The Hundred Days

Several bloggers have commented on the first hundred days of the Obama Presidency, especially in context of the edited volume Threats in the Age of Obama, to which I contributed a chapter.
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I want to give particular attention to posts by Sam Liles, Mark Safranski, , Mike Tanji, as well as ubiwar and Mark Curtis.

The threat I wrote about was the collapse of the military-industrial complex, possibly as a result of financial crisis.

My evaluation of President Obama, with regard to keeping the military-industrial complex strong, is in two parts. First, his foreign policy, and second, his economic policy.

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Obama’s foreign policy has been brilliant. The team of Secretary of State Clinton and Secretary of Defense Gates may be unmatched in modern times. A coherent, and frankly brilliant, policy of reaching out to important partners while focusing our defenses in sensible ways has contributed to an astonishingly safer world. An example of this one-two punch is Clinton’s “G-2” meeting with China while Gates pushes kill the F-22 (in spite of corrupt Congressional opposition). This helps incorporate China into the global regime we created, helps establish them as partner, and paves the way for (among other things) Taiwan’s best stock market rally in 19 years.

And when the chance permitted itself, we killed some pirates too. We are clearly signaling who are friends are, who are enemies are, and what we can do about it.

Obama’s foreign policy grade is a high A. Absolutely brilliant.

Part of keeping the military-industrial complex relevant is making sure it is aimed in ways that are not intolerate to future policy makers.

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Obama’s economic policy has been disastrous. As America’s economy experienced echoing shocks, as the incompetence of New York bankers (many of which were under the jurisdiction of New York Fed President Tim Geithner) were compounded by give-aways and bailouts lobbied for by Tim Geithner (among others), Obama’s choice was inexplicable: he named Tim Geithner as the Secretary of the Treasury.

Geithner’s response have not merely been made in a technical sense: for worse, they have been aimed at destroying the free-market financial system in the United States. Nearly every day brings new of a new scheme by Geithner to prevent banks from experiencing the consequences of their bad bets. The latest conduit for Geithner’s capital-laundering is Chrysler. While Geithner’s Treasury Department extended saved Chrysler from an bankruptcy for a time, they never used secured loan. That means that the “loan” to Chrysler is in fact a gift to Wall Street.

I was ignorant of the depth of Geithner’s belief that bankers should not lose money regardless of the decisions they make. Obama should not have been. Further, when Geithner actually proposed to guarantee all debt in the banking system, Obama should have used all that opportunity to begin nationalizing the zombie banks, taking back the grants we have to Goldman Sachs and other large institutions, and re-establishing a free market.

Obama absolutely as failed at this, and his policy is authoritarian-leftist. Obama’s economic hostiles appear designed to increase governmental control over the economy, destroy the middle class as an independently wealthy sector of the economy, and establish a statist model of economic stasis.

Obama’s economic policy grade is F. It can hardly get worse.

All other things being equal, Obama’s foreign policy brilliantly helps modernize the military-industrial complex that lies ahead.

All other things being equal, Obama’s economic policy is the operationalization of the greatest threat to American power in the Age of Obama.

5 thoughts on “The Hundred Days”

  1. i don’t know enough about foreign policy to agree or disagree with you. i’ll take you word for it.

    on the the economic side, i think you’re extremely off-base, and in danger of losing the forest for the trees. moreover, i think you rely on “motivations” for policy or guesses at “beliefs” of the actors who you are criticizing.

    i won’t try to convince you you are wrong, rather, i’ll let level-headed dr. roubini do that.

    http://www.rgemonitor.com/blog/roubini/256589/the_thinkers_who_predicted_early_on_many_aspects_of_this_financial_crisis

    Roubini: “And even among the policy makers there was a difference in views. Alan Greenspan, Don Kohn and Bernanke repeated the mantra that it is impossible to prick asset bubbles and that monetary policy should do nothing when a bubble was rising and then, asymmetrically, aggressively ease when the bubble was bursting to avoid the collateral damage to the real economy. Instead thinkers at the BIS and policy makers such as Tim Geithner, Jean Claude Trichet and Mervyn King had a more nuanced approach on how monetary and credit policy could be used to contain such bubbles. Tim Geithner devoted his first five speeches as President of the New York Fed to the issue of systemic risk in financial markets; he also warned about the unsustainability of the US twin deficits at the time when Bernanke was blaming it all on the global savings glut caused by China and other surplus countries.”

