Republican Politics, American Style
Published on March 26th in Metro Éireann By Charles Laffiteau
In my follow up to last week’s column, this week I will attempt to explain why France and the United States have the two of the highest fertility rates of all the developed countries in the world as well as why economists and some politicians view this as positive factor for their country’s future financial health and well being.
Believe it or not, by the end of the 18th century France was actually the most populous country in Europe and the third most populous country in the world, behind China and India. Unlike the rest of 19th century Europe, France also saw very few of its citizens immigrate to America. But during the 19th century, France’s fertility rate began to decline much faster than other European countries, causing France to fall behind Russia, Germany, the UK and Italy as Europe’s fifth most populous nation in 1900. France’s low fertility rates also resulted in virtually no population growth between 1900 and 1945 at a time when other European countries, including Ireland, had booming populations and much higher fertility rates than they do today.
In an effort to avoid the negative economic consequences of declining population, France undertook efforts to increase immigration by encouraging citizens from its colonies in North Africa and Indochina as well as those living in other countries in Southern and Eastern Europe to immigrate to France following the end of World War I. Even though fertility rates in France and other developed countries soared following the end of World War II, France still continued to encourage immigration from its former colonies in North Africa, particularly Algeria until the mid-seventies. Today France has over 3 million citizens who are of Algerian descent, many of them 3rd or 4th generation.
But beginning in the seventies fertility rates in America and all other developed countries began to decline thanks largely to women in those countries entering the workforce, delaying both marriage and childbirth, which in turn meant fewer children. Today, the only reason why countries in Europe with low fertility rates like Germany and Spain have thus far avoided population declines has been because of increases in immigration. But thanks to France’s success integrating its immigrants, its fertility rate is the highest in Europe even though France stopped encouraging immigration 30 years ago.
While France’s 2.0 fertility rate still falls short of America’s and the developed country population replacement rate of 2.1 children per couple, France’s immigrant women from North Africa and Turkey are at least partially responsible for this. Native French women only have an average of 1.7 children each but their immigrant women counterparts give a boost to France’s fertility rate by having almost 3 children per woman. Since France has a chronically high unemployment rate, especially among its immigrant population and their descendants, I asked some French immigrants why they wanted to have 2 or more children given such bleak future employment opportunities.
They told me that while their children may have difficulty finding jobs once they reach adulthood; they still believed that their children’s future job prospects would be roughly equal to those for the children of native French people. But they also told me that the French government had numerous income-based policies such as free child care and tax benefits, which encouraged women to have more children than they might otherwise. They went on to say that even higher income families received many of the same benefits such that only a fraction of any working woman’s income had to be spent on child care.
I thus concluded that the reason why France has grown to become the 3rd most populous country in Europe was because it had both opened its doors to immigration at the beginning of the 20th century and then it instituted policies to encourage impregnation in the latter half of the 20th century. I also concluded that the reason France now has the highest fertility rate in Europe was because it had been more successful than other European countries, in terms of integrating immigrants into French society through its use of government policies that treated all of its native citizens and immigrants equally.
Hmm, increasing Immigration plus better Integration equals more Impregnations. I + I = I+ So my formula, D+E=F+ or (cultural) Diversity + Equality (of opportunity) = Fertility + (higher rates of) appears to explain what is going on in France. But will it also work to explain why America has the highest fertility rate for developed countries? How would this formula work in America, given the fact that the United States doesn’t have anything close to France in terms of policies that encourage women to have children?
Well before we examine America’s fertility rate in more detail, maybe we should discuss why I think increasing immigration and or higher fertility rates bode well for all citizens living in more developed countries. Precisely why do economists and politicians view this as positive for developed countries’ future financial health and well being?
To be sure, if having a larger population was the key to the door of greater economic power then China and India would be the most powerful developed countries in the world instead of the world’s most populous developing nations. Most people believe that a larger population diminishes their quality of life by exacerbating problems like urban sprawl and strains on countries’ transportation and education infrastructures. It’s also a fact that increased immigration leads to more competition between a country’s native citizens and immigrants for economic resources and increased social tensions.
