“I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter, but now I want to come back as the bond market. You can intimidate everybody.” — James Carville, advisor to Clinton
The quote is from a Naked Capitalism post titled, Paulson playing chicken with markets: Guess who will win?. It’s about how Treasury Secretary Paulson thought he could bluff the bond markets during the ongoing credit crisis.
From the comments
I have great sympathy for Obama, who will be entering into an office stuffed wall to wall with financial C4.
Get used to saying it, “President McCain.”
If (I wouldn’t have used ‘if’ a month ago) Obama does win, I don’t pity him for the economic situation. I think it will be very easy for his to offload the responsibilities for the crisis squarely on a Crawford, Texas doorstep.
What I do think will be interesting is how Obama decides to deal with the recession. Will he take what I call a practical good-governance-in-spirit approach, and give us our painful medicine to get this fixed:
1)major infrastructure investment, especially in public construction to absorb the lost commercial and residential real estate jobs;
2) incentives to re-train those who were employed in bubble and now-defunct industries;
3) investigations of the incentive programs / compensation design of broker-originator-lender-investor relationships to fix what clearly was a system that included affordances and encouragement for fraud / lax underwriting / general bubble-blowing (and I used to work in mortgages, so I know a bit about that…);
4) publicly resetting our expectations to understand that 6%+ annual real estate appreciation isn’t coming back without runaway inflation;
5) promoting frugality and less-Earth-abusive living, via reduced consumption and smaller homes;
6) likely increased taxes in a high-unemployment environment and a substantial reduction in the public workforce;
7) and much, much more.
Will he be practical and accept crucifixion by his critics that will already have a beef with him for any number of reasons, as well as those who will suffer from further stagnating retail consumption and a severely shrunken residential construction industry? Not to mention the surge in unemployment that would at least temporarily result before our economy can shift to building useful goods, rather than just ‘goods’. He will take some short term heat and possibly be a one-term sitting duck, and he will face incredible resistance from Congress, but I believe those 7 items, roughly, have to be considered.
Or will he unload all the troubles on GWB’s lap, and promise to fix it and change it, using ploys similar to the recent Stimulus packages to technically take the economy out of recession, or dramatically increase federal payrolls to improve unemployment figures while masking all the pain into greater deficits and higher debt maintenance for future generations, and take credit for the economy’s revival?
Or is there another route he can take? I have always doubted Obama’s ‘change’ message for numerous reasons, but his response to this crisis will be definitive to me. It’s clear what a George H. would do in this situation, and what a George W. would do. Which is Obama more like?