    Roubini sees Geithner and his policies prior to becoming treasury head more accurately, in my view, than do you.

    Roubini: “One may also partially agree or disagree with the specific policy actions undertaken by policy makers in managing and resolving this economic and financial crisis. And I do disagree on some specific policy actions, among other on how the banking crisis is being handled. But one should also recognize that the current administration – the President, Geithner, Summers and the rest of the economic team – did a lot to contain and resolve the worst economic and financial crisis since the Great Depression, a crisis that it had inherited from the previous administration.”

    Indeed. It can’t be understated enough just how bad things were in Q4; it was cataclysmic, and Geithner, Summer, Obama and others stepped into the middle of a cataclysm, rolled up their sleeves, and got to work.

    Roubini: “In the first 30 days (not 100) of this administration three major policy actions were undertaken: a $800 billion dollar fiscal stimulus program that is necessary to stimulate aggregate demand; a housing plan that addresses more aggressively the need to slow down defaults and foreclosures; and bank stress tests and a bad assets resolution plan whose initial launch was botched because of the lack of specific details but that was much more favorably received by the markets once its details became clearer.”

    Now, it is true there are strong criticisms which can be leveled against some of these programs. They are not perfect by any means, and so, a 100% grade is impossible.

    Roubini: “Given the justifiable rush of getting these policy actions implemented in short order (the three major ones were announced in 30 days) many details, flaws and shortcomings remain.”

    Quite right. My biggest problem with the rollout thus far has been the fiscal stimulus contains tax cuts which do nothing to stimulate economic activity (or at least very little).

    Roubini: “Fiscal policy stimulus should have been more front-loaded in 2009 and ineffective tax cuts (out of last year’s one of $100 billion only 30% was spent and the rest saved) should have been avoided; the foreclosure avoidance plan may require principal value reduction of mortgages as millions of households are underwater rather than mortgage debt payments relief alone; the Geithner plan for dealing with toxic assets has some design flaws that can be fixed and while it can be used to deal with the toxic assets of solvent banks it cannot resolve the capital problems of near insolvent banks.”

    These are all true in my estimation, and deserving of some critique in performace.

    Roubini: “But one should recognize that US policy authorities – as well as the authorities of many other countries looked into the abyss of the risk of a near depression – given the free fall in global economic activity in the last two quarters – and decided to start using most of the weapons in their arsenals – bazookas, missiles, rockets, artillery, etc – in a financial policy equivalent of a Powell doctrine of overwhelming force in order to avoid a near depression. This is why now the risks of an L-shaped near depression – like the one that hit Japan after the bursting of its real estate and equity bubble – have been reduced.”

    I want to underline that. The threat we faced was first, a great depression; next a near depression L-shaped recovery. Great depression has been averted. Near depression L-shaped recovery risk (lost decade) is now our major problem. That is a HUGE difference. And according to Roubini, as well as my own view of the macro situation, we are now in a U shaped recession. Which is a SIGNIFICANT improvement. The patient was dying, Obama saved him, and significantly improved his prognosis.

    Surely those actions are worthy of more than a failing grade.

  2. Without TARP, unemployment would have been in the 15 to 25% range by Christmas, 2008. Historians will view TARP as GWB’s only significant accomplishment.

  3. Fed X.,

    i think you rely on “motivations” for policy or guesses at “beliefs” of the actors who you are criticizing.

    This is a problem. Right now all I have to help in understanding Geithner’s behavior are his words (particularly, his emphasis that banks should not be exposed to risk) and the idea of regulatory capture. [1] I am sure I am missing something.