But allowing a country’s population to decline means its labor force will become older, smaller and less productive. This has major implications for public policy given the fact that developed countries also have to provide pensions and health care for their retirees. As the workforce gets smaller, governments will have to steadily increase taxes of the remaining workers in order to pay for their retirees’ healthcare and pensions. Isn’t there a better solution? Let’s discuss one next week.
Wednesday, April 1, 2009
The Three I's
Republican Politics, American Style
Published on March 19th in Metro Éireann By Charles Laffiteau
Last week I closed my column by saying “just as the US led the world into the current economic recession, so too will the US lead the world out of it.” One of my friends questioned this reasoning given the continuous stream of bad economic news currently emanating from America. I told them that, in addition to my belief the US economy would bottom out and start improving before the EU’s, America had a number of other factors working in its favor that Ireland and the EU did not.
Today I’ll be discussing America, France, the EU and the three I’s; Immigration, Integration and Impregnation. As a basis for this discussion I will be using the equation D+E=F+ or (cultural) Diversity + Equality (of opportunity) = Fertility + (higher rates of).
All of these different factors affect a country’s demographic trends, which I believe have a wider and longer lasting impact on a nation’s society than any other single political, social or economic force has. But we don’t notice changes in demographics like we do changes involving those other forces because a country’s demography changes very gradually and over much longer periods of time, usually several decades
A 19th-century French philosopher named Auguste Comte once said that “Demography is destiny” in an effort to emphasize its huge yet very subtle influence on the political, social and economic changes that occur in any given country. Comte is also considered the father of “sociology” so I find it ironic that so many practitioners of social science (including anthropology, communication studies, criminology, economics, geography, history, political science, psychology, social studies and sociology) don’t pay more attention to changes in the demographics of a nation’s population.
But during the past 50 years some economists and politicians in the world’s developed countries have taken note of demographic trends that they find worrisome. However, unlike most of their fellow citizens, their biggest concern isn’t the effect that unfettered immigration of people from poor developing countries will have on their nations’ education and social welfare system. Rather their concern is that their countries will soon be unable to financially support their existing education and social welfare infrastructure unless something is done to arrest a decline in their national populations.
Most of these concerned economists and politicians have only recently come to the conclusion that the solution to the problem of declining population involves one or more of the three I’s; Immigration, Integration and or Impregnation. That is because the two main reasons why countries’ populations begin to decline are low rates of inward migration and or low fertility rates. In the developing world countries need higher birth and fertility rates of 3 or more children per woman because so many children die at a young age and adults there have a shorter life expectancy. But in more developed nations like the US and Ireland, women of child bearing age need to have only slightly more than 2 children each in order to maintain their countries’ populations at their current levels.
When the number of impregnations and subsequent childbirths in developed countries falls below the replacement fertility rate of 2.1 children per woman for a period of 30 or more years, then that nation’s total population begins to slowly decline unless it is offset by significant levels of immigration. If those immigrants are able to successfully integrate with the native population, they and their children will remain in that country as productive members of society. But if they do not find acceptance in that country, these immigrants and their children will either leave or become a social welfare burden to it.
One doesn’t have to look far to see examples of immigrants who either have or have not been successful integrating into the native communities of their new homelands. Many here in Europe cite their respective country’s Muslim communities as the most glaring example of less than successful integration of immigrants into their societies. Judging by the attitudes expressed by both Muslim émigrés and non-Muslim natives in the UK and Germany, such observations appear to be fairly accurate.
But despite the fairly recent 2005 and 2007 urban riot in the mainly Muslim banlieues of its largest cities, this doesn’t seem to be the case in France. Contrary to many news reports at the time, there wasn’t any religious aspect to these disturbances, rather they were social riots triggered by the poor housing, racial discrimination and unemployment of up to 40% in the grim housing estates surrounding France’s largest cities. The young rioters were not just Muslims either, but also included many Christian teenagers from the Caribbean as well as many other non-Muslim teenage immigrants.
