Tonight’s State of the Union speech comes at a good time for the president. He badly needs a boost and these set piece, state occasions tend to elevate the president from politician to statesman in people’s eyes.
The rituals and protocols associated with this speech are, in a way, comforting. I suspect as the Democrats did for George Bush, Republicans will rise when President Obama enters the chamber, they will applaud politely at appropriate times while noticeably sitting on their hands otherwise. The Democrats - as Republicans did when George Bush was president - will leap continuously to their feet, giving their party leader standing ovations for innocuous blather about how well he is doing, or when touting some minor accomplishment. Watching them as they perform this tiresome, ritualistic nonsense will convince you that the guy who invented the jack-in-the-box probably got the idea from watching State of the Union speeches.
The cold winds blowing across the country bringing evil economics to almost every village and hamlet are put at bay for a while as what passes for a large audience today will gather in front of their TV’s and listen to what the president has to say.
Forget the prepared remarks and all the spin about the speech and concentrate on what isn’t mentioned. That will tell you the true “State of the Union” for the overwhelming majority of citizens.
In truth, in times like these, no president would give a speech that reflected what was truly on our minds. Presidents don’t do fear and depression. They’re not about anxiety and worry. They may acknowledge such but to get at the root causes of why we feel the way we do at this moment in history is just not done. No one wants to hear how bad things are nor are the people anxious to be told that even worse times may be on the horizon. Cassandras are invariably tuned out while Pollyannas are embraced.
No, I don’t expect the president to sugar coat the fix we’re in - much. He may leave a few inconvenient facts on the editing room floor such as the stubborn refusal of the housing market to improve, thus imperiling the homes of millions, not to mention the entire economy.
We’ve poured nearly a trillion dollars into banks and mortgage companies in order to stabilize the market and it hasn’t worked. The delinquency rate is still at an all time high as is the default rate on home loans. Meanwhile, the value of real estate continues to fall, people are still in desperate trouble because their loan values exceed the worth of their houses, and the market is having a devil of a time wringing all this bad paper out of the system because of massive intervention by government.
Did I mention that if, as expected, the federal government retreats from propping up the housing market that the flood of defaults could trigger another bank crisis? I’m sure you remember TARP - the Toxic Asset Relief Program - that didn’t buy up much in the trillions in toxic assets being held by banks but came in handy when the administration wanted to save some union jobs and purchased a huge stake in Chrysler and GM. You may also recall that Treasury Secretary Timothy Geithner was going to come up with a plan to take those toxic assets off the balance books of banks.
Well, Timmy got some flak from banks and growls of disapproval from hedge fund managers and dropped his plan, promising to come up with something else. Here we are a year later and Geithner has moved on to bigger things - like approving the astronomical bonuses of his Wall Street drinking buddies. Meanwhile, that great big hole in the financial industry has been papered over and is just waiting to meltdown again - waiting for another default crisis that appears to be a real possibility.
Or could a meltdown be triggered by what is happening overseas:
The Greek budget deficit ran more than four times the European Union limit of 3 percent of gross domestic product last year and Greece is one of 13 nations facing deadlines from the European Commission to cut its shortfall. The country’s debt is set to top 120 percent of GDP this year, the highest in the euro region and twice the limit for adopting the single currency.
Trichet on Jan. 14 dismissed as an “absurd hypothesis” the argument that Greece could be forced to exit the euro area. The country should remain in the union where its problems “will be unequivocally easier to solve,” central bank governor George Provopoulos said in the Financial Times on Jan. 22.
Roubini said for all the focus on Greece, Spain may eventually pose a bigger threat to the euro zone because it’s the region’s fourth-largest economy and has higher unemployment and weaker banks. Spain’s jobless rate is more than 19 percent, almost twice the EU average.
“If Greece goes under that’s a problem for the euro zone,” he said. “If Spain goes under it’s a disaster.”
What Professor Roubini is talking about is the risk of sovereign default - a real domino scenario where nations like Greece, Spain, Italy, and Portugal are barely treading water at the moment and countries like Greece and Spain already going under. The risk to the entire European economy is growing and one of the solutions may be to get China to take on even more foreign debt:
Of course the one entity which will benefit from this is the Squid: Goldman Sachs seems to be taking the lead in trying to orchestrate a desperate and expensive sale of Greek debt to China. Expect more such desperate moves as the southern European macroeconomy continues to deteriorate; anybody who watched the world’s investment bankers swarming all over Domingo Cavallo in the final weeks of Argentina’s currency board will remember just how vulturish they can be in such situations.