    Roubini sees Geithner and his policies prior to becoming treasury head more accurately, in my view, than do you.

    Geithner’s thoughts on how to prick bubbles are interesting, but not relevent here. They may refer to his ability to perform some other aspect of his job, at some other time.

    Analogously, McClellen may have been a brilliant peacetime general. His Governership of New Jersey implies remarkable skills in keeping a ship steady. Thankfully for the country, Lincoln dismissed him, because when it mattered, he was not a general during peacetime.

    Indeed. It can’t be understated enough just how bad things were in Q4; it was cataclysmic, and Geithner, Summer, Obama and others stepped into the middle of a cataclysm, rolled up their sleeves, and got to work…

    Now, it is true there are strong criticisms which can be leveled against some of these programs. They are not perfect by any means, and so, a 100% grade is impossible.

    The arguments Roubini mention are (1) a spending plan that did not take effect in Q1, (2) a protection of the least efficient form of capital allocation, and (3) stress tests that have not yet been released.

    How have these helped?

    (This is a real question.)

    s.,

    It may well have been (though I can’t recall anyone at the time arguing so), though this point is irrelevent to the current discussion.

    [1] http://en.wikipedia.org/wiki/Regulatory_capture

  4. look, you aren’t going to get an argument from me on regulatory capture. we’ve been saying the fox is guarding the henhouse since the reagan era.

    the spending plan DID take effect early, with the signing of shovel ready contracts. even though that work isn’t going to happen for sometime, the stimulative effect is felt as soon as the deal is inked and production starts to ready. moreover, forecasting economic activity is what matters, not what it is doing now. so the forecast of economic activity creates… more economic activity. not enough mind you. still too small. but something.

    the housing plan has already started to help homeowners, combined with Fed actions, it is stemming the tide of losses on the housing front. still more to be had, of course, but it is something.

    the stress tests have helped even though they are not released yet because they are adding certainty to the situation. we may not like their results, but the results, and the directives coming after them, are certain and telegraphed, which has clarified to some degree the murky picture of the bank’s balance sheets. still more clarification is needed, of course, but this is something.

    now when you take these three actions by themselves, it isn’t much, but it is something. when you combine with the Fed activities, it is more than something. it is a good job at managing a very bad hand.

    my criticism of your post is you seem to be ignoring some of the positive developments, and instead harping on only the bad occurrences. we knew it was going to be bad quite some time ago. the question of how bad though has been helped by obama’s movements.

    i would also add that obama has parlayed a good deal of psychological leadership on the markets. the timing of everything has been impeccably managed, with the exception of geithner’s initial rollout, and the stress test results. but those are minor problems. they have done a good job at reassuring a very nervous market. they needed to do that in order to finish the job.

  5. Fed X.,

    Thank you for your comment.

    We agree on regulatory capture.

    I agree that if people expect to be earning more in the future, they are likely to spend more now.

    I agree the housing plan can help homeowners. As I have complained on this blog, Obama and Geithner are actively transferring wealth away from workers or those with cash to those who have already spent (they used the word invested) in housing stock.

    We may disagree on the utility of this ‘telegraphing.’ Allowing leaks of varying accuracy and earliness strikes me as a corrupt way to punish or reward political favorites. It is a murky process by design.

    There have been positive developments, but compared to the systemic harm that Geithner is persuing they drop out. In the same way, Clinton’s gaffes are completely overwhelemed by other successes.

    A man who drives to work, files paper correctly, kills a co-workeres, drives home, and recycles his trash will be remembered for the murder, not the adequate level of competence he exhibited in his other tasks that day.

    The concern against Geithner is not simply the timing ofhis roll-out, or the murkiness of the ‘stress test’ process. It is his (so far successful) attempt to replace a free-market financial system with an Oligarchy of his friends and retainers.

    That is, Geithner is actively destroying what was once a functioning financial system, and using what remains to enrich the Oligarchs.

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