The White House stance on reducing the deficit, laid out in the president’s speech at George Washington University last week, was clueless – clueless and dangerous.
Starting moments after Mr. Obama stepped down from the podium, political commentators have been giving the address a thumbs down. Everyone has seen the media comments about the talk’s excessive partisanship and lack of any serious thinking on how to deal with the crisis. As is his custom, the president spoke in general terms as if he were a committed debt reducer. But when he got down to specifics, his mode was “yes… but.” The “buts” all came down to, “well, yes, we spend a lot, but we have to, so we won’t cut.” The only exceptions were defense and taxes.
This not-giving-an-inch-of-ground approach was coupled with ripping into Congressman Paul Ryan for his deficit-reduction plan, the sole plan on the table for seriously addressing the government’s debt crisis. In a particularly graceless move, reminiscent of his dressing down of the Supreme Court with the justices present during the 2010 State of the Union address, the president had invited Congressman Ryan to attend the speech and placed him in the front row.
The dismayed media reaction was not confined to conservatives. Among many frequent media cheerleaders, commentary took on a new tone. There was an edge that suggests the president’s support in what until now has been a poodle press may have been in some fundamental way damaged. But perhaps the most telling dismissal of the remarks came from an entirely non-political source, the hometown publication for Wall Street wonks called Institutional Investor.
As II’s columnist Steve Rosenbush summed up, “President Obama’s speech on deficit reduction largely was ignored by the financial markets. Investors found little significance” in it. He quoted free-market economist and asset manager John Rutledge saying of the talk, “For the US, I don’t think we have the political will to fix the problem, which means it will be dealt with by inflating the price level and, effectively, repudiating the real value of government debt.”
That repudiation by inflation may already have begun. Yesterday World Bank president Robert Zoellick, speaking about inflating global food prices, warned that the world may be “one shock away… from losing a generation.” Fear of the worldwide economic devastation that U.S.-driven accelerating inflation could cause is one reason that China, Brazil, and others have been asking if there is an alternative to the dollar’s preeminence in international trade and finance.
The fact is, the move away from the dollar’s dominance could already be underway. The decision will not truly come from governments but from markets. More and more global transactions will be conducted in denominations other than dollars. Whenever governments and the various official bodies drop the dollar as the global standard, they will only be ratifying a fact that markets have already decreed. Our officials will protest, but it will be too late.
Power, like nature, abhors a vacuum. Already Washington is beginning to look for alternatives to compensate for the lack of leadership from the White House. Congressman Ryan is emerging as one answer. The Senate’s Gang of Six is another. The think tanks are feeding their own proposals into the mix. The Left has sided with the president in effectively denying there is any spending problem, outside of defense and what they call tax expenditures. And as a result the Left’s power may be waning among Senate Democrats, their powerbase on Capitol Hill. Senators may not know much about economics and finance, but they do know about votes. Last November’s election told the many Red State Democratic senators that they must find a route for accommodation with the budget cutters. Those in the Senate class of 2012 who can’t or who refuse to go along may secure another nomination from their party’s leftist base. But looking at the recent election, you’d have to say – and they are undoubtedly saying to themselves — reelection will be out of the question.
So here is where we stand today. The president is seen as having effectively announced that he is not a serious player in resolving the great crisis of American government in our age. There is, effectively, a search underway for an alternative to this feckless leadership. We will see what progress is possible before the 2012 elections, when the American people will decide if checking out is acceptable in the occupant of the highest office in the land. But with the situation as dangerous as it is, do we have that much time?