In fact, a recent Pew research poll taken after these riots concluded that “All in all, one might conclude that, despite their problems, ¬prime among them joblessness among youth generally, not just Muslim youth, the French need to take no integrationist lessons from their European neighbors.” Polls show that in France far fewer Muslims see any kind of conflict between being a devout Muslim and living in modern French society. Almost half of America’s Christians, 48%, and France’s Muslims, 42%, consider themselves to be American or French national citizens first (not as a Christian or Muslim first) vs. only 7% in the UK, and 13% in Germany. In Muslim countries, those putting national identity ahead of religious, ranges from 6% in Pakistan to 39% in Indonesia.
Despite widespread reports of French nationalists and Americans distaste for Muslim immigrants, research indicates that Muslims in both the US and France are generally more assimilated and prosperous than Muslims in the rest of Europe. As a result, Muslim immigration to France and to America has continued to increase. In fact more people from Islamic countries became legal permanent US residents in 2005 than in any other year in the previous two decades.
But France and America also share another similarity I’ll discuss more next week; they have the highest fertility rates of all the world’s developed countries.
Published on March 19th in Metro Éireann By Charles Laffiteau
Last week I closed my column by saying “just as the US led the world into the current economic recession, so too will the US lead the world out of it.” One of my friends questioned this reasoning given the continuous stream of bad economic news currently emanating from America. I told them that, in addition to my belief the US economy would bottom out and start improving before the EU’s, America had a number of other factors working in its favor that Ireland and the EU did not.
Today I’ll be discussing America, France, the EU and the three I’s; Immigration, Integration and Impregnation. As a basis for this discussion I will be using the equation D+E=F+ or (cultural) Diversity + Equality (of opportunity) = Fertility + (higher rates of).
All of these different factors affect a country’s demographic trends, which I believe have a wider and longer lasting impact on a nation’s society than any other single political, social or economic force has. But we don’t notice changes in demographics like we do changes involving those other forces because a country’s demography changes very gradually and over much longer periods of time, usually several decades
A 19th-century French philosopher named Auguste Comte once said that “Demography is destiny” in an effort to emphasize its huge yet very subtle influence on the political, social and economic changes that occur in any given country. Comte is also considered the father of “sociology” so I find it ironic that so many practitioners of social science (including anthropology, communication studies, criminology, economics, geography, history, political science, psychology, social studies and sociology) don’t pay more attention to changes in the demographics of a nation’s population.
But during the past 50 years some economists and politicians in the world’s developed countries have taken note of demographic trends that they find worrisome. However, unlike most of their fellow citizens, their biggest concern isn’t the effect that unfettered immigration of people from poor developing countries will have on their nations’ education and social welfare system. Rather their concern is that their countries will soon be unable to financially support their existing education and social welfare infrastructure unless something is done to arrest a decline in their national populations.
Most of these concerned economists and politicians have only recently come to the conclusion that the solution to the problem of declining population involves one or more of the three I’s; Immigration, Integration and or Impregnation. That is because the two main reasons why countries’ populations begin to decline are low rates of inward migration and or low fertility rates. In the developing world countries need higher birth and fertility rates of 3 or more children per woman because so many children die at a young age and adults there have a shorter life expectancy. But in more developed nations like the US and Ireland, women of child bearing age need to have only slightly more than 2 children each in order to maintain their countries’ populations at their current levels.
When the number of impregnations and subsequent childbirths in developed countries falls below the replacement fertility rate of 2.1 children per woman for a period of 30 or more years, then that nation’s total population begins to slowly decline unless it is offset by significant levels of immigration. If those immigrants are able to successfully integrate with the native population, they and their children will remain in that country as productive members of society. But if they do not find acceptance in that country, these immigrants and their children will either leave or become a social welfare burden to it.
One doesn’t have to look far to see examples of immigrants who either have or have not been successful integrating into the native communities of their new homelands. Many here in Europe cite their respective country’s Muslim communities as the most glaring example of less than successful integration of immigrants into their societies. Judging by the attitudes expressed by both Muslim émigrés and non-Muslim natives in the UK and Germany, such observations appear to be fairly accurate.
But despite the fairly recent 2005 and 2007 urban riot in the mainly Muslim banlieues of its largest cities, this doesn’t seem to be the case in France. Contrary to many news reports at the time, there wasn’t any religious aspect to these disturbances, rather they were social riots triggered by the poor housing, racial discrimination and unemployment of up to 40% in the grim housing estates surrounding France’s largest cities. The young rioters were not just Muslims either, but also included many Christian teenagers from the Caribbean as well as many other non-Muslim teenage immigrants.
