Wrestling with Chicken Little

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U.S. Automakers currently sent home to re-think their requests for a bailout package from Congress have run into two major problems bode poorly for the U.S. and the global economy.

First, the policy drift in Washington that's taking place as we all hold our breath for the Bush Administration to pack its bags couldn't have come at a worse time: the speed at which the economic fallout is now coming back to depress the stock markets has been a matter of weeks, not months, and I really shudder to think how much worse it can get between now and January 20, 2009. And, frankly, our Congress just doesn't seem up to making a decision, whether for pure fright at the enormity of the consequences, or because we're just in the political doldrums until Obama's inauguration.

The second problem is a kind of "Chicken Little" problem. Our American automobile manufacturers have been back to Washington over and again for help to "stay competitive", "to retool" or otherwise to stay in business. Patience among taxpayers and their reps in Washington is wearing understandably thin, but all signs actually point to the sky falling this time. At a time when we have shudders at hearing of over 200,00 layoffs on Wall Street alone, imagine the tsunami effect if Detroit, the poster child for supply chain economics, fails: best estimates are millions of 2.5 million to 3 million jobs lost -- in the heart of the country.

In the broader contest of the debate between conservatives and liberals over how much intervention, how much regulation, how much government should be involved -- and over the fundamental soundness of our financial system, the reality of an entire industry sector poised for failure is sobering for its fear factor alone: witness yesterday's stock market plunge. The ripple effect that will be quickly seen spreading out among Detroit's supply chain will have a corollary effect among all industries. Will others follow Detroit? The last thing we need is for Washington to go numb in the brain at a time when action alone has a psychological calming effect. The less of Chicken Little is that his call is so disturbing that people just shut down and tune out, and while no one is tuning out, fear of action in the face of the enormity of the consequences is the equivalent.

January 20th can't come soon enough, but I really worry about what's in store for us over the next 8 weeks.

Taxes, the Election and the National Self Interest

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I have to credit the McCain campaign for making lemonade out of lemons. At a time when the economy is tanking and Americans are truly and justifiably fearful for the economic future, when it becomes commonplace for our government to speak of figures in excess of many hundreds of millions of dollars being committed to this bailout and that rescue, and the national debt be damned, they have managed yet again and at just the right time to twist the minds of lower and middle-class Americans away from anger at those in power who have brought us to economic disaster, and flipped it into a powerful fear that the Obama administration would preside over a massive and universal tax increase. Can you see the total disconnect in thinking?



Clever. And ironic, given that so much of our country's financial problems are the direct result of a mindset among our current corporate and government elite is that government must cede its fiduciary responsibility to Americans to the gods of profit and growth. Where would we be if the SEC hadn't handed over to the five largest Wall Street investment banks control over their own risk? Where would we be if we weren't in Iraq and Afghanistan, where it now looks like we will go down as the Russians and the Brits before us? At a time when government spending is skyrocketing as fast as the stock market tanked in October, the McCain camp would like us to overlook a basic question. Where will all the money come from?



Obvious answer, of course: us. There's not much debate that we cannot leave our economy to its own travails, although there is considerable debate about the impact of us digging our hole quite so deep. James Kenneth Galbraith spoke about this in a recent Bill Moyers interview which makes fascinating and enlightening reading. He says, rightly, that the failure of government regulation of the banking system has created a crisis of trust and confidence, and goes on to say that it is appropriate and necesary that the US Government borrow whatever funds necessary to provide the capital to provide a bailout on the national, state and local levels. http://www.pbs.org/moyers/journal/10242008/transcript4.html I'm not sure I agree with Galbraith that the US dollar is and will remain the one solid go-to currency in the global economy. And he ignores the ultimate question: what are the long term consequences for our nation to have effectively mortgaged an entire generation's wealth. Remember that the Chinese government is the single largest holder of U.S. debt, and for now, it remains in their interest not to call that in. But back to taxes and the election.



Are we so averse to individual pain in the face of national crisis that we cannot see the plain necessity of taxes being raised to pay the costs of our mistakes -- our individual mistakes in arriving at a national economy that relies on soft goods and credit card debt, as well as the mistakes of policy and leadership that have put us in this place? Again, the Republicans play the fear card, only this time they've managed to twist our gaze away from reality and layer it on our own deep national unease at our individual and collective economic futures. The Democrats, in the interest of winning this election, don't do much better in truth-telling grounded in real economic reality. Maybe it's just too much to deal with now. Our problems are much deeper than our leaders will let on, and politics will prevail.

I only hope the only saying holds true for Americans: you can fool some of the people some of the time, but not all of the people all of the time.