On Sunday night, President-elect Barack Obama told CBS' "60 Minutes" that Franklin D. Roosevelt would be a model of sorts for him. "What you see in FDR that I hope my team can emulate is not always getting it right, but projecting a sense of confidence, and a willingness to try things. And experiment in order to get people working again."As Goldberg points out, it's just a hop, skip, and jump, from projecting a sense of confidence and not always getting it right to arrogant incompetence - just what Bush critics have been wailing about for eight years.
But, as Goldberg also writes, what our markets need now is some sense of security about what government is going to be doing. Can you imagine making investment and business decisions in this atmosphere? You don't know what the Democrats are going to do regarding taxes. Which companies are going to receive bailouts and which won't? Henry Paulson certainly hasn't contributed to a sense of confidence about what the government is going to be doing.
One of the main reasons there's all of this "money on the sidelines" out there among private investors is that Wall Street doesn't know what the government will do next. Will it bail out the auto industry? The insurance companies? Which taxes will go up? How far will interest rates go down? How long will the federal government own stakes in the banks? Will more stimulus checks go out? If so, how big will the deficit get?Obama may have confidence in the ability of government to solve economic problems. I doubt if business leaders around the country share that confidence.
Interventionists, bailout czars and "bold experimenters" in all parties claim to be like firefighters; they can't stop what they're doing until the fire is out. But this analogy only works if you understand the nature of the fire. If it's a credit crisis, that's one thing. If it's uncertainty, it's quite another.
And if the problem right now is uncertainty, then these aren't firefighters, they're arsonists.
Treasury Secretary Henry M. Paulson told Congress he'd spend his kitty of tax dollars on bad mortgage-backed securities. Instead, in the spirit of bold experimentation, he's spent much of it to date buying banks.
Obama insisted he had a specific plan for the economy -- but his plan seems to be to "project confidence."
The problem with this "In Obama We Trust" approach is that it makes private-sector decision-making very difficult. If your boss says he will lay off half his employees next month, but he doesn't know who yet, will you buy a new house this month?
In a time of stability and growth, government can afford bold, persistent experimentation. But in a time of uncertainty, the last thing it needs is more uncertainty. Yet Obama's confident pragmatism, like FDR's, is a threat to confidence where it matters -- among consumers, credit markets and investors.
Yes, letting GM go into bankruptcy would be scary. But a GM bailout merely kicks GM's problems down the road while spreading the contagion about where Uncle Sam's big feet will land next. Besides, bankruptcy isn't the end of the world. It's the means by which bad companies restructure to fix themselves. Bailouts are the means by which governments subsidize bad companies.
The engine company in Washington has pumped more than a trillion dollars through the fire hose. It's time to turn off the spigot, not only to see where we are but to let the normal people start fixing things.