In fact, a recent Pew research poll taken after these riots concluded that “All in all, one might conclude that, despite their problems, ¬prime among them joblessness among youth generally, not just Muslim youth, the French need to take no integrationist lessons from their European neighbors.” Polls show that in France far fewer Muslims see any kind of conflict between being a devout Muslim and living in modern French society. Almost half of America’s Christians, 48%, and France’s Muslims, 42%, consider themselves to be American or French national citizens first (not as a Christian or Muslim first) vs. only 7% in the UK, and 13% in Germany. In Muslim countries, those putting national identity ahead of religious, ranges from 6% in Pakistan to 39% in Indonesia.
Despite widespread reports of French nationalists and Americans distaste for Muslim immigrants, research indicates that Muslims in both the US and France are generally more assimilated and prosperous than Muslims in the rest of Europe. As a result, Muslim immigration to France and to America has continued to increase. In fact more people from Islamic countries became legal permanent US residents in 2005 than in any other year in the previous two decades.
But France and America also share another similarity I’ll discuss more next week; they have the highest fertility rates of all the world’s developed countries.
Toxic Assets
Republican Politics, American Style
Published on March 12th in Metro Éireann By Charles Laffiteau
A couple of weeks ago I suggested that the US and other governments take possession of their banks “toxic assets” so that those banks could go back to private investors and raise fresh capital that they could start lending again with a clean set of books. To reduce the cost to taxpayers I also suggested that those governments could get warrants when they acquire toxic assets that would convert to bank stock the governments could sell to private investors, and hire private equity managers to oversee the valuations and disposal of those “toxic assets” to ensure that they’re sold only when the time is right.
Well it now appears that the US government is going to pursue a hybridized version of what I suggested. Instead of taking these “toxic assets” off the books of the banks and creating a “bad bank” to hold and dispose of them, President Obama’s economic team is proposing to set up several public-private funds to compete with each other in valuing and buying these bank assets. The basic idea is to attract private investors to both manage and put their own money into these funds with the US government as their partner agreeing to cap their losses and share in the risk of buying these “toxic assets”.
President Obama believes that by competing to buy these “toxic assets”, these new “vulture funds” could establish some more realistic market prices for the “toxic assets” that will allow banks to sell them off. While the Obama administration’s proposal isn’t as clean as what I proposed two weeks ago, I am cautiously optimistic that it might succeed in realizing the same goal; cleaning up the banks books so they can once again begin to raise and subsequently lend new capital to businesses and consumers in the US.
In the meantime I believe the economic situation in the US and the rest of the world will continue to get worse before it begins to get better. There is an old saying that “it’s always darkest before the dawn” and I happen to believe that is the case here as regards the current global recession. But I am now detecting the first glimmers of light at the end of that long tunnel of economic misery the world is now traversing. The first indication that the worst may soon be over will be the bottoming out of the stock market in the United States which may be closer at hand than most people currently think. So why exactly do I believe this might be the case?
Yesterday the US stock market dropped to its lowest level in twelve years, and while it may have a bit further to fall yet, I suspect it is now fairly close to its bottom. That means there are some really good companies with strong balance sheets and excellent future earnings potential available at relatively low stock prices. Savvy investors will begin to buy these stocks now or in the near future while they are cheap which will in turn stabilize the overall stock market.
Note I said stabilize, not reverse, the current downward trend of stock markets around the world. Global stock markets won’t start moving back up again until a majority of private investors become confident that the financial crisis is well on its way to being resolved. Because we are still some months away from being able to predict with any level of confidence that the banks have finally cleaned up their books, I foresee a period of small movements up and down for stock markets over the course of the next year.
The smartest investors are the ones who step in and begin buying stocks or investing when the market in one of these kind of “troughs”. They don’t wait until they are certain the market has bottomed out but instead buy whenever they see weakness in an already down market. They do so because they know that once the majority of other investors regain confidence in the market they will then be competing with them for the best investments and paying a higher price for them as a result of this competition.
