Later that day, on Air Force One, Mr. Obama went back to the press corps section to chat with reporters. In eight years, Mr. Bush did this only once. What a change.
But the most striking change came when Mr. Obama, a few days ago, responded to the stories about his two candidates for office who removed themselves from consideration after tax problems surfaced. He simply declared, "I screwed up." In eight years of the most disastrous Presidency in American history, Mr. Bush never once admitted making a mistake. Billions of dollars disappeared, crimes were committed, thousands of Americans died on his orders, yet he never once admitted a single mistake.
What's especially interesting here is that Mr. Obama did NOT himself screw up. Both problems arose because the candidates in question had been insufficiently candid with Mr. Obama's staff. Mr. Obama made no mistake, and his staff made no mistake. But that didn't stop Mr. Obama from accepting full responsibility for the errors.
The contrast with the Bush Administration is stark. Where Mr. Obama would have flatly declared, "The buck stops here", the Bush Administration would have released the following statement: "The so-called 'buck' is a fantasy created by left-wing extremists and taken up by the left-wing media as just another effort to divert the nation's attention from the many successes of this Administration."
I like the difference between the old and the new. This is change we can admire.
9 comments:
"What's especially interesting here is that Mr. Obama did NOT himself screw up. Both problems arose because the candidates in question had been insufficiently candid with Mr. Obama's staff."
True regarding Daschle and Richardson, but not (to my knowledge) true regarding Geithner. I believe Obama knew about Geithner's problems prior to putting him forward as Treasury Secretary-designate; the defense was that his expertise could not be duplicated, etc. This is never a convincing argument, and wasn't in this case either.
But I'm certainly with you when it comes to celebrating the real change that Obama represents. It's my guess that Bush will ulltimately look like a pygmy alongside Obama (and in many ways he already does, as in the example you cited of admitting his mistake).
I thought Obama said he "screwed up" because he had vowed to support Daschle AFTER the revelations about the latter's allegedly improper conduct. He was acknowledging that his support for Daschle implied that the powerful were held to a different standard than ordinary people, and that this was unacceptable. Thus, it WAS his own mistake (of poor judgment) to which he was owning up.
Even so, Chris, don't you find it the least bit disconcerting that Goldman Sachs man Paulson was replaced by Goldman Sachs man Geithner, especially after Senator Obama had voted for a multi-billion-dollar bailout of Goldman Sachs, which also happened to be the single largest source of donations to his presidential campaign?
In a country with over 300 million people, Obama couldn't find someone qualified to be Treasury Secretary who hadn't come from Goldman Sachs, was not a lobbyist, and hadn't failed to pay taxes? It seems that he is trying to staff his cabinet with the entrenched establishment -- more of the same, not change.
Thanks for correcting me on Obama's actual mistake with respect to Geithner.
As to Dither's remarks concerning the desirability of Geithner in the Treasury position: that particular position is especially vulnerable to the dangers of loss of confidence. Remember, much of what makes an economy work is confidence, and the trillions of dollars of wealth that just vanished over the last year were all lost due to a loss of confidence. It is therefore crucial that the Treasury Secty be someone who commands lots of respect among the major financial operators. That's why Treasury Secty's almost always come from one of the big financial firms.
Look at it this way: we've already committed nearly a trillion dollars on the TARP program, whose sole purpose is to bolster the sagging confidence of the financial community. The choice of a good Treasury Secty is worth at least a few hundred billion. And that's not something you want to get experimental with.
Chris,
I wouldn't call resorting to hiring a tax-cheat and big-banker to the treasury a confidence-booster. I don't have particularly strong views on Geithner, and I understand the value of having a high-powered financial figure, but I don't think that Geithner's image, between the two things I listed, is one that screams of "change we can believe in!"
Just saying the facts, Geithner doesn't look like someone likely to restore confidence given his horrible image.
But Alex, who's confidence needs restoring? Not yours or mine -- we're not the ones controlling the financial system. The people who need confidence-building are the people who are making decisions about committing billions and billions of dollars. The question is, will Mr. Geithner restore their confidence?
The sad truth is that these are the very same people who screwed up the whole system in the first place. In the long run, we need to correct the vulnerability of our economic system to the abuses of such a small group. Above all, we need a more decentralized system with stronger competition so that there are always contrarian challenges to the industry wisdom that can sometimes be so horribly wrong. If we just pass this stimulus bill and then return to business as usual, we're just asking for another disaster.
There's a brutal truth here: no matter how smart our regulations are, there will always be clever people coming up with ways to outsmart the system, and we simply cannot prevent that from happening. Our best defense against such clever people is to keep financial institutions small enough that one clever Gordon Gecko at one institution can only wreak a limited amount of financial havoc. Our biggest mistake was in permitting financial institutions to grow too large.
Chris,
The entire banking system is a gigantic pyramid scheme that has always been a disaster in the making. As you probably know, the Fed can create new money at almost no cost. But it's worse than that.
