From: Travis
From: Dick Morris *
December 16, 2008
2009: A PREDICTION*
The politics of 2009 will be dominated by a continuation and deepening of
the global Depression. Under the guise of stimulating the economy, look for
Obama to pursue a radical, socialist agenda that will bring America into
conformity with the government domination of health care and the economy
that prevails in the European Union. When the dust clears, the economy will
still be in the tank. The new president's stimulation packages will do
little or nothing to abate the depression, but they will transform American
life and politics. For his part, Obama will take advantage of his built-in
majorities in Congress to pass his agenda, but will suffer rapidly dropping
ratings. By the end of the year, he will be as radioactive as Bush is today.
Here's a detailed look at what I think will happen at home and abroad during
the coming year.
*The Economy* To get a hand le on what is happening to the global economy,
consider these basic facts: In the mid 1980s, the total amount of debt in
the world – all debt including consumer, corporate, and public from all
countries, companies and people on the planet – equaled the global GDP. We
humans owed one year's income. Now, the planet's GDP is slightly above $50
trillion and the total planetary debt is up over $180 trillion! We now owe
almost four years' income. (Source: A fabulous book by Charles Morris -- no
relation – entitled the *Trillion Dollar Meltdown*. Published in Feb.,2008,
it predicts much of what has happened since).
The prosperity of the past fifteen years has been largely based on debt.
Drawing on credit cards, inflated home values, negative interest policies at
the Federal Reserve, and a global willingness to subsidize American
indebtedness, we borrowed our way to wealth. But now the house of cards is
collapsing all around us and won't stop doing so until we are free of the
debt addiction, several years hence.
The process Schumpeter called "creative destruction" now has to run its
capitalist course, putting inefficient companies out of business and forcing
people to live within their means. It will be a difficult and prolonged
process.
But it won't be as bad as the Great Depression. Between 1929 and 1933,
America lost a third of its GDP and unemployment topped 20%. That won't
happen now because the governments of the world are willing to douse the
economic conflagrations with streams of money. Obama's, Japan's, China's and
Europe's stimulus packages are really pain killers – methadone – as we go
through the process of kicking the debt habit. They assure that we won't be
racked by the destabilizing agony of massive depression. But they won't do
much to cure the underlying ailment. The cure has to come from the normal
workings of the capitalist system. Creative destruct ion made easier to bear
by government welfare.
Obama's stimulus legislation will increasingly be seen by Americans as a bad
joke and his predictions of job creation will ring increasingly hollow.
At first the new president will try demand-side stimulus through public
works construction. But it won't work. He will identify public projects that
need doing and fund them. Important endeavors like repair of public school
buildings, the development of alternative energy generation sources, and the
renovation and replacement of our failing national infrastructure of bridges
and roads will all get massive infusions of federal funds. While these
projects are deserving in their own rights, they won't do much to alleviate
the depression. Only about a quarter of the funds will actually be spent in
the fiscal year in which they are appropriated, the average for federal
public works. It takes time to plan, design, and scope out the projects and
three-quar ters of the spending will not take place until subsequent years.
And, of the spending that takes place, most of it will be used by the
workers who get the paychecks to pay down their debts and will do nothing to
stimulate the economy. Terrified by the collapsing economy around them,
consumers won't embark on bold new purchases, but will use any increase in
pay to reduce their student loans, credit card debt, pay off their car
loans, or just pay that month's bills. The result? No stimulus.
Next Obama will forget about funding just important new projects. He'll just
pass out money. But even direct checks to people won't do much to help
revive purchasing power. As noted, people will just pay down bills with the
money. It is estimated that 80% of the Bush stimulus package of earlier this
year went to debt reduction, not new spending. In 2009, with mounting terror
over the economy, it will be even higher.
Finally, Obama's centrist economic team, despi te the president's
predilections, will try supply side stimulation. He will cut business taxes,
increase R & D tax credits, and might even cut capital gains taxes. He will
get desperate as the economy gets worse and he'll begin to try anything.
But, as President Eisenhower noted, "you can't push a string." Giving rich
people and businesses money to spend won't result in new plant and equipment
or new services. Scared to death by the bad economic environment, they won't
spend the money constructively either and there will be little real
stimulus.
The result of all this will be that the economic numbers and Obama's
popularity will sink in sync with one another and he will lose more and more
of his real political power.
*Socialism Comes To America* Charles Krauthammer has it about right. Obama
has named a largely centrist team to supervise economic and foreign policy
to pacify these turbulent areas of public policy so he can get on with
passing his basi c leftist agenda. But while Obama struggles with a failing
economy, he will use the need for stimulus as an excuse to move ahead with
the conversion of the American economy to a European Union model of social
democracy. He will use the $750 billion bailout voted this year by Congress
as a pretext to demand equity in America's major businesses. And then he
will use that equity to demand "reform." At first the "reforms" will be
obvious: limitations on executive compensation and bonuses, investment in
environmentally friendly technology, and other socially worthy objectives.
