Friday, August 14, 2009

Barack Earl Hoover, Jr. (Part 2 of 2)

(Continued From Part 1)

For both Herbert Hoover and Barack Obama, the problems began early in their presidencies.

Seven months into office, Herbert Hoover witnessed the great Wall Street
Crash of October 1929. In September 2008, two months prior to Obama's
election, Wall Street repeated its 1929 performance, sending stocks to
ten -year lows while wiping out both major investment banks and
millions of hapless investors.

In both cases, the market collapse resulted in mounting bankruptcies,
foreclosures, and quickly skyrocketing unemployment. By June of 1930,
unemployment had doubled to 9.6 per cent. By May of 2009, using a
more expansive measure, unemployment was also 9.6 per cent - and rising.

At first, both Obama and Hoover were reluctant to directly intervene. In Hoover's time, market panics and crashes happened every seven to ten years, and usually corrected themselves in months after the excesses of speculation had been liquidated away. Obama had been forced to divert valuable
campaign time and resources into negotiations with the outgoing Bush
Administration over relief measures, as it became apparent that he would be the
likely winner of the 2008 election and would require some continuity in order to fully address the problems.. Thus, both men chose to start by using the "bully
pulpit" of their office - to try to stem the tide of events by moral suasion.

Hoover began by calling a series of meetings with the "key men" of his time -
bankers, industrialists, and academics - to explain his view of the problems and
what he needed them to do to help correct them. He wanted the banks to
resume lending, the industrialists to hold the line on layoffs, and the academics
to lend theoretical support to his efforts. To get things started, in 1930 Hoover
and the Congress created the Reconstruction Finance Corporation (the RFC);
an unprecedented combination stimulus and banker's relief measure.

(It would later be greatly expanded by the Roosevelt Administration under the New Deal.)

Obama also called in his "key men" from Congress and the business, financial and academic communities to get their support behind relief efforts. Using the Troubled Asset Relief Program (TARP), passed in the waning days of the Bush Administration as a start, Obama, like Hoover, persuaded a frightened Congress to pass an unprecedented RFC-like stimulus program of tax cuts and spending bills, in an effort to "re-light" the flamed-out economy.

In both cases, the "Key Men" listened politely - and went on as before.
The banks hoarded the cash proffered them under both the RFC and TARP
and quickly ceased lending. The financial community - the investment banks
and brokerage houses - used the funds to resume paying their executives and
traders huge bonuses, while the sector as a whole continued to show losses.

A few investment banks even used the relief funds and government
guarantees to speculate against their own customers - using inside information
and proprietary trading.

The response of the business, government, and academic sectors to the
efforts of both men was equally disappointing. Under both Hoover and
Obama, the business community took the assistance and continued to
slash output and employment. The Congress took Obama's stimulus package
and used it to fund thousands of pet "pork barrel" projects in their districts.
Consumers and the wealthy used tax cuts to increase saving and pay down debt
instead of spending. The States used their portion of the funds to
shore up sagging state budgets and preserve the jobs of existing state
employees instead of embarking on new programs. And the academic
community under both Hoover and Obama began sounding the alarm about
"Deficits"and the need to balance the budget.

Conservative economists began to call for slashed spending and increased
"liquidation"of troubled sectors of the economy. Liberal economists began
calling for immediate tax increases on "the wealthy" and for new sources of
government revenue, such as a Value-Added Tax and new carbon-fuels and
energy-consumption taxes.

The end result? Both men, despite their best efforts, managed to do little
more than slow the rate of an inevitable decline. In Hoover's case, matters
continued to drift gradually downward until he was replaced by Roosevelt in 1933.

Obama, seeing the economy shrink to new lows despite the vast amounts
appropriated and spent, began new initiatives on "the green shoots of the Green
Economy" (a sop to the environmental activists of his party), and a quixotic
attempt to reform Health Care.

In both instances, both of these bright, technocratic men fell into The
Technocrat's Trap: that doing what should be done would result in
what must be done. Hoover, ever the cautious and calculating engineer,
believed that his sheer logic and scientific precision would both win over
doubters and persuade opponents.

Of course, that did not happen - and the same high-minded, logical approach
was to lead another engineer President ,James Earl Carter Jr. - to disaster
fifty years later.

Obama. a lawyer and community activist by training, did not have the same
mathematically logical mindset as Hoover. But his years of experience as
a community organizer, attorney and politician led him to believe in the
value of consensus - that what must be done was to first, achieve consensus;
and then the result could be carried through to do what should be done.

Having carefully studied both the problems and the failures of past Presidents
to achieve consensus, Obama also brought a legislative majority and a solid
electoral victory to the table. Combining a desire to seek consensus and
an extraordinary grasp of detail with an even-handed, mature temperament,
he had every reason to believe he would succeed.

But, as they say, the devil is in the details. And in the rough-and-tumble
struggle between reality and idealism, reality usually wins.

Reality saw Obama's Stimulus package bear only the slightest resemblance to
what he had originally proposed. The final product featured non-stimulative tax
cuts, an unprecedented porkfest for politicians, and precious little in the way
of immediate, employment-creating projects and programs. Even worse,
Obama's natural caution has led to a glacial slowness in implementation.

Result? Hooverization.

But it is on Health Care that Obama's efforts most resemble the struggles
of the 39th President. In what can only be described as a Carteresque
mix of idealism, inexperience, and naivete, Obama handed off the responsibility
for this key Administration initiative to the Democratic leadership of the Congress.

Now you don't have to be a hardened cynic to understand that these Solons
are hardly "tribunes of the people". Rather, they are the bought and paid for
creatures of every special interest with business to transact or bring before the
federal government. And one of the wealthiest and most powerful of
those Special Interests is the Health Care industry.

And on this one they are taking no chances. Backed by a 300 million dollar war
chest, they have deployed a brigade of 3300 lobbyists to Capitol Hill. That's
roughly six cash-carrying lobbyists per Member of Congress.

And they aren't stopping there. The demonstrations against "Government
Health Care" have been largely paid for and orchestrated by those same
interests - often by slick, well-paid young organizers in khakis and polo shirts
with the logos of Blue Cross, Pfizer,Cigna, Wellpoint, and United Health,
to name a few. And coverage of these incidents - especially on conservative
or business-oriented networks - has been paid for by these same folks.

Against this, Obama, until very recently, has declined to use the influence
of his office or the Executive Powers of the Presidency to shape the debate.
As a result, the opinion polls are now running 4 to 1 against Health Care Reform.

Mr. President, you've Carterized yourself.

Barack Hussein Obama, meet Barack Earl Hoover Jr.

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