George W. Bush was a horrible president. His tragic wars in Iraq and Afghanistan were prosecuted without Constitutionally required declarations. Those wars were deadly and harmful to our international standing. Domestically he addressed hysteria about terrorism by rolling back Constitutional protections and stirring blind nationalism. He countered challengers with simplistic, personal attacks and catered to the paranoia of his base. And he did it all while spend, spend, spending away.
But his intentions were not bad. Few people questioned Bush's motives, although his tactics were idiotic. In fact, what was most horrifying about him was that he actually believed the stuff the neocons were feeding him.
But Obama is worse. Worse in the sense that his ideology is more foolish that that of Bush, but he is willing to abandon it for political support. He is a man without commitment, other than to rising politically.
Bush's one decent action was appointing sensible judges and Supreme Court justices. Obama has promoted activist radicals who will rule from the bench as foolishly as he has been from the White House. Perhaps Bush's most dangerous action was not the wars, not the questionable international covert operations, not even his dismissive attitude toward such essential axioms as the right to trial by jury or habeas corpus. Bush's most insidious act was TARP, which trampled private property rights, subsidized big corporations, and kicked the nation's economy square between the teetering legs. It was an action and a precedent which might very well have accelerated the economic collapse of the country to a point that it cannot be escaped from. TARP did not create our problems, but it created a new, USG involved approach that mocked free market capitalism and set us on the path toward true central economic planning. But again: he believed it would help.
Obama is different. He screamed for months about stopping the wars in Iraq and Afghanistan. He has somewhat fulfilled that pledge in Iraq- although it is likely a technical win only, we still have a massive footprint in the country under the theory we are there to provide "developmental assistance" (diplomacy, it appears, no longer takes place overseas, instead we are in the nation building business). In Afghanistan though, he has expanded our presence, increasing troop levels and extending our reach even further and more visibly into Pakistan. He has done so on the advice of the Pentagon and the neocons in the rest of the USG. The same goes with his pigeonholing of Iran, a foreign policy initiative which is of great benefit to the Saudis, Turks, and Israelis- but not needed for John Q. Unemployed back at home. And Gitmo- the greatest embarrassment this country has produced since MC Hammer- is still open.
Obama has done all of this despite not believing in it. He has done it because it is what he perceives is necessary to remain in office.
For this reason then I am certain he, on the surface, will work to improve the federal budget in the next year. It is in his electoral interest.
Probably more importantly, it is in the electoral interest of the Republicans recently elected to Congress.
Brought in on a tide of cutting the debt, the Republicans instead will work with the Spender in Chief to tweak the existing budget so that it ostensibly looks like a great deal of improvement has taken place. There will be some loud, symbolic cuts (like the recently proclaimed freezing of federal pay increases, which I wrote about last week). All of these will be good, of course; any cut in spending is needed- but they won't be enough. At least not to appreciably cut the debt. (And as has been discussed before- it is the debt, not the deficit, that is the issue.)
But the new Congress and the Borrower in Chief won't care about that. They will be looking to 2012 and what needs to be done to convince the voters that they have moved to be "fiscally responsible."
If I am correct and this is how things will play out, we might anticipate continued economic growth too, because the USG does have the ability to game the system a bit. Conspiracy theorists would say the feds are cooking the books on inflation and other critical stats. Maybe they are. But the nation's political leadership is almost certainly launching spending initiatives and other actions to prop up the economy until just about late 2012.
As such, the much feared double dip is likely pushed back until at least then. The stock market, the traditional "leading indicator," suggests that this is correct. But more importantly, so does the political reality. All parties are screaming about federal waste right now, and the recent findings of the Deficit Commission suggests there will be action. Of course, the market trumps the political reality, or at least it will in the long term. Our current snake tail in the mouth system of government and the free market is unsustainable and will come crashing down. But I am betting it won't be in this cycle. Obama and friends (and that includes the newly elected GOP). Will pull a few more levers and keep things going until 2012.
But that is when things will get scary. Because he will be in his last term and the above calculus will fall apart.
I do not know when exactly this political fiction will succumb to the economic realities. At some point though it will all come down. Remember that what collapsed Ponzi's postal stamp scheme was not the reality that he could not possibly be making such returns from flipping stamps- Barron had been crying that from the start- the problem was the numbers finally caught up with him. And that's how it will end here too. At some point the validity of our debt will be at issue.
Some governments- the Chinese and Russians just lsat week- have recently agreed to start trading in their own currencies instead of dollars. This move to abandon the dollar's reserve status in favor of other options is prescient. Inevitably, we will step back from our imperial role- but will it be done gradually and sensibly, or will we be forced to?
It seems obvious it will be a forced move, and it will be rough.
My hope is that it will be with minimum political repercussions though. Because times of economic trauma often breed political disaster.
Two canaries in the coal mine to look out for in that regard.
The rise of far right, nationalist "blame someone" parties. If things become so bad that politicians are publicly blaming ethnic groups, social classes, or religions for our mess- be careful. The other extreme is also an indicator- populist parties demanding seizing of small hildings of private property. Bailing out Goldman to hook up some of Dubya's college buddies is an inside deal. Majoritarianism appropriating the property of individuals is actually much more frightening. If grocery stores and gas stations are being converted to state assets, hold on tight.
I do not think either of those scenarios will transpire here. I think it is more likely the Printer in Chief and Congress will postpone economic apocalypse for a fairly long time. Much of what I have written could have been posted in 1940, 19950, 1962, 1971, 1979, or 2000- and every time we dodged the bullet (or more accurately: delayed being shot by a bullet in exchange for being shot by a larger caliber at a later date- at this rate it will be an ICBM to the head when it comes).
But I could be wrong. I also though Palin's daughter would manipulate that stupid dance contest for a win, and instead she lost to that broad from Dirty Dancing.
Sensible libertarian views on nearly everything- except foreign affairs.