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15th September 2008 Charles J. Brown
04:45 pm

Compare and Contrast: Obama and Paulson on Economic Crisis


Here’s part of what Barack Obama said today about the problems plaguing Wall Street:

The situation with Lehman Brothers and other financial institutions is the latest in a wave of crises that are generating enormous uncertainty about the future of our financial markets. This turmoil is a major threat to our economy and its ability to create good-paying jobs and help working Americans pay their bills, save for their future, and make their mortgage payments.

The challenges facing our financial system today are more evidence that too many folks in Washington and on Wall Street weren’t minding the store. Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans have brought us to the most serious financial crisis since the Great Depression.

Now here’s part of what Treasury Secretary Henry Paulson said today:

We’re working through a difficult period in our financial markets right now as we work of some of the past excesses, but the American people can remain confident in the soundness and resilience of our financial system. . . . We’ve got excesses we need to work through and we need to work through them as quickly as possible, and I think we’re making progress.

I appreciate the fact that Paulson is, along with Bernanke, doing his best to prevent a total meltdown of the economy, and I recognize that both men are largely trying to fix problems created by their predecessors.  But come on — who exactly does Paulson think was responsible for the “excesses” that brought about this mess?  Or is the Bush Administration going to try to do what they did with 9/11: blame it on the Clinton-Gore team?

The reality is that for the past seven (nearly eight) years, the Bush Administration has allowed the rich to play with everyone else’s money in ways that has left many Americans exposed to real risk.  In the process, it also has failed to fix many any of the other problems the country is facing — a weakened industrial base, an eroding infrastructure, a blooming debt, a growing climate crisis, a continued dependence on foreign oil, and a declining dollar, just to name the first six that come to mind.

I do not discount the role played by people who bought houses they could not afford.  But who allowed the market to exist in the first place?  Who ignored the problems we faced until it was too late?  Republicans’ arguments that this is all somehow the fault of people who took out sub-prime loans is little more than blaming the victim.  That is so typical of Republicans:  blame the middle class and the poor for the fat cats’ mistakes.

Should things really go south, there really isn’t a safety net capable of preventing the slide.  Face it:  we’re broke.  As a government, we’re no different that Lehman Brothers:  our debits exceed our assets.  Do people really think that the Chinese are going to continue to bail us out, especially now that they’re beginning to find other markets for their goods?  (For the Chinese perspective, read between the lines of this piece.)

Large segments of the world would like nothing better than to see the United States economy crash and burn.  Yes, there will be some short-term impact on global markets, but the reality is that the rest of the world will quickly find that it can live quite well with a weakened United States.

This is, in many ways, even worse than the Depression, even if the final economic consequences prove not to be as dire (something we are not yet assured will be the case):  this time, the government doesn’t have the ability to turn this around.  Unless, of course, à la Zimbabwe, we start printing worthless money (but of course that just creates a new set of problems).

I don’t know whether Obama or McCain or anyone can reverse this slide.  I do know that an Obama administration would be far more likely to convey the reality of the situation than a McCain administration.  An Obama administration would be able to work with a Congress more likely to act on his prescriptions.  But that doesn’t mean that what he wants will work.

In my gut — and that’s all it is at this point — I can’t help believing that this isn’t merely the start of another recession/depression.  It feels much more like the beginning of America’s slide off the top of the pyramid.  I hope I’m mistaken.

In the meantime, you might want to go back and take a look at this James Fallows piece from 2005.  He gets some of the details wrong, but I think he’s scarily on target in terms of the big picture.

This entry was posted on Monday, September 15th, 2008 at 4:45 pm and is filed under globalization, politics. It is tagged under , , , , , , , . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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