The other big components of the current financial meltdown were the collapse of home prices followed by a collapse in consumer spending. Once again, at least in the US, I see the first glimmers of light in both of these areas as well. Consumer spending in the US actually rose a modest .06% in January for the first time following a record six months worth of steady declines. While it may decline again in the coming months I think this is a signal that the downward trend is now over and the US will enter a period of more modest advances and declines in consumer spending during the rest of 2009.
Private investors have now begun moving into the US housing market as they see opportunities to buy homes for roughly 45-50% of the prices they would have paid two years ago before the housing bubble burst. This is a sign that the US housing market has finally reached a bottom and any further declines in home values will be relatively modest. Just like stock prices however, don’t expect home prices to begin rising again until they have spent some months languishing at the low end of the housing market.
Similarly, while US unemployment continues to rise, manufacturing activity in February actually increased for the first time in more than a year. This is a sign that the steady contraction in US business and manufacturing which has been going on since the beginning of 2008 is also coming to an end. Nevertheless, you should expect US economic, employment and spending reports to continue to be pretty dismal for the rest of 2009. But the good news for Ireland and the rest of the world is; just as the US led the world into the current economic recession, so too will the US lead the world out of it.
Published on March 12th in Metro Éireann By Charles Laffiteau
A couple of weeks ago I suggested that the US and other governments take possession of their banks “toxic assets” so that those banks could go back to private investors and raise fresh capital that they could start lending again with a clean set of books. To reduce the cost to taxpayers I also suggested that those governments could get warrants when they acquire toxic assets that would convert to bank stock the governments could sell to private investors, and hire private equity managers to oversee the valuations and disposal of those “toxic assets” to ensure that they’re sold only when the time is right.
Well it now appears that the US government is going to pursue a hybridized version of what I suggested. Instead of taking these “toxic assets” off the books of the banks and creating a “bad bank” to hold and dispose of them, President Obama’s economic team is proposing to set up several public-private funds to compete with each other in valuing and buying these bank assets. The basic idea is to attract private investors to both manage and put their own money into these funds with the US government as their partner agreeing to cap their losses and share in the risk of buying these “toxic assets”.
President Obama believes that by competing to buy these “toxic assets”, these new “vulture funds” could establish some more realistic market prices for the “toxic assets” that will allow banks to sell them off. While the Obama administration’s proposal isn’t as clean as what I proposed two weeks ago, I am cautiously optimistic that it might succeed in realizing the same goal; cleaning up the banks books so they can once again begin to raise and subsequently lend new capital to businesses and consumers in the US.
In the meantime I believe the economic situation in the US and the rest of the world will continue to get worse before it begins to get better. There is an old saying that “it’s always darkest before the dawn” and I happen to believe that is the case here as regards the current global recession. But I am now detecting the first glimmers of light at the end of that long tunnel of economic misery the world is now traversing. The first indication that the worst may soon be over will be the bottoming out of the stock market in the United States which may be closer at hand than most people currently think. So why exactly do I believe this might be the case?
Yesterday the US stock market dropped to its lowest level in twelve years, and while it may have a bit further to fall yet, I suspect it is now fairly close to its bottom. That means there are some really good companies with strong balance sheets and excellent future earnings potential available at relatively low stock prices. Savvy investors will begin to buy these stocks now or in the near future while they are cheap which will in turn stabilize the overall stock market.
Note I said stabilize, not reverse, the current downward trend of stock markets around the world. Global stock markets won’t start moving back up again until a majority of private investors become confident that the financial crisis is well on its way to being resolved. Because we are still some months away from being able to predict with any level of confidence that the banks have finally cleaned up their books, I foresee a period of small movements up and down for stock markets over the course of the next year.
The smartest investors are the ones who step in and begin buying stocks or investing when the market in one of these kind of “troughs”. They don’t wait until they are certain the market has bottomed out but instead buy whenever they see weakness in an already down market. They do so because they know that once the majority of other investors regain confidence in the market they will then be competing with them for the best investments and paying a higher price for them as a result of this competition.
