Meltdown Politics

Meltdown Politics

By Bob Burnett

Created Mar 25 2008 - 10:37am

According to the latest Gallup poll [1] three quarters of Americans believe

the economy is in a recession. It's no surprise respondents tell pollsters

the economy has become the dominant political issue [2]. How will the

recession play out in the 2008 Presidential campaigns?

We are in the middle of an economic meltdown spurred by the bursting of the

debt credit bubble. Speaking on the PBS New Hour [3] noted financial

reporter Jane Bryant Quinn described the situation as "the most significant

financial crisis we've had since the 1930s." Financial writer David

Leonhardt [4] recently wrote, "The crisis isn't close to ending."

Why has the economy turned sour so rapidly? Most observers fault the

mortgage credit bubble that saw financial institutions making questionable

loans - sub prime mortgages - that resulted in their being saddled with vast

portfolios of failed mortgages. (One in ten homeowners now have no equity in

their homes.) As financial institutions began to report disappointing

quarterly results, public confidence plummeted and some Wall Street

institutions - most notably, the venerable Bear Stearns brokerage firm -

began to fail. This led to a domino effect: confidence deteriorated, stock

prices fell, and more firms were threatened. Recently, New York Times

columnist Paul Krugman [5] wrote that Wall Street is facing "a systemic

market call," where "the whole financial system is facing demands to come up

with cash it doesn't have."

There are four major players in this economic drama: the Federal Reserve

Board, large financial institutions, the White House, and Congress. To its

credit, the Federal Reserve Board has acted aggressively to stop the erosion

of public confidence. They have lowered the discount rate to 2.25 percent,

increased the money supply, and bailed out Bear Stearns. While these actions

are laudable, the Fed is running out of options.

The financial markets have responded defensively. While the discount rate

has fallen by more than 50 percent, the prime rate (5.25 percent) has not

decreased as rapidly. And the rates paid by consumers - mortgage (5.62

percent), automobile loan (7 percent), and credit card (12 percent) - have

remained stationary or, in some cases, increased. As a result, there has

been a tightening of credit; it is now more difficult for small and

medium-sized businesses to get loans. Therefore, consumer confidence has

fallen, inflation has risen, and the total number of jobs in the economy has

shrunk.

Sinking to new levels of incompetence, the President doesn't understand the

gravity of the situation. In his March 14th speech at the New York Economic

Club, Bush promised to veto legislation aimed at ameliorating the recession:

"I'm deeply concerned about law and regulation that will make it harder for

the markets to recover." His solution was for Congress to make his tax cuts

permanent.

While there are many creative idea floating in the Democratically-controlled

Congress - such a relief for homeowners facing foreclosure - most of these

face Bush vetoes.

Given this situation - a market paralyzed by fear, a Federal Reserve board

with limited options, and a stalemate created by a witless Republican

President blocking Congress - what should we expect from the Presidential

candidates?

The Republican candidate, John McCain, plans to run as the new, "improved"

version of George Bush: I'll follow the same policies, but do a better job

of implementing them. McCain doggedly pursues the failed Bush Iraq policy

and plans to "deal" with the recession by cutting taxes and trusting the

market to do the right thing.

McCain's intransigence is an opportunity for the Democratic presidential

candidate, likely to be Senator Barack Obama. Obama should make three broad

points: this recession is tied to the war in Iraq; the American public needs

immediate assistance; and the President must represent all of the people.

Senator Obama must link the mind-boggling cost of the Iraq war to our

current economic woes. According to Nobel-prize-winning economist Joseph

Stiglitz [6]: "The spending on Iraq was a hidden cause of the current credit

crunch because the US central bank responded to the massive financial drain

of the war by flooding the American economy with cheap credit." On March

20th [7], Obama made this connection, stating the $12 billion per month

being expended on the Iraq campaign might better be spent on domestic

programs.

His second point should state the obvious: main street needs help as much as

Wall Street. Senator Obama has proposed a common-sense economic plan [8] to

buoy the confidence of average Americans: a plan that emphasize tax cuts for

the working class, protection of homeowners, and massive investment in

America's infrastructure.

The final and most critical component of an Obama alternative to the failed

Bush-McCain policies is to instill confidence in the American people. Poll

after poll has indicated Americans believe the US in headed in the wrong

direction and don't approve of the President's handling of the economy [9].

Senator Obama, with his teamwork message, we're all in this together, can

both instill confidence in Americans and motivate them to form the new

consensus necessary to overcome our nation's daunting problems.

_______

--

NOTICE: This post contains copyrighted material the use of which has not

always been authorized by the copyright owner. I am making such material

available to advance understanding of

political, human rights, democracy, scientific, and social justice issues. I

believe this constitutes a 'fair use' of such copyrighted material as

provided for in section 107 of the US Copyright

Law. In accordance with Title 17 U.S.C. Section 107

"A little patience and we shall see the reign of witches pass over, their

spells dissolve, and the people recovering their true sight, restore their

government to its true principles. It is true that in the meantime we are

suffering deeply in spirit,

and incurring the horrors of a war and long oppressions of enormous public

debt. But if the game runs sometimes against us at home we must have

patience till luck turns, and then we shall have an opportunity of winning

back the principles we have lost, for this is a game where principles are at

stake."

-Thomas Jefferson

A hight point of Bob Burnett's ``Meltdown Politics''

Senator Obama must link the mind-boggling cost of the Iraq war to our

current economic woes. According to Nobel-prize-winning economist

Joseph Stiglitz [6]: "The spending on Iraq was a hidden cause of the

current credit crunch because the US central bank responded to the

massive financial drain of the war by flooding the American economy

with cheap credit."

