Lindsey’s verdict
Lawrence Lindsey (was he fired by President Bush?) analyzes the Obama administration’s performance on the economy:
Obama has made a complete hash of economic policy, utterly squandering his mandate in a series of missteps that suggest he has not made the transition from campaigning to governing…
the package the House produced was not “stimulus” in any normal understanding of the word. Of the $820 billion package that emerged from the House, only 20 percent would be spent in fiscal 2009 and only another 40 percent in 2010. That left 40 percent of the package to be spent in 2011 or later…
The package was so bad that it made criticism of the new president socially acceptable, a rare development for the first initiative of a president elected with a large mandate. Alice Rivlin, doyenne of Democratic party policy economists, criticized the lack of macroeconomic benefit in the plan. Her sentiments were echoed by just about every leading economist in both parties who was not employed by the administration…
Bank recapitalization and housing mortgage issues would also have to be dealt with. The task for announcing these was delegated to Treasury Secretary Timothy Geithner. But the scripting of the message and indeed the whole “rollout” of the issue was tightly controlled in the West Wing…
Geithner still had to say something, and none of the various options available was attractive. Buy the assets from the banks? Set the price high enough to bail out the banks and you have a trillion-dollar overpayment. Set the price at current market prices and you have to come up with the same trillion as a bank capital injection. Do what Bill Seidman and the George H.W. Bush administration did during the S&L crisis by nationalizing the banks and then reselling the pieces into the market? Might work, but while Seidman disposed of the thrift industry by selling them to the basically healthy commercial banks, there aren’t any basically healthy banks left on the planet to buy an institution like Citibank or Bank of America. Combined, those two institutions have 14 percent of the deposits in the American banking system, and there are plenty of other banks that need help as well.
The Geithner announcement was repeatedly put off while each of the options was publicly discussed. In the end the political decisionmakers decided there was no politically acceptable decision. But expectations had been building, stoked higher with each postponement of the speech. When Geithner finally spoke and by omission essentially admitted that the Obama administration hadn’t come up with a solution, the stock market plummeted.
But it wasn’t only the stock prices of America’s publicly traded companies that collapsed. So did the stock of the Obama administration. A discredited stimulus package followed by an overly hyped but largely vacuous bank-rescue speech proved to be too much. The mainstream media, which had given Obama a free ride since the election, turned on their choice. In the space of just over three weeks, Obama and company squandered the greatest stock of political capital any president since Lyndon Johnson had inherited from an election.
It’s early days yet, but the signs are not encouraging. Certainly the question of bipartisanship appears to be settled, and perhaps that colors analyses like Lindsey’s. From the awful stimulus bill to the Geithner fiasco, we have to say we pretty much agree with Lindsey’s assessment at this point as regards substance. He seems wrong about one point, however: the media still seem to adore their man.