The other big components of the current financial meltdown were the collapse of home prices followed by a collapse in consumer spending. Once again, at least in the US, I see the first glimmers of light in both of these areas as well. Consumer spending in the US actually rose a modest .06% in January for the first time following a record six months worth of steady declines. While it may decline again in the coming months I think this is a signal that the downward trend is now over and the US will enter a period of more modest advances and declines in consumer spending during the rest of 2009.
Private investors have now begun moving into the US housing market as they see opportunities to buy homes for roughly 45-50% of the prices they would have paid two years ago before the housing bubble burst. This is a sign that the US housing market has finally reached a bottom and any further declines in home values will be relatively modest. Just like stock prices however, don’t expect home prices to begin rising again until they have spent some months languishing at the low end of the housing market.
Similarly, while US unemployment continues to rise, manufacturing activity in February actually increased for the first time in more than a year. This is a sign that the steady contraction in US business and manufacturing which has been going on since the beginning of 2008 is also coming to an end. Nevertheless, you should expect US economic, employment and spending reports to continue to be pretty dismal for the rest of 2009. But the good news for Ireland and the rest of the world is; just as the US led the world into the current economic recession, so too will the US lead the world out of it.
President Obama's State of the Union Address
Republican Politics, American Style
Published on March 5th in Metro Éireann By Charles Laffiteau
Last Wednesday at 3:15 in the morning I found myself doing something I can not recall ever doing before. It took me a moment to realize that I had actually started to clap at the end of an hour long speech I had just listened to on the telly. Sure, I’ve clapped, along with other members of the audience, at the end of other speeches I have heard, but not when I’m sitting alone in front of the television. When I realized what I was doing I immediately stopped myself and wondered; “Why on earth am I clapping at my TV?”
Well I guess the answer is that I must have been pretty impressed by President Barak Obama’s first speech to a Joint Session of Congress, which is the traditional first term President’s equivalent to the State of the Union address. When President Obama addresses Congress and the nation again at this same time next year, this speech will be called Obama’s first State of the Union address because only a President who has been in office during the previous year is entitled to deliver a State of the Union speech.
But even though this speech wasn’t actually a State of the Union address, it was still treated like one since it was broadcast nationally by all ten of the major television networks in America. In fact President Obama’s speech was watched by viewers in more than 37 million US homes, the third largest TV audience to ever watch a State of the Union address and here in Ireland I was able to watch the speech broadcast live by the BBC, SkyNews and France 24. This unprecedented interest in President Obama’s first major speech after his inauguration only a month earlier underscores both the American and worldwide interest in President Obama’s plan to deal with the economic recession.
Neither I nor my parents were alive when Franklin Roosevelt, only eight days into his first term as President, delivered the first of his famous and reassuring fireside chats to an American public reeling from the devastating effects of a worldwide depression. Then as now America and the rest of the world were anxiously hoping for bold and effective economic leadership. While it remains to be seen if Obama will be as effective as Franklin Roosevelt, last Wednesday night I think President Obama delivered the kind of message that Americans and citizens of other nations were so desperately hungry for.
Instead of being lofty and inspirational like his presidential campaign speeches, I characterized President Obama’s inaugural address as being a very sober and serious speech. That’s because President Obama was preparing Americans for a long and nasty recession while simultaneously reassuring citizens in America and around the world that we would eventually overcome the many challenges we are currently confronting. I felt the tenor of his inaugural address was quite appropriate given the rather dire economic conditions America and the world was facing on the day he became our 44th President.
Last Wednesday night President Obama’s hour long speech added some layers of detail that were missing from his relatively brief 18 minute inaugural address. In his inaugural address President Obama had also challenged those “who suggest that our system cannot tolerate too many big plans”. One month later, having already achieved the passage of his top priority, the $800 billion economic stimulus bill, President Obama proceeded to lay out his other “big” plans for improving education, creating jobs through investments in rebuilding America’s infrastructure and developing energy independence.
President Obama also outlined his plans for reforming Medicare and Social Security in order to set the stage for implementing a universal healthcare program health care and an upcoming federal budget that doesn’t hide things like the cost of the Iraq war as well as his plans to help beleaguered US homeowners. Having spent the weeks following his inauguration using a pessimistic tone to apply pressure to Congress to pass his stimulus plan, President Obama used more optimistic language in this latest speech detailing his plans while also promising that America “will emerge stronger than before.”