The fractional reserve system allows banks to keep sometimes as little as 10% of all demand deposits in the vaults. This means if there are $100 of demand deposits (think checking accounts) in a particular bank, the bank only has to keep $10 on hand. The other $90 are simultaneously available "on demand" to the depositors, and being lent out to borrowers at the same time. That means, in this case, $90 has just been created out of thin air, on top of the Fed's inflation.
But it doesn't even stop there. That $90 will be spent and will eventually find its way into another bank, which will only have to keep $9 on hand, lending out $81 and thereby creating another $81 in new money.
And this process repeats. The actual sums are much greater, of course. All of this artificial money creation distorts the market's price signals and causes economic dislocations that must inevitably be corrected in cyclical recessions. In simpler language, resources that were chasing funny money must eventually be freed up to serve real needs.
Money is just a medium of exchange. Money saved represents real goods that have not been consumed, and are thus available for future consumption. It is easier to see this if you imagine a barter system. A baker bakes 3 loaves of bread; he trades one loaf for a dozen eggs, eats one loaf for his dinner, and saves the remaining loaf.
When the interest rates do not reflect this real information about actual savings, but are distorted by the creation of money that is not backed up by anything tangible, we no longer have a functioning market. The reason capitalism works and socialism doesn't, fundamentally, is because only capitalism has prices that reflect the reality of supply and demand, and thus make economizing possible. If the prices don't reflect reality, well, you get the idea.
The problem then is not a lack of regulation. No amount of regulation can fix a system that is unworkable to begin with -- and besides, it is naive to think this system was ever designed to be anything but a ripoff of the masses. The Federal Reserve Act was essentially written by a cabal of wealthy banking and financial elites. You are asking the wolves to guard the henhouse.
Want to fix our financial system? End the Fed! Get government out of money and banking altogether. Let the market choose the best money, as it did in the first place, before governments took it over. Of course, this would mean a much smaller government, and an end to most wars and welfare state spending boondoggles, the true costs of which are currently hidden from the public. Fine by me!
"The people who need confidence-building are the people who are making decisions about committing billions and billions of dollars. The question is, will Mr. Geithner restore their confidence?"
This is true, but they're not the only ones. The economy ultimately relies on these factors:
(1) Ordinary citizens having enough confidence to spend rather than save
(2) Businesses (big and small) having enough confidence to expand
(3) Ordinar people having enough confidence to invest in the stock market
Many of these everyday people have a very simple anxiety; a deep distrust of the "greedy bankers" (I put that in quotes to show that I am currently displaying neutrality towards the idea of greed bringing us down). The American people feel more afraid as we allow more fraudulent big-shots to run the system. I admit I am blowing the effects of Geithner's appointment out of proportion, but sustaining this kind of tolerance for the sake of "saving the system" will have significant consequences for consumer confidence.
Also, let's hope that the Republicans in the senate don't eat Geithner for breakfast; we need a stimulus bill passed, and hopefully without the ridiculous process it's going through now.
Alex,
I disagree with the premise of the stimulus bill. The recession is necessary. It is a correction of the errors made during the preceding bubble, which was most likely caused by massive Fed inflation intended to counteract the recession that followed 9/11/01.
Consumer spending is not the engine of economic growth. Consumer spending is made possible by economic growth. The real engine of economic growth is savings and capital accumulation. All capital must come out of savings. It is capital that makes labor more productive, raises its wages, and simultaneously makes goods more abundant and cheaper.
All of this is obvious if you imagine what would have happened if past generations consumed without saving. We'd still be wearing loin cloths and running around with spears.
The "spending and debt" economy we have is a result of a deliberate government policy of keeping interest rates artificially low. This policy discourages saving and encourages borrowing and spending. Why save when your money is being debased, and will buy less and less each year?
Americans thus produce very little, while buying goods from China on their credit cards. This economy is unsustainable and must be replaced by a "savings and production" economy, if for no other reason than that the Chinese will stop taking our IOUs when they realize they aren't going to get anything in return.
In any case, the stimulus won't prevent a recession. It might forestall one in the very short term, making the inevitable downturn even worse. How is spending billions of dollars we don't even have going to cure an economy that is ailing from too much spending and debt? Why even try to revive the same bad habits that created this problem? It's absurd.
Obama talked about "sacrifice" but now he wants everyone to spend, spend, spend, and run up those credit cards -- no pain necessary to clean up the mess we've made! That's politics, not reality. This is going to painful.
Dither, I don't want to argue with you, but your notions of economics are, shall we say, most unorthodox. It's obvious that you have diligently studied these issues in piecemeal fashion, but I suspect that you would do well to fill in some of the gaps. For example, you discuss money supply issues. The question of defining money supply is quite tricky; I urge you to explore that question in greater depth. What's so difficult for many people to understand is that many economic realities are ultimately matters of perception. That's about as intangible as you can get, yet its effects are absolutely real.
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