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Archive for November, 2008

My last post raised the issue that it wasn’t just that the economy could be worse, it should be worse. It was appropriate to give a break until after the election so now it is time to recap some of what has happened and look at where we go from here.

What I didn’t see happening was Paulson and Bernanke going in front of Congress and convince them the sky was falling. The economy, was, and is, in pretty grim shape. But did the way that DC handled the whole issue make it better or worse? No one wanted to look at that while there was an election coming up. For whatever reason, Congress and the administration did what they did. Passed a “stimulus” package and opened up the taxpayers checkbook, and in this case, signed the taxpayer to trillions in promissory notes. And that is just the beginning.

As of Nov. 5, this has been the Obama administration. Even if Bush didn’t have approval ratings that only are made better by looking at Congress’, his ability to function as anything other than the guy who will try to get his cleaning deposit back on the WH is over. And if you don’t want to believe that, just look at what GM, Ford, Chrysler, and the UAW did to get in line for their checks. They didn’t even make a courtesy call on the administration. They went directly to Pelosi who has the advantage of already having a position while Obama has to wait a while. This is an interesting turn of events as shortly before the election, Treasury basically turned down the auto makers requests and said that they will have to go for their share of the $25B retooling package, which doesn’t even have guidelines set up yet, and then go after the current Obama administration for a bigger handout. Now Pelosi under Obama’s direction could have brought back Congress for a lame duck session and force feed an auto bailout for those loyal Michigan and Ohio voters. That’s what those people sold their votes for after all. But instead, Pelosi reads that there is some feeling among the electorate that these bailouts may not be popular. So Pelosi thought it would be a good idea to have Bush take the heat for a quick check to the auto companies. And how did the Obama/Democratic administration negotiate this deal? They sent a letter to the WH and released it to the press last Saturday.

The letter asks for Bush to, on his own authority, add the auto cos. to the stimulus package so Congress doesn’t have to approve giving $15B to GM to make the payment due in Dec. to the UAW to fund the auto worker golden parachutes. If GM makes that payment, they will probably be in technical bankruptcy in the first quarter of 09. So they would really like the tax payer to make that payment. And the UAW is in total agreement. After all, if GM defaults on the package they negotiated in 07 to turn the pension liability over to the UAW (along with a total of $61B that they don’t have) the retirees will be looking at GM bankruptcy or having to go to PBGC. Either way, they get pennies on the dollar just like anyone else that depends on an insolvent pension fund. But that isn’t what the UAW wants or GM really. UAW workers tend to get somewhat vindictive and have the wisdom to take it out on the product they build. Something that GM can’t survive. The short term plan would have been for GM to make a deal with the Wall Street Cerberus fund to get the $11B in cash that ChryCo has. But Cerberus, with Larry Summers as its head and with such notables as spokesperson Dan Quayle, might not get this year’s bonus if the taxpayer didn’t also throw another, say, $10B at them on Wall Street. So GM has pretty much dropped the ChryCo deal and went straight to the deepest pockets they could find with the easiest to push negotiators in charge, the US taxpayer. Why exactly Bush would want to give the Obama administration and the Democratic Congress cover is not very clear. Not saying they can’t make a deal with him. But you don’t do it with releasing a letter to the press. And as of right now, it doesn’t seem like Bush has decided to rush the checks to Detroit.

But what is it that makes this all work? We are now in the post election period and there is business as usual and there is the hope of change. Business as usual would mean that the US taxpayer would now go into a coma after the election. We spent our energy picking experienced people who had all the right makeup to be president on a moment’s notice. Whether it is answering the red phone at 2AM or handling an economic problem. And we (with the medias’ help) poured over the plans that the experienced candidates would implement on day one to rejuvenate this economy. And now, historically, these competent, experienced people, with the right plan in hand, need time to figure out what to do and how to do it. Doing things the way we have for hundreds of years already means that the taxpayer needs to go into a come for three and a half years. At which time they can be reawakened when their vote is once again needed and told how well everything has worked out since they put the current administration in office. That’s the way things have always worked and exactly the way the Obama administration wants them to work now. And it wouldn’t make any difference if it were a McCain administration. They would be the same. But Obama got 62M votes for himself. It is time to ignore the 58M that voted for McCain.

So what would change look like? It would be an electorate that actually wants to see how competent these people are on day one. They convinced us they were ready to launch nuclear missiles at 2AM. They need to get to work right now. Not three months from now and surely not three years from now. And the electorate needs to watch everything they do with the same interest a month after the election as they had a month before the election. Trillions in bailouts to get the party going again on Wall Street but plans for credit card reform or mortgage assistant need to work their way through the system. Just as they have for the past several years. This is Obama/Democrat administration right now. No one needed to be reminded that the inauguration isn’t until January other than those who are now trying to buy as much time as possible instead of having to get to work immediately. California is already seeing the effects of “Just don’t say no” fiscal policy. Except they don’t have printing presses. But my guess is that with a Democratic friendly administration, the taxpayer in all those other states will get to pay many of California’s bills. And if the electorate does what the politicians want, and goes into snooze mode for three and a half years, they won’t even know it’s happening.

So, there’s the choice, US politics as usual for the past two hundred years or change. And change will involve having to dig for information and making your voice heard. Otherwise, don’t expect much to change. I wonder if we have the interest to hold politicians responsible every day or just sleep? As usual.

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