With Dubya, you always wondered if the government was doing stupid stuff just because it was run by stupid people. I don’t think he chose to sit around reading My Pet Goat while we were attacked, or decided to let New Orleans drown, or concluded that of all the options, only the TARP could work. I got the feeling he was a dumb guy who went whichever way his closest friends went, and, by the way, that Dick Cheney was at least as dumb and only spared exposure by being such a jerk people assumed there was something they couldn’t understand.
The financial crisis lays this bare, because it is a subject that requires some real technical knowledge. I would bet that most members of Congress cannot name the major categories of a corporate balance sheet, or why both sides must balance, or, for that matter, whether a bank deposit is an “asset” or a “liability”. I feel very confident in the last one.
So we have Republicans ranting and raving about how some “stimulus” is not “stimulus” but “spending”, or about how something can be “work” but not a “job”, and my major reaction is that these are dumb people who at best understand one thing: they will get no credit for the success of any plan and can blame the Democrats for any failure, so there is no reason to be conciliatory. Fine. I get them.
What has been confusing is the Obama Administration’s ham-handed approach. Does Obama know? The guy was an activist, a law professor, and an elected official. He knows something on every subject, but does he get the finance stuff? I have tended to suspect that he doesn’t. Nothing wrong with that, but it might explain some of the government’s irrational fear of words such as “bankruptcy,” which in common speech means the end of an enterprise but in actual fact means a rearranging of ownership among the claimants to an enterprise.
Anyway, turns out he has a damn good idea what is going on, and understands the precedents around the globe and the alternatives on offer. And he knows the right way to do it:
Yet despite knowing the right answer, he doesn’t want to do it. This is mind-boggling. He would go down a path, knowing it will be ineffective and unfair, instead of making the right decision, because he believes the right decision is outside of our traditions.
The only analogy that comes to mind is that at one point the Royal Navy faced the difficult decision of whether to stay with coal or convert to oil. Oil had some obvious performance advantages – higher energy density, can be pumped in tanks instead of shoveled by massive crews, can be resupplied at sea, can easily be shifted to give better trim characteristics, does not belch as much smoke – but the major disadvantage that is a giant lump of coal, while petroleum needed to be sourced far away from places that might not be reliable (such as the US). Outside of geopolitical risk, the UK coal industry was naturally opposed to any switchover, as it would in time mean the end of all coal-based shipping.
Still, the Admiralty did it. Once you have seen petroleum-powered ships up against coal-fired ships, there is a right and a wrong answer, and once you know the right answer, it is incumbent on a serious leader to do it.