He acknowledged Americans anger towards Wall Street but also reminded them that many of them had also played a role by using credit recklessly and spending beyond their means. Obama then sought to convince viewers that the only way to avoid making the current economic crisis worse may be to commit more taxpayer money to cleaning up Wall streets financial mess. He cautioned Americans about opposing this idea saying that “we cannot afford to govern out of anger or yield to the politics of the moment.” Obama went on to say that “it’s not about helping banks, it’s about helping people.” He made the case that America and the world faced a decade of hard times unless we acted to stabilize the banking system so banks could begin lending so we could buy cars and homes again.
President Obama also continued to refrain from using partisan rhetoric during his speech and instead encouraged Republicans to take the “carrot” he was offering and rise above partisan politics and try work with him in developing bipartisan solutions for the many problems the country faces. But Obama also showed his Republican opponents the “stick” by giving his audience a powerful critique of the policies of the past 8 years which led up to the crisis which he and his administration had just “inherited.”
I thought President Obama did an excellent job of making the case for using the current economic crisis to make far reaching changes and reforms in the areas of healthcare, education and energy independence by creating “opportunity from ordeal.” President Obama closed his speech by reminding Americans that the world was watching saying “As we stand at this crossroads of history, the eyes of all people in all nations are once again upon us, watching to see what we do with this moment, waiting for us to lead.” Well one thing’s for sure, Obama is leading.
Published on March 5th in Metro Éireann By Charles Laffiteau
Last Wednesday at 3:15 in the morning I found myself doing something I can not recall ever doing before. It took me a moment to realize that I had actually started to clap at the end of an hour long speech I had just listened to on the telly. Sure, I’ve clapped, along with other members of the audience, at the end of other speeches I have heard, but not when I’m sitting alone in front of the television. When I realized what I was doing I immediately stopped myself and wondered; “Why on earth am I clapping at my TV?”
Well I guess the answer is that I must have been pretty impressed by President Barak Obama’s first speech to a Joint Session of Congress, which is the traditional first term President’s equivalent to the State of the Union address. When President Obama addresses Congress and the nation again at this same time next year, this speech will be called Obama’s first State of the Union address because only a President who has been in office during the previous year is entitled to deliver a State of the Union speech.
But even though this speech wasn’t actually a State of the Union address, it was still treated like one since it was broadcast nationally by all ten of the major television networks in America. In fact President Obama’s speech was watched by viewers in more than 37 million US homes, the third largest TV audience to ever watch a State of the Union address and here in Ireland I was able to watch the speech broadcast live by the BBC, SkyNews and France 24. This unprecedented interest in President Obama’s first major speech after his inauguration only a month earlier underscores both the American and worldwide interest in President Obama’s plan to deal with the economic recession.
Neither I nor my parents were alive when Franklin Roosevelt, only eight days into his first term as President, delivered the first of his famous and reassuring fireside chats to an American public reeling from the devastating effects of a worldwide depression. Then as now America and the rest of the world were anxiously hoping for bold and effective economic leadership. While it remains to be seen if Obama will be as effective as Franklin Roosevelt, last Wednesday night I think President Obama delivered the kind of message that Americans and citizens of other nations were so desperately hungry for.
Instead of being lofty and inspirational like his presidential campaign speeches, I characterized President Obama’s inaugural address as being a very sober and serious speech. That’s because President Obama was preparing Americans for a long and nasty recession while simultaneously reassuring citizens in America and around the world that we would eventually overcome the many challenges we are currently confronting. I felt the tenor of his inaugural address was quite appropriate given the rather dire economic conditions America and the world was facing on the day he became our 44th President.
Last Wednesday night President Obama’s hour long speech added some layers of detail that were missing from his relatively brief 18 minute inaugural address. In his inaugural address President Obama had also challenged those “who suggest that our system cannot tolerate too many big plans”. One month later, having already achieved the passage of his top priority, the $800 billion economic stimulus bill, President Obama proceeded to lay out his other “big” plans for improving education, creating jobs through investments in rebuilding America’s infrastructure and developing energy independence.
