I’m sure you’ve noticed that the economic news is not exactly designed to start you off to work in a good mood. Unless, of course, the fact that you have work to go to is cheer enough.
On the international scene, Islamic terrorists slaughter innocent people in Mumbai, targeting especially Americans and Jews; Vladimir Putin shreds the Monroe Doctrine by sailing his ancient warships into South American waters; Angela Merkel, leader of Europe’s largest economy, decides she is not enthusiastic about joining a worldwide stimulus effort; and parts of Africa remain killing grounds.
On the national level, house prices continue to decline, unemployment continues to rise as the economy heads downward, share prices engage in nerve-jolting gyrations that bring smiles one day and scowls the next, and retailers gird for a Grinch-dominated Christmas.
Things are not much better on the local level. The Wizards manage to invent new ways to lose ballgames; the Redskins prove that they are not in the same league as the Giants — well, technically in the same league, but only technically; construction projects are grinding to a halt; and the town is about to play unwilling host to somewhere between 1.5 and 4 million visitors, with portable potties in short supply.
All this is obvious. What is less obvious is a profound change in the nature of our government. Until now, we could rely on two constraints on government power. The first was built into our constitution by the system of checks and balances inherent in the separation of powers among the executive, legislative and judicial branches of government.
Those checks have now been weakened by Democratic control of the White House, both Houses of Congress, and, when Barack Obama gets around to filling the numerous vacancies in the federal courts, the judicial system.
No matter that the Democrats will not have a 60-seat, filibuster-proof majority in the Senate. The so-called moderate Republicans, probably with some help from John McCain, eager to burnish his bipartisan credentials, will give the Democrats the votes they need.
The second constraint on government power has always been the market. Remember, it was Clinton political strategist James Carville who so chafed under the constraints that markets impose on policymakers that he said if there is reincarnation he doesn’t want to come back as a president, or as a pope, or even as a .400-hitter, but as the bond market because then he could “intimidate everybody.”
But in a real sense the government now is the bond market, or at least the key economic player. The heads of Citigroup and other bankers, the president of General Motors and other automakers, the CEO of AIG and other insurers no longer look to markets to guide their policies, but to the U.S. Treasury and the Fed.
It is only a bit of an exaggeration to say that Sen. Chuck Schumer, D-NY, the man whom columnist Charles Krauthammer calls “the noted automotive engineer”, has as much to say about what you will be driving in the future as the CEO of any of the auto companies who are in Washington rattling their begging bowls after a long drive from Detroit.
Schumer might have to share authority with the noted analyst of balance sheets and the plausibility of business plans, House Speaker Nancy Pelosi, but no matter. She will decide whether the automakers business plans are really “new”, while Schumer orders out battery-driven vehicles that can manage 40 miles on a charge and are so expensive that they will require government subsidies.
There’s more. Senate Majority Leader Harry Reid has given Elizabeth Warren, a consumer bankruptcy expert, a week or so to decide whether the ever-changing bail-out plans emanating from the fertile mind of Treasury Secretary Hank Paulson are coherent, and how to restructure the regulation of financial institutions.
Paulson, of course, continues to preside over the billions-going-on-trillions that will be made available to whatever industries make the best case for a hand-out. You might recall that the Treasury Secretary came to Washington after heading up Goldman Sachs, a firm now reporting billions in losses after abandoning its business model in favor of status as a government-sheltered commercial bank.
Nothing more clearly demonstrates the shift of power from Wall Street to Washington than the Paulson saga. Once the man who raised private-sector funds for private-sector businesses from his perch at Goldman, he is now the man who distributes taxpayer funds to private-sector businesses from his perch at the Treasury.
Have a nice day.
Examiner columnist Irwin Stelzer is a senior fellow and director of the Hudson Institute’s Center for Economic Studies.