My feeling is that the US poses at least as much of a risk to the global economy as southern Europe does. There’s a good chance that 2010 could be the year of walking away from underwater mortgages; there’s no sign of the private sector releveraging; and the government has clearly reached its limit in terms of the degree it can step in and borrow on behalf of the rest of us. If the attempt to prop up the still-overvalued housing market fails and there’s another downwards lurch, there will be a whole new wave of bank insolvencies and much less fiscal space to bail them out than there was pre-crisis. And the fact that most delegates here at Davos seem blissfully unconcerned about the possibility of a second nasty lurch downwards doesn’t reassure me in the slightest.
This, along with the idea that we don’t need any outside help to send the economy into a double dip recession - a possibility many believe is growing - and you have a glimpse of economic hell that could be in store in the next year or two.
But most of us don’t follow this kind of news as a rule so the question may be asked why are we so anxious? Why has this recession affected us in ways that others haven’t?
Do you get the feeling talking to your friends and neighbors that cynicism is at a high point? Parties don’t matter. Leaders are inconsequential. It’s not Obama’s fault or Bush’s, or any one party or one man. In fact, many I talk to get impatient if you try to play the blame game. I don’t think people care so much about who’s to blame as much as they want someone to acknowledge their doubts, address their fear of the future, and instill some confidence that the people in charge can deal with all of these dizzying, systemic problems that are eating away at the one thing we’ve always had faith in; our ability to govern ourselves.
The view from Streator, IL should be enlightening for our president and the Congress. The county unemployment rate as of November was 13.6% and rising. It may be closer to 20% in Streator itself. Business creation is at a virtual standstill. Some might comfort themselves with the idea that they are not quite as bad off as my friends and neighbors, but people’s anxiety cannot be measured in raw statistics. Our fellow citizens may be told that the economy is improving but I guarantee you they don’t see it. That’s why fear is still rampant in much of the country - nobody believes anything anybody says coming out of Washington.
This may have been true in the past but not to this degree. People are not stupid. They see what’s happening in Washington - the deal making, the self aggrandizement at the expense of taxpayers, the constant drumbeat of name calling, accusations, hate filled criticism, and nastiness that is inexplicable to people who expect their political leaders to put aside such childishness and address this crisis. The “anti-incumbency mood” we are told by pollsters that runs through the voting public is but a symptom of this loss of faith. People are beginning to believe that it doesn’t matter who is in power, who goes to Washington, that nothing will change.
In short, no one thinks anyone in power is looking out for them. Hence, the tea party movement which is fueled by this feeling that something has to be done or we’ll go down the tubes. Incoherent at times, raging against what they do not know - at times. Deficits? Sure. Socialism? As they understand it, yes. Obama being a black man? A few, but if Democrats make the mistake in pegging this movement as a fringe element of the Republican party, they will be seriously shocked come November.
The tea party movement may be the last authentic expression of revolutionary spirit this country is granted before it disappears in a cloud of dependency and cynicism. I saw this spirit in my youth in rallies against racism, the war, and for women’s rights. Then too, the establishment dismissed the protestors as fringe elements - “communists” and “troublemakers” (which was a euphemism for n****r lovers). But they were expressing the best of the revolutionary spirit that makes America unique and exceptional. And they managed to change America for the better - mostly.
President Obama will not talk about the tea party movement tonight. He will not talk about what animated so many to get up off their couches, turn off their TV’s, and parade with their fellows in protest against cynicism and their own self doubts about America and where she is headed. Their numbers may be relatively few. They may not be able to articulate exactly what they are enraged about. It’s spending, but it isn’t. It’s the debt, but it isn’t. It’s their conception regarding the violation of tradition, and a disappearing familiarity with an America that is changing before their eyes in ways they don’t approve.
They, and the millions who feel the same way but don’t have the time, or the motivation, or the opportunity to join them, are looking for some acknowledgment from the president tonight that he has heard their concerns and is sympathetic to their plight. Perhaps many are looking for something that President Obama can’t give them; words that will wash away the gnawing doubt that America’s best days are behind it and that we can only look forward to managing our decline.
I don’t envy the president’s task. And I don’t have a clue what he can say that could even start the process of turning things around. Actions, more than words will be more important in the long run. So perhaps rather than concentrate on what the president will say tonight, we should look to what he does tomorrow.
One thing is certain; it’s hard to see how he could make things much worse.