Students of history will recognize the method to this President’s madness.
Students of history will recognize the method to President Obama’s madness. The parallels in both policy and politics to the Roosevelt Administration are too striking not to be deliberate. President Obama is consciously modeling his Administration on the Roosevelt Administration. But just as the liberals of the 1930s graduated to the New Left of the 1960s, President Obama’s policies and politics transcend the liberalism of the 1930s. He is building what Newt Gingrich rightly calls a secular socialist machine in his new book To Save America.
Unreconstructed Keynesian Economics
Roosevelt’s Keynesian economics was left for dead in the 1980s with President Reagan’s supply-side revolution miraculously ending the stagflation of the 1970s with a 25-year economic boom. But President Obama came into office talking as if that never happened, casting it down the memory hole. While Reagan’s early 1981 budget cuts slashed the federal budget by about 5%, Obama rammed through an almost $1 trillion stimulus package of nearly all Keynesian economics from the 1930s, laughing at his astounded critics with the question, “What do you think a stimulus is?”
Economically, it didn’t work, just as it didn’t in the 1930s or the 1970s. Now 29 months after the recession officially started in December, 2007, unemployment is 10% and rising, and the stock market is again stumbling, with the Dow still 4000 points off its last highs. The recovery was overdue a year ago, and even now economic growth is not half what it should be.
But note how the stimulus spending was structured so that more is spent this year than last. Was the goal to reduce unemployment as quickly as possible, or to use the guise of Keynesian stimulus spending for a political slush fund to buy as many votes as possible in this political year? Note also that about half of the direct “stimulus” spending went to state and local governments to prop up the employment of public employees, the most reliable supporters of liberal Democrat candidates. The only thing President Obama’s stimulus is stimulating is a left-wing Democrat political machine.
Attack on Wall Street
Another early central theme of the Roosevelt Administration was a searing attack on Wall Street. The famed Pecora hearings, led by the Chief Counsel to the Senate Banking Committee Ferdinand Pecora, crucified top Wall Street bankers and brokers as the cause of the Depression. Despite the hallowed political propaganda long taught to American schoolchildren, Wall Street misdeeds played only a minor bit role in the Great Depression. The real causes were Fed mismanagement enabling a drastic collapse of the money supply, causing ruinous deflation, followed by brutal tax rate increases, and the soaring protectionist tariffs of the Smoot-Hawley Act. Roosevelt’s massive overregulation and Keynesian economics draining private sector investment were additional factors extending the Depression for a decade, putting the “Great” into the “Great Depression” as Amity Shlaes put it in her eye-opening book, The Forgotten Man.
But the Pecora hearings and Roosevelt’s class warfare rhetoric excoriating “the malefactors of great wealth” successfully shifted the blame politically from the government to the private sector. The result was passage of the Securities Act of 1933 and the Securities Exchange Act of 1934, imposing extensive new regulation on Wall Street, as if that would resolve the causes of the Depression. The measures did not produce economic recovery, but rather mostly just decades of voluminous securities filings filled with meaningless boilerplate that nobody ever read.
Today we see President Obama trying to pull off the exact same thing. The Democrats managed to inspire union-generated civil unrest with their incendiary rhetoric regarding contractually specified Wall Street “bonuses.” The statesman Obama then poured oil on the fire, explaining,
The people on Wall Street still don’t get it. They’re still puzzled why is it that people are mad at the banks? Well, let’s see. You know, you guys are drawing down 10-, 20-million-dollar bonuses after America went through the worst economic year that it’s gone through in decades, and you guys caused the problem. And we got 10% unemployment.
But actually, no, Washington, it was “you guys” who caused the problem. The Fed again started it, this time with excessively loose monetary policy during the Bush Administration keeping real interest rates below zero for years, as explained by Stanford monetary policy guru John Taylor in his book Getting Off Track. That policy essentially subsidized excessive leverage and runaway risk.
Those cheap dollar, easy money policies joined with the “affordable housing” policies of the Clinton Administration and Congressional Democrats to create the housing bubble, pumped up by subprime mortgages going to people who couldn’t afford them, or who were just speculating and willing to abandon their homes if they got into trouble. The Congressionally sponsored, financial terrorist organizations Fannie Mae and Freddie Mac then spread trillions in toxic securities backed by these subprime mortgages throughout the global financial system, ultimately threatening to bring it all down.
Following Roosevelt, President Obama again used the crisis to enact further government regulation of Wall Street in the financial regulatory reform bill. But Obama’s regulatory monster makes Roosevelt’s Wall Street regulation look like a sellout. Obama’s bill effectively takes over Wall Street, institutionalizing bailouts with comprehensive new federal authority to seize any institution the government deems troubled. That power does not even have to be used, for the financial industry to become a house pet of the Democrat political machine, with President Obama’s new billy club always ready and waiting in the closet. Don’t expect to see any Republican fundraisers on Wall Street any time soon. Those are all Democrat affairs now, collecting protection money.
Further following the Roosevelt model, the Obama Administration inaugurated the Congressional debate on the financial regulation bill with a trumped-up, show-trial securities fraud suit against Goldman Sachs. Any free market advocate has to detest Goldman, which already has long been a central cog in the Democrat political machine. But the civil fraud suit against Goldman is an abuse of power, alleging essentially that Goldman defrauded itself into $75 million in losses in sponsoring an investment vehicle demanded by the market, which enabled investors to bet either for or against the subprime housing bubble. The suit is so contrary to legal precedent and the basic facts that the government prosecutors richly deserve sanctions, and if it ends with the deserved judicial excoriation, remember you read it here first.
In the end, two of the actual malefactors of the great wealth of government power themselves at the root of the housing bubble crisis, Barney Frank and Chris Dodd, stood taking credit for the financial reg reform bill, which will only add to the secular socialist machine rather than address the root causes of the financial crisis.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?