Let’s Introduce Obama’s Left Hand to his Right

To post or … what to post?

As I was perusing the business press this morning, an article caught my eye:  “That would make a great post!” I thought to myself.  I continued reading through the rest of the articles, intending to go back to the one that piqued my interest to compose a comment.  Of course, when I went back, I could not find it!

Trouble internally

But in the process of looking for that particular paragraph, I noticed something troubling. Something that, should my students’ papers include the same, would bring their score down by a full letter grade, if not more.

That troubling observation can be summed up in two words:  internal inconsistency.  My students and I don’t agree on everything, and don’t have to.  They can take any point of view in their written assignments in my class, but their views must be well-articulated, free of factual error and, perhaps most important of all, internally consistent.

The internal inconsistency of the policies coming out of Washington discussed in the news gave me a bit of a headache. While one article stressed the problems with winding down the massive mortgage-related asset accumulation at the Federal Reserve, another discussed the Treasury Department’s efforts to push banks and other mortgage companies into offering reduced rate mortgages.  While one article called for an end to all executive compensation bonuses, another discussed how President Obama was reaching out to those very chief executives for advice on job creation.

The paper reports that the government needs to float record amounts of new debt to service the existing deficit, while the weak labor market is going to make selling those bonds more difficult.  The Federal Reserve strives to ease credit while paying banks to hold on to to their excess reserves. The business section contains a half a dozen articles on programs and legislation – from health care to cap and trade — that will increase taxes, and one or two articles on how businesses are having to cut back, convert full-time employees to part-time contract workers with no benefits, just to survive.

What we don’t need

We need leaders in Washington who can step back and survey the whole of the landscape, who can see that the policies being promoted by Obama’s left hand are slapping up against those being waved about by his right.

We shouldn’t be spending money to rescue bad mortgages when the policies of the government created those bad mortgages in the first place.  We shouldn’t be punishing private business executives while pretending to ask them for advice that the White House has absolutely no intention of following in the first place.  We shouldn’t be raising taxes and other costs of doing business when we need private industry to keep our labor force gainfully employed.

What we do need!

In fact, full employment is the key.  Focusing all policy, all efforts, all spending, on allowing free enterprise to do what it does best – hire labor and capital to produce goods and services that private consumers want and need — is the solution to the problem.

For example, gainfully employed people who go to their local bank to get a mortgage will be assessed on their true credit-worthiness without some Treasury Department official breathing down the necks of the lending officers and telling them they have to extend credit for the greater good.

With full employment, foreclosures fall to normal levels.  Mortgage-backed securities are priced correctly.  There are no toxic assets for the Federal Reserve, in cahoots with the creative-accounting-extraordinaires at the Treasury Department, to pile onto their balance sheet. And the Fed would not now be undergoing experimental reverse-repos to try to unwind the massive increase in assets (from $800 billion to $2.5 trillion by the time it’s over) without further upsetting the credit markets, fueling fears of latent inflation, and undermining the strength of the dollar.

Ah, the internal inconsistency— better yet, the ETERNAL inconsistency — between business and politics.

By Sherry Jarrell

3 thoughts on “Let’s Introduce Obama’s Left Hand to his Right

  1. The most paid French CEO gets less than 5 million Euros. Heads of BNP (Europe’s largest bank) and Renault-Nissan (Goshn, with a production of 7 million cars, soon only behind Toyota and Ford, as GM will go bankrupt) make around two million Euros.

    And so on. American executives are so grossly overpaid, they spend more time worrying about their compensation than about their jobs. meanwhile, compensation being a zero game, most workers in companies in the USA, are not paid enough to be motivated, and for recruiting top talent.

    Thus, many a top Boeing engineer has ended UP at Airbus. Meanwhile in recent planes, Boeing has only 30% American content… While Airbus has 40%.

    If the boat sinks, it is because it has a hole in it. And those who held the helm before have got to have something to do with it.



    1. I don’t see how the compensation of the French CEO is relevant or informative. I bet you make more money than I do….. does that mean you should make less, or give me some of your income? No; of course not.

      I don’t accept the premise that compensation is a zero-sum game. Compensation should reward and incent over time, dynamically. A cross-sectional comparative view of wage rates tells us nothing of any value, in my view.

      Nor do I believe that any one individual – like you, or me — can or should determine the “appropriate” level of compensation for another. It may be imperfect, but the innumerable arms-length informed transactions in a competitive labor market best determine the appropriate levels of compensation.


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