Recently the bad news has been mitigated by glimmers of hope – not exactly good news, but some intimations of a possible turn in the road ahead.
The President sees that some of his proposals are having severe labor-pains and may not emerge intact. So he is going to the airwaves – TV and radio, to address the American people. How ironic! This is a tactic most recently employed by the great communicator, Ronald Reagan. But Reagan did it in pursuit of smaller government – to bring about deregulation and a cut in entitlements. Now Obama uses this tactic to achieve the exact opposite. We will find out if this American public is so different from Reagan's or if they can be made to believe anything the President says eloquently enough. Eloquence rather than logic is being employed, when he says, for example, that the status quo in health-care is unacceptable, and, therefore, (any) change is to be preferred. It should not take a rocket scientist to realize that a very bad situation can almost always be made worse by ill-advised legislation.
The monstrosity of a health bill is having a rough time in Congress. Almost certainly what comes out of these deliberations will be very different from the blueprint the President provided. Hopefully, it will be much, much leaner. It is very important that this be seen as the President's first major failure, and a big one. The public needs some hard evidence to become disabused of the messiah illusion.
Signs of this surfaced recently in President Obama's laughable missteps surrounding the Gates arrest. Usually so smooth and so careful, the President found himself unable to control the link between the honest part of his brain and his mouth. Barak Obama, the first "black" president, ran a campaign that purportedly rose above race. He was first an American and second an "African." Race was pace. He was too sophisticated to stoop to Jesse-Jackson-like victimology. Well, it seems that this time the temptation was too great, and he succumbed. He paid the price, and came as close to an apology as his, much deemphasized, pride would allow. Retrospectively, it is hard to maintain that this incident was about race – though, clearly, stupid mistakes were made all round. Still, it has served a useful purpose in the exposition of fallibility.
Now the Congress has parted company with the President in seriously considering linking international trade barriers to emissions standards. The President, to his credit, is opposed. But, predictably, politicians, venal as they are, see a golden opportunity to buy votes by providing their local constituents with protection from international competition – at the expense of everyone else. This enviro-imperialism could cripple the world economy as successive rounds of retaliation lead to a "beggar thy neighbor" policy, as happened in the 1930's. There are some signs that the Europeans (the UK and Germany, in particular) will pull back from this, and hopefully so will we.
On foreign policy, the Obama administration has adopted a curious and shameful moral-ambiguity – abandoning the liberal universalism of its rhetoric for some type of inverted self-interest – in Honduras, in Israel, in Iran, in North Korea, in Russia – for God's sake find me an instance I can praise! Dare one hope the public will see through this before too long?
Price inflation has not surfaced yet, mainly because, as explained in earlier blogs, the lending-borrowing environment is very uncertain (mainly owing to the unpredictability of government regulation). So the massive expansion of bank-reserves (high-powered money – deposits held by the commercial banks at the Federal Reserve) are being stockpiled. Bernanke promises to mop them up. One wonders how, and one wonders why were they put there in the first place just to be "mopped-up" with great difficulty later. Whatever he does now will result in an explosion of the National Debt and will burden Americans for generations to come. Still, if, by some miracle, inflation can be avoided, that is to the good. This one is a long shot.
So you see it is not really good news. It is just a series of signs that the incompetence of government may result in helpful sorts of government paralysis that will lead to a return to the healthy skepticism of its powers.