire life, now you want to steal from my grandchildren to pay for your viagra?
If your corporations wern’t so damn money hungry, there wouldn’t be a need for unions, now people like the aflcio chief makes 7 million a year for what? We pay the 7 million through higher prices.
You told us we couldn’t have butter, sugar, booze, cigars, cigarettes, eggs, beef and dope. All the things you got to have.
Now we get a guy like Paul Ryan and your media makes fun of him.
What a mess. What a mess!
We are doomed.
Thanks for nothing.
@ Ethan, I don’t think anyone would argue with you that Obama inherited a mess. On the other hand, he was a senator voting for most of the outrages, so he’s hardly blameless.
That said, all the talk about “change” was just that: talk. If he understood that debt was the economic problem we needed to address, he would have done the very opposite of what he’s been doing for the last 2.5 years. You can’t solve a debt crisis by borrowing trillions more.
If we don’t stop the nonsensical Keynesian fiscal stimuli, corporate bailouts, and pointless foreign wars, all is lost. Just hit the reset button, because America will become a banana republic.
Jimmy:
I don’t mean Navies in terms of Man ‘O Wars. Navies today have missiles, planes, aircraft carriers, satellites, even naval infantry (Marines). Large standing armies should not be necessary for the United States as a rule of thumb. Their presence is a relatively new phenomenon in our nation’s history.
You are correct that we have reduced our military before, and then had to build it back. The reason being was that even though we reduced the size of our military (example, after Viet Nam), we did not change our defense doctrine. I’m saying we need to change our defense doctrine. I don’t understand how having land forces in Central Asia and the Middle East is defensive in nature. It looks like Empire to me.