Crisis President
Faced with a dire situation, Barack Obama has not responded well.

In 1933, Franklin D. Roosevelt, facing a 33 percent unemployment rate, a collapsed banking-and-exchange system, and starvation-level agricultural prices, proclaimed the gravity of the challenge and pledged to surmount it. He explained his measures carefully to the public, presented them as a comprehensive plan of action fulfilling a mandate "to put people to work," and sent carefully drafted bills to the Congress, where they were adopted almost unaltered. His message was an attack on fear "in the warm courage of national unity."

President Obama, facing a fraction of the problems that greeted Roosevelt, began by fanning fears, not calming them, and has been translating his mandate into a more radical transformation than polls indicate the country approves. Ramshackle legislation has moved through the Congress like Christmas trees on a conveyor belt, with the Democratic barons festooning them with earmarked pork baubles. The president's rhetoric has often been divisive. Secured creditors in the automobile industry have been reviled as "speculators"; TARP-laden banks have been muscled with threats of attack by the IRS and SEC.

As of now, this administration is building a plane in the air, and it doesn't look like the craft will fly far or land softly. The proposed cap-and-trade measures and increased income taxes on those who are already paying the most will stifle recovery. The bunk about "tax cuts for 95 percent of Americans" — including the 45 percent who don't pay taxes and will be receiving cash payments called "refundable tax credits" — really just means taking money from people who have earned it and paying it out to those who haven't. This promotes what Roosevelt called "the pauperism of the dole."

Poverty can best be addressed, at least initially, by a small-percentage, self-eliminating tax on individual net worth over $5 million, averaged over years to allow for fluctuations due to market forces. The tax could be directed by the taxpayer to a cause of his choice, approved as bona fide (as charities are). The tax would be reduced, and disappear altogether, as poverty disappeared. This would involve the ablest financial minds in combating poverty and would give the wealthiest a direct material interest in the eradication of poverty.

The administration's reliance on reduced medical costs is a mirage; costs will skyrocket, as they always do in the public sector, and service will deteriorate for most people. No medical-care system based on coercion and nationalization — and not including a cap on malpractice awards, a corresponding reduction of premiums, and some restraint on drug prices — can succeed in this country. A serious medical-care plan must address these questions and aim to cover those who aren't covered, not to take over coverage of those who are.

The commitment to reducing oil imports is admirable, but unachievable in any significant measure via the present envisioned recourse to alternate sources. Instead, gasoline taxes should be raised so pump prices are as they would be if oil was at $150 per barrel, with rebates for those who make their living from automobile-, bus-, and truck-based businesses. Nuclear power should be embraced on the scale of the French model.

We are entering uncharted waters with more than $10 trillion of additional debt projected over the next ten years. There is no reason to believe that the bonds necessary to fund this debt could be sold at sustainable rates. The president said in Prague that "words must have some meaning," and he has often spoken of fiscal responsibility. But his $17 billion of expense reductions evokes the wife of a businessman in Dinner at Eight (a splendid 1930s Barrymore-Dressler film), who responds to her husband's bankruptcy by saying, "I'll fire the florist." There has to be some ghost of fiscal responsibility still dragging its chains around and frightening the spenders. Otherwise, disaster impends.

The other big revenue increase, apart from the gasoline tax, should be a tax on issuances and sales of securities. and on sales of assets that constitute the effective sales of whole businesses. It should be a small percentage of volume-value, so as not to discourage financial activity, but this is the best way to harness that gluttonous business to the public good.

The huge recent increases in the money supply are almost certain to produce early inflationary pressures as soon as there are any signs of recovery, and it is impossible for there not to be such signs with so much new money floating around. The planned tax increases will tightly cap the recovery but not the inflation. The first line of defense against inflation should be standby powers to eliminate tax on income arising from savings and investment, and increases of tax on designated non-essential expenses, and not just a mechanical hoist in interest rates.

The automobile industry has to be incentivized to produce high-quality cars in plants with non-union work rules and benefit scales, whether said plants are unionized or not. The UAW must be a capital-gain-seeking shareholder (or ex-shareholder), rather than the retrograde, protectionist, Luddite force it has been. If the administration tries to preserve Detroit on conditional life support, making uncompetitive green cars while sheltered by fiscal and trade and energy-use rules, as a political payoff and consolation prize to organized labor for the loss of card check, it will be a gigantic economic and moral disaster.

This airplane can still be made airworthy, but the wings are already shaking — and so far the only tailwind comes from the president's oratory.

– Conrad Black is the author of Franklin Delano Roosevelt: Champion of Freedom and Richard M. Nixon: A Life in Full.

© 2024 Conrad Black