But Obama will use economic populism to justify greater and greater
government de facto control over the financial and insurance sectors. He
will, for example, move to curtail financing of outsourcing or offshore
business operations. He may penalize companies for layoffs by withholding
bank loans. He may embrace some of the more intrusive programs for
manipulation of the economy. The heavy hand of government "guidance" will
come to corporate America.
Remember that half of FDR's program was designed to combat the Depression –
Agricultural Adjustment, the National Industrial Recovery Act, the Public
Works Administration, the Works Progress Administration – but half had
nothing to do with recovery but was sold under the rubric of "reform." These
measures included Social Security, the SEC, and the Wagner Act, all of which
totally transformed the level of government intervention in the economy.
Obama will follow that model, advancing programs that change our basic
relationship of government and business disguised as measures to fight the
Depression.
But nowhere will the transformation be as great as in health care.
Manipulating the national consensus that we must make health care a "right"
and move to cover the 47 million uninsured "Americans" (even though about
7-10 million are illegal immigrants), Obama will fundamentally transform our
health care system into one subject to government control. He has to. He
can't extend health care coverage from 250 million people to 300 million
with no increase in the supply of doctors, nurses, and hospitals without
introducing rationing. While he may use private health insurance companies
and HMOs as his capos to enforce the rationing, the demand and impetus for
the controls on utilization will come from Washington. As a practical
matter, this change will revive the idea that the elderly have a "duty to
die" as first articulated by former Colorado Governor Dick Lamm. Elderly
Americans will find that they cannot have heart bypass operations or get MRI
exams or CT scans even if they are willing to pay for it themselves. We will
come to emulate the British or Canadian model of health care under
government control. (For a fuller discussion of the changes he will bring to
health care, see our book Fleeced).
So do the math. Right now, the federal government's spending accounts for
about 20% of our national GDP and State and local government, exclusive of
federal aid, adds another 12%. Their 32% share of our economy is about the
same level as in Japan but markedly lower than in the United Kingdom (41%),
France and Germany (about 48%). Other countries, like Sweden are even
higher.
When the bailouts have run their course, it is not illogical to assume that
the government or the "taxpayers" as Obama likes to call them, will own
about 1/3 of the equity in banks and major insurance companies. The
financial sector accounts for about 20% of our GDP, so that is about 6% that
moves to the public sector (and, of course, the remainder, while still
private, is subject to massive government influence due to the large public
share). Health care consumes about 16% of our GDP and it is about 40% public
at the moment. Under Obama, while not a single payer system, government will
effectively control the whole health care sector th ough mandates and
rationing. So add another 10% to the public sector. And there you have it:
about 48% government control, just like in Europe.
*Permanent Political Shifts* Obama will use his heavy majorities in Congress
to act on four fronts to try to assure a permanent Democratic majority in
the country.
a) He will pass the union card voting law which will allow labor unions to
intimidate workers into voting for a union by denying them the right to cast
secret ballots in representation elections. His goal will be to increase the
share of the American labor force that is organized (now about 12%) so as to
increase labor's political and economic clout.
b) He'll move ahead on immigration reform, based on amnesty to legalize
millions of undocumented workers. He will probably adopt the Democratic
proposal that anyone who has lived here illegally for five years can get
amnesty and on a citizenship track. Dodge the cops and there is a reward
waiting for you. His goal will be to increase the Latino vote from the
current level of about 12% to 15-18% to assure Democratic domination of such
red states as Texas and Arizona.
c) He will cut taxes on the middle class. His goal will be to concentrate
the obligation to fund the government on the wealthy, so that a political
minority pays the taxes but an electoral majority consumes them. Right now,
the richest 1% of the nation pays 40% of the income tax revenues (up from
33% in 2003 and 27% in 1996, according to *Reality Check*, an excellent book
by Dennis Keegan and David West). He wants a situation nationally akin to
that in New York City where landlords are hopelessly outvoted by tenants and
have to face whatever the tenants decide to approve in terms of rent
controls. It will no longer be possible for a Ronald Reagan to appeal to
middle class taxpayers to form a coalition against liberal tax increases.
There will be no middle class taxpayers.
< br /> d) Obama will move to squelch talk radio, either by applying the
Fairness Doctrine or, through use of the doctrine of "localism" (i.e. local
control of the management and operation of radio stations as required by
federal communications law) put liberals in control. (Again, see Fleeced for
a full discussion). This measure will strip the right of its most powerful
form of communication.
With Obama's coming low approval ratings, it is clear that the Republican
Party will make huge gains in the Congressional elections of 2010 and,
perhaps, retake the White House in 2012. Whether the off year gains will
suffice to give the GOP control remains to be seen. But, by then, a lot of
this damage will have already been done and, particularly in the realm of
health care, it will be politically impossible to undo it.
COMING NEXT: FOREIGN POLICY PREDICTIONS
*THANK YOU!*
****COPYRIGHT EILEEN MCGANN AND DICK MORRIS 2008. REPRINTS WITH PERMISSION
ONLY*** *
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