It is sometimes said that the cure is worse than the disease. This sounds counterintuitive, but makes sense when processed. On a day to day basis, going through certain treatments is worse than “just living with it.” Of course, “just living with it” would mean a sudden end, hence the reason why people subject themselves to painful treatments.
On the other hand, a cure isn’t a cure if it merely treats symptoms. To date, the newest of new deals, aka this hope and change, seems to suffer from the problem of treating symptoms. President Obama won election in 2008, citing “Eight years of failed Bush policies.” Some of those policies include a war against a dictator that supposedly provided little imminent threat to our Nation, a bloated medical program, and major deficit spending geared towards stabilizing the economy.
Not to say that the alternative in 2008 was better. John McCain’s offering for our economic ills was to suggest that “the fundamentals of our economy are still strong.” Even so, let’s chronologically summarize the current doctrine: major deficit spending geared towards stabilizing the economy, a bloated medical plan, and a war against a dictator who provided little imminent threat to our Nation.
Indeed there are fundamental problems. It seems that the Nation is waiting for something to happen. I believe Jimmy Carter called this feeling “malaise.” It was a lot easier to come out of this funk when there were Nazis to be destroyed, or Soviets to beat to space. We are locked in a battle with our own inertia, and Newton posited long ago that inertia is undefeated.
There is uncertainty in the marketplace. Markets hate uncertainty. The solutions offered to date have merely exacerbated this uncertainty. Many of these solutions have been the offspring of two parties coming together to employ the politics of victimization. Let’s analyze a few of these.
The American Recovery and Reinvestment Act, aka the stimulus bill, was designed to rebuild America through a series of “shovel ready projects” that would ultimate stimulate demand. Let’s leave the complaining over line items in this bill to the talk radio circuit, and address it from the uncertainty perspective. Half of the controversial TARP program was handed to the current administration and (drum roll please), yours truly feels that President Obama did well in his stabilization efforts. While TARP fulfilled its purpose, its existence was rooted in the fact that some viewed profit as a right, and that losses should be socialized because they were victims of the housing market.
The rush to a stimulus bill was a populist reaction to the bailouts. In practice, it became a bailout for State governments, allowing them to make signs that read “Putting People Back to Work.” While there were winners in the stimulus sweepstakes, at what cost did it come? In this piece, there is discussion of a range from $92,000 (as of that date) to $250,000 (when all jobs would be counted and all funds disbursed). More over, the CBO notes that stimulus related hiring peaked in 2010.
The market cannot establish the effectiveness of this bill. Vice President Biden never helped matters in his sales campaign. He thought he was when he offered, “the economic forecasters have attributed … the vast bulk of this growth to the Economic Recovery Act — the much-maligned and battered Economic Recovery Act. Put another way, without the Economic Recovery Act, it’s very unlikely this economy would have expanded at all this last quarter. It may have even contracted.” Or put another “another way,” this economy really can’t stand on its feet right now. All of this uncertainty has created a new victim class, the chronically unemployed.
Another victim class that was fought over was the uninsured. So the solution to this problem was the Patient Protection and Affordable Care Act (Shortened to just the ACA after some Senatorial politicking). Included in this bill is a mandate for employers with fifty or more employees to provide health insurance to Federal standards. Penalties for not meeting this standard will be $2,000 per employee. This law has forced businesses to choose between maintaining their existing benefits, or perhaps dropping payroll to come under the fifty person threshold. All of this uncertainty has the potential to create a new victim class, the unemployed and uninsured.
The Frank-Dodd Financial Reform and Consumer Protection Act (pet name Frankendodd) gives the FDIC the authority to wind down firms deemed “too big to fail.” But not for Senator Richard Shelby (R-AL) a $50 billion fund would have been created to assist in this liquidation process. Indeed, the Feds were willing to take “too big to fail” out of the pejorative realm and were ready to institutionalize it. Even though this fund was not established, critics feel that FDIC’s role as fiduciary in TBTF matters will lead to the ironic situation of FDIC causing runs on financial institutions. Markets hate uncertainty.
Mortgage assistance is another element of financial reform; however, the standards for assistance are strange. Some have decided that they are the victims of depreciation, and that this nullifies any note that has been signed. The next logical step appears to be to cease making payments. These appear to be ideal candidates for the various programs at the State and Federal level.
Of course, the last few sentences hit close to home. I have followed the cautionary tale of Herb and Christine Will (Herb’s Soup and Such) on The Chestertown Spy. These folks appear to be victims of victimization. While there is a mechanism in place to protect all facets of the economic chain, there appears to be little recourse for the small town entrepreneur who has asserted that his bills have been paid on time while holding up his end of an exotic instrument approved by a bank.
I’m glad to read that this couple has gained some traction in their legal battle. There is no malaise at Herb’s. As I heard him say in his questioning of Congressman Harris, “To my family, I’m too big to fail.” More of that “gottawanna” we talked about last week. Main Street still has it.
Troup’s Corner Non-Sequitur: I mentioned that I was at the Farmer’s Market last weekend. I failed to detail my purchase. I bought a couple of the ink and tea stain prints from the couple in the second row of artists (if you’re facing the market from High Street). They are fairly priced, and look good in many decorating themes. Somehow they are rustic and hip all at once. I only have three credit hours of art history to my name, so I won’t offer more than that. Heck, I may have just insulted them without realizing it.
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