"What the world needs now is another folk singer
Like I need a hole in my head" David Lowery, Cracker
As those lines suggest, the time for passivity and "words, words words"(as Hamlet would say) is over. In two weeks the U.S. will finally have the regime change at home that we have so desperately needed as our war criminals(Bush, Cheney...) have squandered our financial stability, sense of hope and optimism, and perception around the world in the name of enriching their war machine allies by overthrowing sovereign states. Indeed, the masters of war have once again brought this country to its knees, tearing apart the delicate social fabric that has allowed America to be a beacon of hope for generations of immigrants who have built this nation and made it better, stronger, more just. My love for this country is deep, despite the horrific legacy of racial intolerance that has dominated our short history. Unlike the "advanced" European societies and pretty much every other country in the world, we have made incredible progress addressing the disease we call racism, despite our poor record of recognizing the class disparities that threaten to ruin this nation if we do not confront the disgusting level of greed personified by Wall Street and CEOs that laughably continue to think they are worth hundreds of times the wages they pay their workers.
Just how does one develop the misconception that it is acceptable to ask for a $10 million bonus when your company is being bailed out by taxpayers? This shocking level of arrogance can only be addressed by putting these criminals in jail. How does a country justify putting a kid in jail for stealing a bicycle while Madoff steals $50 billion and is given house arrest(at a $7 million penthouse)? This is no Golden Age; it's the new Gilded Age, with the toxic and dangerous combination of privatization of profits and socialization of losses(e.g. Wall Street does well and they keep their billions; they fail and WE bail them out) This is the groundwork for social upheaval on a scale this country has never witnessed, and there's a legitimate chance(at least 25%) that we sink into Depression(10% drop in GDP) in 2009. If you think this is overstated consider the legacy of 2008(NY Times 1-1-09): Stock Market down 34-40%($6.7 TRILLION of wealth, pensions, savings etc. lost), 2.6 million jobs lost, median home prices drop from $230,000 to $180,000, government takeover of 206 banks, treasury bills dropping below 0%( people are so scared of losing their money, they will pay to keep it safe instead of earning interest) Good luck trying to find numbers that match those in the history of this country. Of course your search will lead you one place: The Great Depression.
Rarely has a country entered a new year with this profound juxtaposition of hope and fear--hope that Obama's rhetoric and vision can enable the country--and indeed the world--to confront the most dire economic circumstances a president has faced since FDR's election in 1932, as the Great Depression was just kicking into high gear in the aftermath of a market meltdown that was both significantly different and disconcertingly similar to the challenges that this nation must overcome if we are to avoid a downward spiral of economic devastation that would be a tremendous shock to pretty much all Americans, except those very few, such as my 90 year-old Italian grandmother who literally walked through the snow in Buffalo, New York searching for work to help feed her family during the early 1930s. Most 12 year-olds in this society are not really up to that task in my humble opinion. We like to tell ourselves that we are the most creative, hard working people on earth, when in reality we have become soft, very soft, content to live beyond our means by charging our lifestyles on credit cards, fed by the pimp bankers who gave $750,000 mortgage loans to lettuce pickers who make $14,000 a year.(NY Times). Go back and look for all the safety net programs this country had in 1930. There was no safety net--you either worked, starved, or stood in soup lines. Indeed, one of the more bitterly ironic indicators during the stock market crash was that on several days one of the only stocks to see gains was...Campbell's Soup!
