Report’s of capitalism’s death are greatly exaggerated
March 15, 2009
The Republican Party may not realize it, but they have become the masters of irony. After floundering around just saying no, some Republicans have found their voice: Reduce government spending and the deficit first and let the banks fail. How ironic. It sounds like they are channeling some of Herbert Hoover’s initial approaches to the stock market crash of 1929. It did not work for him, either. The Great Depression followed.
I looked up the definition of irony. The word “irony” comes from the Greek, meaning hypocrisy or feigned ignorance. The shoe fits these Republicans well in either Greek or in our understanding of the word in modern English.
“Timing is everything” goes the old saying, and Republicans are feigning ignorance of it. Nearly every economist and banker voicing opinions publicly believes the government must spend to dig out of the recession first and deal with inflation later. Republicans rail against tax increases during a recession, but conveniently ignore Obama’s tax cut to 95 percent of the middle class, constituting 38 percent of the bailout cost. Cap and trade, a tax on industrial pollution, will not take place until 2012 .
They skip over the fact that higher taxes on the rich will not take effect until 2011, when most economists believe we will be past the worst of this mess. In fact, no taxes will be raised on anyone until after 2010, and even those on the rich will not be raised as high as they were in the Clinton era. This avoids a major mistake Hoover made of raising taxes in a recession.
Republicans simply dismiss Obama’s plan to reduce the deficit by slashing military waste, taking a troop withdrawal dividend from Iraq and tackling the health care drag on middle class family finances, and the private and public sector’s economic health. They argue it takes focus from the immediate financial crisis and there is already too much on the plate to digest or afford. What they want you to believe is that all of this will happen simultaneously with everything else going on. Not true. What Obama has done is to get the ball going on these future deficit reduction plans now for post recovery timing because it will take that long to implement.
The charge that Obama ought to focus on one thing at a time, especially the banking mess, bears a kernel of truth. The banking piece of the economic recovery proposal has been slow developing and the market has reflected impatience. The Obama administration has gotten that message and this past week, they shifted their PR strategy. Obama’s financial team members are more visible. However, they have not let up on proposing the other initiatives or sped up decision making, either.
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Indeed, Obama has shown an amazing ability to chew gum and walk across the street at the same time. Remember when John McCain dropped everything to run back to the Senate to deal with the financial crisis in September? The flaw in his ability to deal simultaneously with multiple crises became apparent and that is when Obama surged ahead. Hearing McCain criticize Obama for his lack of focus is irony worthy of a chuckle, if not a guffaw.
Another irony is that Republicans claim the market has crashed lately because the American people have no confidence in the Democrats’ plan. Yet in the same breath the Republican talking heads have done everything they can do to undermine confidence that Obama’s plans will succeed, claiming the Obama plans have not worked in the past month so therefore they will be a failure for the next four years.
Last week, the market showed some life on news that Citicorp, a recipient of TARP bailout money, had two profitable months. The lesson: Could it be TARP is working after all and we just have to give these plans time to kick in? Polls show the public gets it, even if partisan Washington does not.
Those on the right of the political spectrum are already drumming up fears of bank nationalization and the end of capitalism before they even know what will be proposed. The irony is that those shaping Obama’s banking bailout policies are free market guys, especially Treasury Secretary Geithner. Both Obama and his economic team have professed their belief in the free market system. Those critics ought to save their ammunition until they know what their target looks like.
One thing is certain, we can count on ideological purists to call any degree of government intervention “socialism,” no matter how restrained or temporary and, ironically, to hark to the policies of the halcyon days of the Hoover era. We know that there will be more regulations to control excesses that brought on this mess and stricter control and monitoring of the use and purpose of bailouts. But to paraphrase Mark Twain, the report of the death of capitalism is a bit premature.
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