Monday, November 17, 2008

Will Obama simply push a rewarmed version of the "New Deal?"

President-elect Obama did an excellent job of selling "change" to the American people during the last election. What wasn't always so clear was what that "change" would look like. He did talk about raising taxes on the wealthy, redistributing wealth as a good thing, giving lower income Americans a refundable tax credit, and moving towards universal health care.

In reality, he was only advocating further advances along the lines of the "New Deal" programs of FDR which means more government, more taxes and more regulation of various areas of human life.

Will the current financial crisis be used as a pretext for advancing this agenda just as FDR did the New Deal in the 1930s? Is this another case of history repeating itself? Amity Shlaes, author of a recent book on the Great Depression, suggests that's just might be what happens in this New York Post op/ed piece.

She writes:

THE trouble with new financial crises is that they provide pretexts for implementing old social agendas. As the president-elect's new chief of staff, Rahm Emanuel, said recently, "never allow a crisis to go to waste."

Consider President Franklin Roosevelt's New Deal, which President-elect Barack Obama invokes when he talks of "a defining moment." Like Obama today, FDR was inaugurated into trouble. He wisely addressed the financial crisis through the steps that we learned about in school. He signed deposit insurance into law, reassuring savers. He created the Securities and Exchange Commission, making the stock market more transparent and consistent. He soothed our grandparents via his radio Fireside Chats. This was the FDR we love.

But FDR also used the crisis mood to push through an unprecedented program of reforms that progressives had been hoping to put in place for years. Sen. George Norris of Nebraska, for example, had for decades argued that utilities should be in the public, not the private, sector. As far back as the early '20s, Norris wanted to build a big power project on Tennessee River. He wanted the government - and not the Ford Motor Company, which was drawing up such plans - to be in charge. FDR made Norris' progressive dream a reality by creating the publicly owned Tennessee Valley Authority. Washington won out, but it wasn't clear its power served the South down the decades.

Will Obama attempt to do the same thing?

The Obama administration isn't likely to advocate a new NRA. But President-elect Obama may go along with Democrats in Congress as they push other old social agendas. They, like the early-'30s Democrats, now have the ugly snapshot of capitalism for which they longed.

Foremost on their reform agenda, as in 1993, will be health insurance. Indeed, we are practically guaranteed a "healthcarization" of our financial crisis, even though health care and mortgage-backed securities have little to do with one another. "Nationalization" used to be a scare word. But the easy nationalization of the giant AIG makes the nationalization of private health care suddenly seem possible.

A Democratic Washington also will likely legislate the fondest wish of private-sector unions - the famous "card-check" legislation that will deprive workers of the chance to cast an anonymous vote on shop unionization. This, in turn, will put upward pressure on wages that workplaces can't afford.

The greater danger is that the public-sector unions, with support of Democrats, will push up their own pay aggressively. Behind the GM crisis is the crisis of state and city budgets - which the demands of AFSCME, the public-sector union, will only exacerbate.

President-elect Obama creates an opening for such demands when he says, as he did recently, that everything about the last four years was wrong. Everything? Sure, the financial crisis needs addressing. But government health care and card check don't have much to do with mortgage crises.

So remember what's really be going on: Voters want change - Obama's campaign message. But the Democratic Party is widening the definition of change by the hour. And the crisis? It's just a pretext.

If Obama does push New Deal approaches we can expect greater economic difficulties in the form of a much longer recession if not depression or maybe more likely, the return of inflation. The latter resulting from an unwillingess to confront our nation's unwillingness to live within our means.

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