In article <47ea7bf9$1$2614$9a6e19ea@news.newshosting.com>,

Gandalf Grey <valinor20@gmail.com> wrote:

>Meltdown Politics

>

>By Bob Burnett

>

>Created Mar 25 2008 - 10:37am

>

>

>According to the latest Gallup poll [1] three quarters of Americans believe

>the economy is in a recession. It's no surprise respondents tell pollsters

>the economy has become the dominant political issue [2]. How will the

>recession play out in the 2008 Presidential campaigns?

>

>We are in the middle of an economic meltdown spurred by the bursting of the

>debt credit bubble. Speaking on the PBS New Hour [3] noted financial

>reporter Jane Bryant Quinn described the situation as "the most significant

>financial crisis we've had since the 1930s." Financial writer David

>Leonhardt [4] recently wrote, "The crisis isn't close to ending."

>

>Why has the economy turned sour so rapidly? Most observers fault the

>mortgage credit bubble that saw financial institutions making questionable

>loans - sub prime mortgages - that resulted in their being saddled with vast

>portfolios of failed mortgages. (One in ten homeowners now have no equity in

>their homes.) As financial institutions began to report disappointing

>quarterly results, public confidence plummeted and some Wall Street

>institutions - most notably, the venerable Bear Stearns brokerage firm -

>began to fail. This led to a domino effect: confidence deteriorated, stock

>prices fell, and more firms were threatened. Recently, New York Times

>columnist Paul Krugman [5] wrote that Wall Street is facing "a systemic

>market call," where "the whole financial system is facing demands to come up

>with cash it doesn't have."

>

>There are four major players in this economic drama: the Federal Reserve

>Board, large financial institutions, the White House, and Congress. To its

>credit, the Federal Reserve Board has acted aggressively to stop the erosion

>of public confidence. They have lowered the discount rate to 2.25 percent,

>increased the money supply, and bailed out Bear Stearns. While these actions

>are laudable, the Fed is running out of options.

>

>The financial markets have responded defensively. While the discount rate

>has fallen by more than 50 percent, the prime rate (5.25 percent) has not

>decreased as rapidly. And the rates paid by consumers - mortgage (5.62

>percent), automobile loan (7 percent), and credit card (12 percent) - have

>remained stationary or, in some cases, increased. As a result, there has

>been a tightening of credit; it is now more difficult for small and

>medium-sized businesses to get loans. Therefore, consumer confidence has

>fallen, inflation has risen, and the total number of jobs in the economy has

>shrunk.

>

>Sinking to new levels of incompetence, the President doesn't understand the

>gravity of the situation. In his March 14th speech at the New York Economic

>Club, Bush promised to veto legislation aimed at ameliorating the recession:

>"I'm deeply concerned about law and regulation that will make it harder for

>the markets to recover." His solution was for Congress to make his tax cuts

>permanent.

>

>While there are many creative idea floating in the Democratically-controlled

>Congress - such a relief for homeowners facing foreclosure - most of these

>face Bush vetoes.

>

>Given this situation - a market paralyzed by fear, a Federal Reserve board

>with limited options, and a stalemate created by a witless Republican

>President blocking Congress - what should we expect from the Presidential

>candidates?

>

>The Republican candidate, John McCain, plans to run as the new, "improved"

>version of George Bush: I'll follow the same policies, but do a better job

>of implementing them. McCain doggedly pursues the failed Bush Iraq policy

>and plans to "deal" with the recession by cutting taxes and trusting the

>market to do the right thing.

>

>McCain's intransigence is an opportunity for the Democratic presidential

>candidate, likely to be Senator Barack Obama. Obama should make three broad

>points: this recession is tied to the war in Iraq; the American public needs

>immediate assistance; and the President must represent all of the people.

>

>Senator Obama must link the mind-boggling cost of the Iraq war to our

>current economic woes. According to Nobel-prize-winning economist Joseph

>Stiglitz [6]: "The spending on Iraq was a hidden cause of the current credit

>crunch because the US central bank responded to the massive financial drain

>of the war by flooding the American economy with cheap credit." On March

>20th [7], Obama made this connection, stating the $12 billion per month

>being expended on the Iraq campaign might better be spent on domestic

>programs.

>

>His second point should state the obvious: main street needs help as much as

>Wall Street. Senator Obama has proposed a common-sense economic plan [8] to

>buoy the confidence of average Americans: a plan that emphasize tax cuts for

>the working class, protection of homeowners, and massive investment in

>America's infrastructure.

>

>The final and most critical component of an Obama alternative to the failed

>Bush-McCain policies is to instill confidence in the American people. Poll

>after poll has indicated Americans believe the US in headed in the wrong

>direction and don't approve of the President's handling of the economy [9].

>Senator Obama, with his teamwork message, we're all in this together, can

>both instill confidence in Americans and motivate them to form the new

>consensus necessary to overcome our nation's daunting problems.

>_______

>

>

>

>--

>NOTICE: This post contains copyrighted material the use of which has not

>always been authorized by the copyright owner. I am making such material

>available to advance understanding of

>political, human rights, democracy, scientific, and social justice issues. I

>believe this constitutes a 'fair use' of such copyrighted material as

>provided for in section 107 of the US Copyright

>Law. In accordance with Title 17 U.S.C. Section 107

>

>"A little patience and we shall see the reign of witches pass over, their

>spells dissolve, and the people recovering their true sight, restore their

>government to its true principles. It is true that in the meantime we are

>suffering deeply in spirit,

>and incurring the horrors of a war and long oppressions of enormous public

>debt. But if the game runs sometimes against us at home we must have

>patience till luck turns, and then we shall have an opportunity of winning

>back the principles we have lost, for this is a game where principles are at

>stake."

>-Thomas Jefferson

>

>

>