Three issues dominating the news this past week felt like they had a common thread … I wasn’t sure what it was but here’s my take… let me know your thoughts
1) Religious Freedom: The Mosque project near ground zero
Obama appropriately waited for NYC’s Landmarks Preservation Commission to green light the Mosque project in Lower Manhattan before weighing in on the month-long simmering dispute. Obama nobly stated “This is America, and our commitment to religious freedom must be unshakable. The principle that people of all faiths are welcome in this country, and will not be treated differently by their government, is essential to who we are.” Well yes, he is right of course. Yet judging by the reactions of some cowardly liberals, rabid conservatives and the seething White House clarifications, being right does not make it politically savvy… or does it?
Let’s cut to the chase – this is not about the mosque, security, Islam, religious freedom or constitutional rights. It is about politics, the 2010 elections and … well, about race. Because there is still a broad swath of Americans that have yet accepted that a Black man runs the White House and an even broader swath that believes Obama is a Muslim, calculating politicians (Gingrich, Palin, Lazio, etc.) are quickly capitalizing on a small local issue to rally the extreme sentiments of their national base and lambasting the President with the usual critiques of being weak on national security, slow on mending the economy, and favoring big government.
While it is “politics as usual”, you know we are rapidly entering the most pernicious kind of politics when smart politicians (I don’t think Gingrich or Boehner are idiots – Palin…) exploit the ignorance, fear, and extremism of its base to achieve short term electoral gains even at the risk of flouting the very Constitutional provisions they claim to protect. OK, but Obama knows that and he probably anticipated the reactions. He may even have set this as a trap for them. So, is he betting on his opponents making stupid and contradictory blunders that will prove fatal during the fall elections? If so, he will need the full support of the Dems. That is not a sure bet.
If he loses, the Mosque will be the least of our concerns. It will mark the time when America’s core values of tolerance and inclusion disappeared.
2) Shedding Skin
That brings me to the Republican Party and the next elections. Lately, many articles argue and results of primaries show that Republicans are fielding a number of new outsiders with little political background and even less established “Republican” alliances. Tea Party candidates and other Independents are rising fast and are expected to fold into the Republican Party come crunch time. In other words, the Republican Party is quickly shedding skin, rejuvenating and expanding its base, its leadership, and its message. It is still in the dumper in the approval ratings, but it seems to be gaining traction. The message is narrowly concentrated on government deficits, debts, intervention, bailouts and taxes … all either too high or too much. The mood is for less of everything and mostly less of well-established insiders with heavy baggage. It does not augur well for Democrats who are now viewed as the staid Party with the same old recipes of higher taxes, more government spending, and stronger regulation. The Party of “Change” is no more.
Whatever the merits of both positions is not the issue here … all I want to say for now is that no matter how you cut it, the Tea Party and the newly-skinned Republican Party are giving voice to a lot of people who are sympathetic to views of various elements of the far-right (the Nationalist Party being far out there but closer and closer) and who never had a channel to express their feelings and desires. In other words, the new Republican party is saying “It’s OK to be a Redneck – come with us, come campaign, come vote – Vote for us!” … and why not? Let them all huddle under that big inviting Republican tent… better there than in the bushes. I mean, had the Tea Party existed back in 1995, Tim McVeigh would have probably ran for Senator rather than blown up Oklahoma City. So, in a way, the Republicans are more tolerant and more “inclusionary”… of the far-right elements.
So we should expect, and indeed are seeing, that as more and more McVeighs find that voice and means of expression, the Republican Party will by definition move further to the right. My fear is that if this recession and unemployment picture doesn’t get much better very soon, the Democrats will implode in 2012 and the Republicans will rush in with a strong army of McVeighs in its ranks.
Hello Mosque?
3) Creative Destruction
Finally it comes down to this again: “it’s about the economy stupid.” This election, as most others before it, will be determined by the strength of the domestic economy. Voters don’t care much about what was inherited or how difficult it is to fix. They vote, it appears, on the basis of verifiable results: “Am I better off this year than last?” So the fact that we’ve been in recession and anemic recovery mode ever since the end of 2008 – pre-Obama – and are expected to muddle along well into 2011 or 2012 is not a very good sign. What the Democrats need is a swift turnaround and there is simply no leadership to show the way. Academics, professional economists, and pundits are polarized on issues of deflation, deficits, bailouts, taxes, etc. Frankly it’s hard to take one side or another – we are in uncharted waters. As a result government officials are paralyzed and keep doing the same thing over and over again and expecting different results – what was that saying from Einstein? …
Anyway, to make my point clear, last week the Federal Reserve and Treasury served us some new leftovers of the same old ineffective remedies: low interest rates and more quantitative easing (purchases of longer-term notes). Please note that the Fed Funds rate has been set at close to zero (0) since December 2008 (that’s 20 months) and that the Fed has already purchased over $2T (Trillion) of assorted bonds since early 2009. And what’s the result? Well after showing a pulse… the economy seems to be dying down again and fast. So why try the same remedy (in a lesser dosage to boot) if the first major wallop didn’t do the trick? Because change, real change, is always difficult to accept and implement.
It’s time to accept the fact that Banks are not lending and borrowers are not creditworthy because they are simply filled with too much bad debt. All Banks still have too many toxic assets in their bellies that are valued at fantasy prices. Bankers know better than to squander their capital (in case another wave of defaults emerges) and would rather play safely on the yield curve. So no or little lending. Likewise a lot of borrowers are filled to the gills with bad debts rendering them practically insolvent. So little demand for loans. Lowering interest rates will not help either one out of their respective mess. Only reducing debt levels will.
So how do we start talking about that issue like adults? This nonsense about moral hazard is so disingenuous at this point; especially when bankers are reaping record profits and bonuses again… it makes one wonder. The fact is that banks, investors, borrowers, and government will have to take major haircuts. It’s time to reinstitute an RTC-like structure to squeeze the toxicity out of banks and to implement arrangements designed to alleviate or write-off heavy borrower debts. In other word, we need a clean slate or what was once called Creative Destruction. But we seem to lack the former and don’t like the latter.
If we don’t do something more creative soon, the winds of political change will bring their own version of destruction.
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