Wednesday, November 26, 2008

Obama's (historical/political/economic) constraints

From Holman Jenkins in the WSJ, more on the painful realities with which Obama must (try to) deal-- and the resulting constraints...

His friends advise Barack Obama to launch a "New" New Deal. Maybe that's because the old New Deal is sinking fast.

Mr. Obama's one deeply false note during the campaign was his harping on "deregulation" as if that were the source of current troubles. His real problem is the crack-up of the world FDR built.

Fannie Mae was a New Deal creation, subsidizing the securitization of mortgage debt. FDR's successors piled on the subsidies for housing debt and incentives directed at low-income borrowers. Kaboom.

Then there's the UAW, born in 1935. For decades the UAW steadily traded away domestic auto market-share to imports and transplants to keep its aging membership toiling away toward their golden pensions and collecting wages and benefits twice those of their competitors. It worked for a while...

Mr. Obama must be looking around and beginning to suspect he will be pouring his political capital, along with considerable taxpayer capital, down bottomless holes for the next four years. He won't be building a legacy as the new FDR, but cleaning up after the last one.

And then, back to the auto industry and its unions with some insightful comments and forlorn predictions...

...the really giant sucking sound is the auto sector, getting ready to gobble up whatever hopes Mr. Obama might have had for an ambitious, forward-looking presidency.

He and Nancy Pelosi naturally insist that any "bailout" must hit multiple bogies. They want UAW jobs to be preserved. They want the shibboleth of energy independence advanced. They want "green" cars to please the Tom Friedmans of the world. They want to tell taxpayers they're getting more for their money than just a bailout of Detroit.

All this makes sense to a politician, but not to any practical person, who knows that multiple bogies are bound to be conflicting bogies. You could just barely envision a bailout that wouldn't necessarily be a disastrous waste of money, one that would help Detroit create a competitive cost structure in pursuit of building products that are competitive in the marketplace.

But this is just the opposite of what Mr. Obama and his Democrats have in mind. Prepare to witness, then, the awesome capacity of an unreformed Detroit to consume taxpayer billions with nothing to show for it....


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