Tuesday, December 2, 2008

$8.5 Trillion and counting....

... in money authorized for various bail-outs. Visit the original post at A Secondhand Conjecture to read the subtotals.

I like the question that Tommywonk asked--back a few days ago when the authorization stood at only 7.8 Trillion (the good old days:

Doesn't this money have to come from somewhere? Is the government just printing money? How does this enormous expansion of lending and investment affect the value of the dollar?


Generally speaking, pumping fiat money into an economy overheats it, producing inflation. Yet the clear spectre haunting our various economic obergruppenfuehrers is deflation.

I begin to suspect that they are in the same position as an addict attempting to use speed to counteract the effects of the barbiturates she just ingested. If she can keep the balance between the upper and the downer just right, she'll pass herself off as something approaching functional ... until the urine test.

We haven't gotten our minds around the enormity of the whole Great Meltdown scam yet.

Here's my chief evidence: LiberalGeek (who, along with Tommywonk, is a leading contender for Delaware's Brightest Blogger) has a recent post at DelawareLiberal suggesting that the best way to bail-out the Big Three without actually handing them $30 Billion in cash is for the Feds to take over their healthcare responsibilities. This would thus backdoor into universal healthcare with the labor unions signed up for the ride. (This is an idea that scares me, because I can see somebody actually running with it.) But LG misses the two key points: the $30 Billion ain't real money (which healthcare actually requires, no matter how you organize the system), and in terms of real money Uncle Sam is just about flat busted broke.

The grim reality for President-elect Obama is this: most of his room to maneuver on anything but the Great Meltdown has been pre-limited by the fact that we're out of money, and you can't keep faking it forever. So while there may be a few cosmetic moves toward healthcare reform, Federal single-payer or even a Federal version of the Massachusetts plan is not going to be coming about in the next two years, no matter who thinks there is suddenly a consensus for it.

On domestic issues, look for President Obama to concentrate on the parts of his agenda that don't really cost money, like expanding hate crimes legislation, eliminating restrictions on gay adoption, or increasing regulatory controls (but not necessarily increasing the regulators to enforce them).

On foreign affairs, prepare to see some major floundering. This is not and indictment of Obama--we were due for some major floundering thanks to the past eight years no matter who inherited the office. Our ungainly over-extension both in the so-called war on terror and the Iraq boondoogle (call me back in two years and still tell me we won the war) have allowed the rest of the world to notice that the Emperor, while still half-dressed, is showing his ass. Right now, we can't really do squat besides piss and moan at Russia; we've allowed China to strategically out-invest us in Africa; we've missed the boat on the current India-Pakistan contretemps; and if this administration actually appoints somebody to the State Department who understands Latin American politics, it will be the first one to do so since Reagan propped up torturers and murderers in Honduras. (Understanding doesn't always equate with moral action.)

$8.5 Trillion: change that's going to knock us all on our ass.


pandora said...

Now I'm depressed.

However, I think you might be wrong when it comes to Obama's agenda. I think it's going to be BIG. I think it has to be BIG, and I think fixing Healthcare and fixing the economy go hand in hand. Tweaking the status quo won't help anyone. The news on bail-outs, job loss, housing, etc. gets worse every day. Slight shifts in policy will only be sucked into the economic vortex and will accomplish nothing other than buying us a few weeks time.

Steve Newton said...

Lay aside for the moment that I don't like a lot of Obama's plans, I will agree with you that the man thinks big. So instead of approaching this as a cynical libertarian, let me approach this as if I were a cynical liberal (worth a shot as a thought experiment, anyway):

I don't think the economy can be "fixed," I think it has to be transformed. I think that's inherently why the bail-outs are not working and will not work, because what we are seeing is the result of trying to postpone a major paradigmatic shift in both the global and American economies. On some level I think Obama realizes this, but I don't think anybody gets the magnitude of the shift because it is something you cannot see by looking backwards, and Obama's team is still looking backwards for his model.

If, however, I am right about that, and you have to transform rather than fix the economy, it also makes no systemic sense to "fix" healthcare in terms that make sense in the current economy but will be almost instantly an anachronism in the economy on the other side.

I'm not depressed in a systemic sense, as I truly believe the old paradigm of liberal/conservative or Keynes/Friedman with respect to the economy is about to be left in the dust. I think the circumstances will constrict or open the choices available to Obama, and that the only real mistake anybody can make is thinking too small.

By the way, I do plan to return to health care (and to answer a comment you left in another thread) and to do one of my very rare posts on university education and why it costs so much by the weekend at the latest.

pandora said...

Okay, we agree that whatever happens has to be big/transformational. And I agree, we must look forward - to something that hasn't been done before. We're about to roll the dice. I simply don't see any other way.