- Better appointments and leadership in the federal bureaucracy
- Better image abroad
- A more competent and well-spoken leader
- Better court appointments
The failures:
- Inability to pass significant changes to the financial status quo
- Inability to pass a strong bill to combat climate change and oil dependence
- Inability to strongly re-regulate business (be it banks or telecoms)
- Inability to fundamental transform health care in America (at least it's looking this way)
It's just a shame. I always thought that a good crisis (like the Great Depression) would push the country toward better policies. I guess I just underestimated the power of big business. They own the country and enough of Congress to prevent any measures that restrict their profits. I know that I shouldn't be surprised, but I just thought that this time would be different. During the 1930s, it was different. FDR didn't stray into socialism, but there's a reason he's was considered the #1 enemy of business.
I think the reason such an effect has not been felt is the groupthink optimism among the media and business class. Starting in March, they all of the sudden decided things were getting better -- even when they weren't. As a result, the crisis mentality has now passed, the business interests are lobbying more than ever to prevent systemic change. On top of that, many in finance are warning about inflation (Inflation! When the economy is deflating with no end in sight!*), a device used to prevent any further government action.
The economy, as things are currently structured and absent any better plans, is going to fall off a cliff again at some point in 2010 or 2011. Unfortunately, unlike last year's collapse, this one will be blamed on Obama. (In truth, people would be right to blame him and Democrats for failing to step up to the plate.) Sadly, I can then envision a Republican having a shot in 2012. It would be like Robert Taft getting elected in 1936. It will be downhill from there...
Any hope? The things that can happen to prevent this from happening:
-- an economic meltdown at the end of this year, which causes a stronger government reaction and propels Obama forward (likelihood = less than 15%)
-- a solid health care bill that assures lower costs for care/drugs and coverage of at least 75% of the uninsured; this will be a big political victory that will bring the administration good will from everyone except the healthcare-industrial complex (20-30%)
-- some decisive international event (less than 10%)
-- a Middle-East regional peace deal including a Palestinian state (less than zero)
-- a surprise change in course in which the Obama team takes over a large bank, precipitating a mini-meltdown and allowing for further regulation (30-40%)
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*All of this talk about the national debt annoys the hell out of me. It's very clear that majority of the current debt is a result of two people: Ronald Reagan and George W. Bush. Reagan tried to outspend the Soviet Union while cutting taxes and put us in a 3 trillion dollar hole (carried over into Bush I), and then Bush's combined policies (the prodigal tax cuts, the prodigal war in Iraq, and the prodigal non-negotiated Medicare drug benefit) doubled it. [Obama's contribution could only be the recovery package, and that will pay for itself in terms of economic growth.] Of course, during those Republican administrations, few Republicans and business people talked about deficits. Now, that's all they talk about. The deficit is not a real problem; it is a talking point to combat Democratic policy proposals. It worked under Clinton and it's working now.
Why we're really screwed...
The bottom chart is really interesting, because it shows what the normal was in the pre-New Deal economy vs. what has been the norm in the Postwar era. Unemployment increasing by 10-15% was the average before WWII. Since then, the average increase has less than 5%. The Depression was "great" because it featured an increase in the 20-25% range. Comparatively, an increase of 8-10% (for a 12-14% unemployment rate) would be just as catastophic today. What people (and even economists) don't seem to understand is that comparing statistics' absolute values are useless. For one, the way that the government has tracked and measured unemployment has changed over the past century. Additionally, the labor market stabilized in the postwar era, creating different expectations and standards of living. One might conclude that our better standards of living today would allow people to withstand an economic environment similar to the 1930s; yet, as standards have risen, so has expectations. The depression will look different this time (not as in your face), but it's effect will be just the same.
If we reached 25% unemployment today, as we measure U3, the government would fall, people would be rioting in the streets, etc. It would be something close to armaggedon. That is not going to happen. On the other hand,15% is within the realm of possibilities (and would correspond to 25% of people unemployed, discouraged from looking, and underemployed). In such a case, we would likely witness a twenty-first century version of what happened back in the 1930s.
Oh, and just in case you think I changed my mind about Bank of America eventually going under, look at this chart showing how much capital BofA would if unemployment reaches 12.4% (the "Your Scenario" in red):
