Mar

Fatal Distraction?

There’s been a lot of commotion in the news media lately about President Obama’s so-called bipartisan healthcare summit, and the stunningly imperious suggestion that Congress use the reconciliation process to avoid Republican filibuster. This evidently urgent healthcare “reform” now has a public approval rating of 44%, and a disapproval rating of 52%. But as far as summits go, it was unremarkable. Obama the ideologue would never compromise meaningfully with Republicans. Republicans, meanwhile, had just won a Senate race in Massachusetts, and it would have been nonsensical to give into the president’s ever-more shrill demands for State directed medical care.

What the summit did accomplish, for a brief time, was to get the attention off the condition of the American economy. For those who have not been paying close attention, there are very, very few signs of recovery.

The DJIA is stuck in the mid 10,000’s. Gold is stubbornly high at ~$1,100/oz. Despite mildly good news from some sectors, labor and real estate are worse than ever. For all the billions trillions thrown at “rescue” efforts, the economy remains lifeless. This translates to less tax receipts, more unemployment disbursements, and bigger deficits. For example, New York faces a 5 year deficit of over $60 billion, while California has a 1 year, $20 billion problem.

The federal government’s balance sheet is in worse shape, with a record $1.56 trillion deficit for 2010. TARP, all said and done, will lose an estimated $117 billion. AIG, which was the recipient of more than $180 billion in tax dollars, lost $8.9 billion this quarter alone. This was a marked improvement over last quarter‘s $61.7 billion loss, but a far cry from profitability. Meanwhile, the Federal printing presses continue to keep interest rates far, far lower than market rates, giving us citizens the historical privilege of living through a rare (and feared) inflationary depression: the seasonally adjusted, annual inflation rate for January was 2.6%. For those readers unacquainted with the finer points of economic theory, consumer prices are supposed to drop precipitously during depressions (and this measure excludes food, energy, and healthcare prices.)

That the Federal Reserve has managed to counteract these prevailing market forces and actually drive UP prices after financial sector paroxysm is, at least in my opinion, reason for genuine concern.

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