So, will Obama be the next FDR or Jimmy Carter? Time will tell, of course, and I, as a big supporter, both in this blog and financially, wish him well. We need him to be a great president, but I am not going to back him on every issue simply because I voted for him. That is not the way I think nor is it the objective of this blog. It's pathetic to see the talking heads on TV either supporting or attacking Obama on every issue. Here's my take: He has shown himself to be prudent and a centrist as far as his cabinet. It's not the "change" he promised, and I think the country needs, but neither is it irresponsible. Hillary and the crew should do a good job if they are willing to buy into Obama's plan. What concerns me most about Obama is his tendency to try to appease everyone. That's not what this election was about: He won on a message of change, so it is a mistake to reach out to homophobic asses like Rick Warren who ambushed him in the staged discussion with McCain and feels that homosexuality between two consenting adults is somehow the same as bestiality and pedophilia. I can understand someone being opposed to gay marriage, even though it's idiotic to suggest that it threatens my marriage. My wife and I are quite happy and are not threatened at all by gay couples. Live and let live--more people should follow that, especially when the issues do not affect the public at large. Warren is about as enlightened on these matters as Bull Connor was on race issues in 1960s Alabama, so if Obama wants to engage the man in a dialog to help him overcome his hatred of a significant group of Americans that supported Obama's campaign, fine. But invite him to be a part of the Inauguration? So, what's next, a KKK grand wizard, an anti-Semite, a Minuteman? I don't think so. Obama is condoning the one generally accepted form of illogical hatred in our society--the persecution of gays, usually by Bible(or some other religious text)-toting folks that use the good book to attack gays even though the Bible is full of polygamy, execution for children who disobey their parents etc. etc. If anyone actually read the Old Testament they would be ashamed of quoting their passages and pasting them to their foreheads. I was surprised that Obama would be so tone-deaf on this issue, especially when there is significant tension in California because 70% of blacks voted for Prop 8, the measure that passed in November and not only bars gay marriage but seeks to revoke the gay marriages that have already taken place. Indeed, 8 is hate in my view. I also understand that for many blacks it is offensive to claim that prejudice against gays is the same as racism because gay people can keep their sexual orientation private while blacks cannot hide their skin color; furthermore, I also acknowledge the profound influence of the church in black communities, and while I am puzzled why any black person would embrace a religion that was used to subjugate them in slavery for centuries I understand that the church has also had an important positive influence in many black communities, but facts are stubborn things, and Obama of all people should be more enlightened than the average American, myself included, and avoid the little wink and nod he gave to Americans who stubbornly retain their bigoted views. That's not change we can believe in.
Other than these real and potential missteps Obama has done an excellent job of both preparing to take office and not appearing to nudge the war criminals out before Jan. 20. So, what should he do in 2009 to save this nation from a potentially cataclysmic financial meltdown?
1. Send a message to the world that he will be a strong commander-in-chief. Obama cannot allow countries to test his mettle, as is the current case in the Israel-Hamas situation. Put an end to this affair by sending in UN peacekeepers; this will anger both sides, a major reason why it is a good idea. Hamas needs to be overthrown and Israel needs to have restraint: some primitive rockets capable of doing very little tangible damage do not call for massive retaliation and civilian deaths. Both sides have plenty of blood on their hands, and while I sympathize much more with Israel simply because I think they, unlike the Arab states, are sincerely interested in living in peace, the fact remains that Israel is not going to bomb their way to peace. I do not buy into the "Islam is a violent religion" rhetoric because there are obviously Muslims who want to live in peace and keep their religion to themselves rather than searching out infidels to murder, but I also refuse to blindly claim that the Koran is only full of peace, love, and understanding. As with the Bible, it's full of hatred, intolerance and some love, but ignorant extremists find more than enough "evidence" in the book to justify in their simple little minds the complete destruction of Israel. If America were under the type of assault Israel has endured for decades, we would act in the same manner(How many bombs from Tijuana would hit San Diego before we wiped out the entire city? Think about it...), but their current offensive and the murder of innocent civilians is simply sowing the seeds of hatred for many generations to come. They have the best military intelligence in the world, so they know exactly where the terrorists are(as they have bombed precise houses) so get in there with ground troops and get after the real problems. Yes, it will be bloody but that's what war is. There has never been a war won with bombing raids only; they should know that from Lebanon. Get your hands dirty or get out.
Obama needs to show leadership to the rest of the world and there is no better place to start than this confrontation.
2. Obama needs to institute an immediate and significant payroll tax cut for people making $150K or less to quickly stimulate the economy. Rebate checks take too long and have shown to be ineffective because people put them in the bank. The massive jobs program he has proposed is of limited usefulness because while it will help in the long-term it is also a relic of the past. This crisis is not the same as 1932; the dynamics are very different and require different strategies. He's rightly concerned about unemployment, which will get much worse in early 2009, but this economy cannot wait for action. The only way to act quickly is through payroll tax deductions, as they can change those percentages in a matter of weeks, while job programs will take months and years to have a significant impact. Obama--and the nation--does not have months or years. We are on the precipice of a financial meltdown; if he doesn't act quickly there will be many more bank failures and the type of run on the banks that led to the Great Depression. The TARP program has been a horrible failure because they gave money to banks, who in turn have sat on the money, afraid that the bad mortgage securities were going to wipe out their entire operations--that's the essence of the problem: Banks are hoarding money they were given to get credit rolling, and their greed and incompetence may bring down the entire world financial market system. There is very little consumer confidence in this society; people are scared and they rightly feel much poorer than they were a year ago. This type of fear leads people to stop spending and that's exactly what is going on. Americans' insatiable appetite for consumer goods has weaned and it's bringing our economy--as well as China's--to a dramatic reversal that will continue to have dire consequences in 2009.
