Jewish World Review Sept. 19, 2011 / 20 Elul, 5771
U.S. can't afford to wait until it happens
By Jay Ambrose
http://www.JewishWorldReview.com | Though the federal debt becomes more a menace daily, the Obama administration is behaving like Rep. Barney Frank when asked the consequences if people could not cough up payments on mortgages he demanded they have.
"We'll deal with that when it happens," he huffily replied as if it never would. It did. As the book "Reckless Endangerment" shows, Frank and a slew of other politicians enabled Fannie Made and Freddie Mac in a spate of corruption that ultimately ruined many buyers purchasing unaffordable homes. The further results were a fiscal crisis and the worst recession this country has seen since World War II.
It's a complicated story with private financial institutions playing no small part. The debt and surrounding issues are complicated, too. None of that means there is no distinction between responsible and irresponsible politics. What Frank did was an irresponsible invitation to a disaster recently underlined by reports on a decline in median wages and an increase in poverty. What President Obama's now up to is an invitation to a disaster that could prove many times worse.
The major factor in the latest shifts in median wages and poverty is joblessness, and Obama does have a jobs plan he is now ballyhooing across the nation. Rejoice, he says, for he wants tax cuts, only they are temporary like adjustable rate mortgages that give you low payments until adjusted. Then it's foreclosure time.
He also wants to get "fair" with income taxes, which is to say, he wants those now paying the lion's share to pay more while almost half of the workforce pays nothing and more money is taken out of the private economy. Oh yes, he wants more job-training programs that would likely do what they have done in the past -- cost a lot with pathetic result -- and he has some stimulus projects in mind that will employ some people already mostly employed.
I don't know what newspapers Obama reads, but I would guess one is The New York Times, and if he does he surely caught the front-page story about employers saying that nothing in Obama's approach would make them expand and hire more people. They want a better economy first, meaning more consumer confidence, more consumer demand and less regulation.
Obama could also learn from Solyndra, a company that was going to make solar panels. Obama, thinking central planners are wiser than millions of buyers, sellers and investors making individual decisions, decided to intervene, hoping to subsidize this and a bunch of other sure thing, future-enlarging green-job firms. The company folded. The public could be out hundreds of millions of dollars, and 1,100 employees are out of work. Meanwhile, many more fossil fuel jobs are ready to go if Obama is not ready to stop them as many fear.
If Obama won't look at the news or his own experiences, maybe he could take a glance at history. That's what Professor Kenneth Rogoff of Harvard and Professor Carmen Reinhart of the University of Maryland have done in their book, "This Time is Different," only more than a glance. They have studied 800 years of recession history. Rogoff said in an online interview that the only way to get growth -- is to do something about the debt. Not only is that the only real answer, but also debt problems can "start blowing up on you" when you least expect them.
Reinhart points out in another interview that both firms and "overstretched" households are more cautious in spending and investing because of the "uncertainties" posed by overly large public debt. Want demand? Help households relax.
That doesn't mean you've got to cut spending drastically all at once, but you do have to do more long-term restructuring than the decreases in planned increases we have so far seen from Obama's proposals and the compromise with Republicans, and he has to start with more solid ideas right away. We can't afford to wait until the worst happens.
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Jay Ambrose, formerly Washington director of editorial policy for Scripps Howard newspapers and the editor of dailies in El Paso, Texas, and Denver, is a columnist living in Colorado.
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