3. Finally, the most important action Obama must take to save the country is to deal with the housing crisis, which is only going to intensify in 2009. Housing got us into this crisis and there is no way out except to deal with the mortgage meltdown that has led to a catastrophic decline and home values, which in turn has destroyed consumer confidence. One of the best recent books is Financial Shock by Moody's Mark Zandi, which details the crisis through mid-2008 and offers a very sobering picture of what the country faces in 2009, as the mortgage crisis is nowhere near its peak. There are literally $500 billion in bad mortgages that haven't reset yet and when they do the decline in prices will continue to the point that millions and millions more Americans will either lose their homes or simply walk away from a house that is underwater, as it makes no sense to pay a $400,000 mortgage on a house that is worth $200,000 or less. If the government does not act to stabilize housing prices no one is going to buy or sell and more and more jobs will be lost. California and several other states are in worse shape than at any time in history because housing has brought down the entire economy. When house are not bought and sold, taxes are not collected and jobs are lost--finance jobs, construction, furniture, repairs--you name it. In California an astonishing 60% of mortgages are underwater! When some one's house has dropped in value from $600,000 to $400,000 that person who has lost $200,000 in equity in a matter of months is not likely to feel good about rushing out to purchase the new plasma TV or new automobile. Sadly, many Americans have been financing their phony lifestyles with home equity loans, which have increased from $220 billion t0 $820 billion since 2000! Now those people are stuck in houses that are worth less than their first mortgage AND they have an equity loan to deal with. I opposed the pathetic $700 billion Wall St. bailout because I knew it would be used precisely for what it has been used for--to enrich Paulson's corrupt banker friends at Goldman Sachs and other banks. They have kept that money and paid their huge bonuses anyway, calling them "retention fees" so they can pay the geniuses who made all the bad loans 10 million or more each to stick around in 2009 to help further destroy the American economy. That money could have literally bought every underwater mortgage in the country, allowing banks to wipe them off their balance sheets so that they could begin making loans again--prudent loans to qualified borrowers. If Paulson and Bush would have acted on this we would not be where we are, so Obama needs to clean up the mess quickly by establishing a system to buy these bad assets(which was what the money was originally allocated for) and essentially reset the housing market by helping it find a "bottom." Currently, the bottom is nowhere in sight and prices continue to plunge, even with no buyers, for who would buy a house now when it may lose another 50% in value in the next 12 months? The only sales in California are short sales and foreclosures, so much so that even houses that are not in foreclosure are having to be sold at foreclosure prices. If this situation is not addressed the country will not get out of this predicament. It's really that simple.
These are the times of the New Austerity, as Christmas retail sales were dismal and major manufacturing in this country--GM AND Toyota etc.--are on the brink of disaster, with declines of 30-50% from last year. People are not buying cars, Big 3 or other. The Big 3 is in deep trouble, in part, because more advanced societies have socialized health care rather than burdening the companies so their bottom line is much different than those of German and Japanese car makers. These redneck Southern senators who attack GM workers as overpaid($60K a year for working on an assembly line is overpaid but $35 million for a Wall St banker is OK?) are desperate to hold on to their $14 an hour jobs by attacking the "fat cats" who make $30 for GM. $14 an hour is $30K a year. How many Americans can survive on that paycheck, and if they can, how do they do it? Well, we know the answer to that: They charge their consumer purchases on credit cards, putting the country deeper in debt, and now those individuals do not have the money to be consumers because there is no more easy credit. The party's over friends, but these ignorant Senators are too blind to see that cutting workers' wages is not going to stimulate the economy. It's the decline in well-paying middle class jobs that has created the new Gilded Age. The rich, led by greedy Republican tax and employment policies, have succeeded in destroying the middle class through depressing wages and paying executives and shareholders more, as well as sending jobs overseas to increase dividends. Trouble is, the loss of middle class jobs has gutted the U.S. economy. How do you think the Dow surpassed 14,000 last year before sinking as low as 7300 when reality hit? Unchecked and unregulated greed. Capitalism does not work without checks and balances because people are greedy by nature; that's why we have laws--and $50 billion Ponzi schemes. Indeed, the American economy is currently one big Ponzi scheme that is about ready to come crashing down if Obama is unable or unwilling to take bold, decisive action. There's a great new book called Unequal Democracy by Larry Bartels, Princeton professor, on this topic. Check it out.
It's been 76 years since a president took office facing the types of challenges that confront the historic presidency of Barack Obama. He has the goodwill of the vast majority of Americans who not only want him to do well but literally need him to be a transformational president, someone with the strength of character and vision to make significant changes, not a middle-of-the-road status quo leader. His future--and that of the nation--depends on this man's character. Let's all hope he is up to the task.