President Obama also outlined his plans for reforming Medicare and Social Security in order to set the stage for implementing a universal healthcare program health care and an upcoming federal budget that doesn’t hide things like the cost of the Iraq war as well as his plans to help beleaguered US homeowners. Having spent the weeks following his inauguration using a pessimistic tone to apply pressure to Congress to pass his stimulus plan, President Obama used more optimistic language in this latest speech detailing his plans while also promising that America “will emerge stronger than before.”
He acknowledged Americans anger towards Wall Street but also reminded them that many of them had also played a role by using credit recklessly and spending beyond their means. Obama then sought to convince viewers that the only way to avoid making the current economic crisis worse may be to commit more taxpayer money to cleaning up Wall streets financial mess. He cautioned Americans about opposing this idea saying that “we cannot afford to govern out of anger or yield to the politics of the moment.” Obama went on to say that “it’s not about helping banks, it’s about helping people.” He made the case that America and the world faced a decade of hard times unless we acted to stabilize the banking system so banks could begin lending so we could buy cars and homes again.
President Obama also continued to refrain from using partisan rhetoric during his speech and instead encouraged Republicans to take the “carrot” he was offering and rise above partisan politics and try work with him in developing bipartisan solutions for the many problems the country faces. But Obama also showed his Republican opponents the “stick” by giving his audience a powerful critique of the policies of the past 8 years which led up to the crisis which he and his administration had just “inherited.”
I thought President Obama did an excellent job of making the case for using the current economic crisis to make far reaching changes and reforms in the areas of healthcare, education and energy independence by creating “opportunity from ordeal.” President Obama closed his speech by reminding Americans that the world was watching saying “As we stand at this crossroads of history, the eyes of all people in all nations are once again upon us, watching to see what we do with this moment, waiting for us to lead.” Well one thing’s for sure, Obama is leading.
The Automaker bailout
Republican Politics, American Style
Published on February 26th in Metro Éireann By Charles Laffiteau
Today I want to discuss the additional government loans being proposed for GM and Chrysler and expand on my comments in last week’s column about my belief that the US and other governments’ must take ownership of their banks “bad assets”, in order to get them off their books so that banks can start raising and lending new capital again.
I recognize that taking these kinds of radical actions sounds to many observers like I am proposing that taxpayers should get stuck with the bill for the mistakes of these US automakers and the lending excesses of financial executives around the globe. Indeed, in a worse case scenario, taxpayers may end up footing a large part of the bill. But history tells me that if the automaker loans and the disposal of toxic bank assets are handled in a judicious manner, then there is a very good chance that taxpayers won’t be stuck with much if any of a tab, and might even profit from these so-called “government bailouts”.
As regards the loans for Chrysler and GM, the very same issues; that such help rewards failure and could cost taxpayers a lot of money, were debated 30 years ago prior to the US Congress approving the first such government loan for Chrysler. The US was also in the midst of a severe economic downturn and the bankruptcy, of what was then America’s 10th largest manufacturer was considered unthinkable to many US citizens. In fact, in most respects, the current situation involving GM, and to a lesser extent, Chrysler, mirrors that which existed in 1979. So what was the end result of that government loan?
First Chrysler proceeded to develop and produce its first front wheel drive small cars, which in turn helped Chrysler double its automobile line-up’s corporate average miles-per-gallon of petrol. Then Chrysler paid off the US taxpayer guaranteed loans in 1983, resulting in a net profit for US taxpayers of over $350 million. Excuse me, but I happen to think a $350 million profit on a 4 year, $1.5 billion loan sounds pretty good.
Having said this, while I am supportive of giving GM more government loans, I’m not so sure US taxpayers should also do so in the case of Chrysler. That is because unlike GM, Chrysler is no longer a publicly held stock company like it was back in 1979. Cerebus Capital Management LP, a huge private equity fund owned by a large group of well heeled private investors, bought Chrysler from DaimlerChrysler 18 months ago. It actually acquired Chrysler’s automaking operations free of debt, so it could get its hands on Chrysler’s lucrative auto finance subsidiary, Chrysler Financial Corporation.
Cerebus wanted to combine Chrysler’s much smaller finance operation, with the GM finance subsidiary, General Motors Acceptance Corporation, that Cerebus had bought a controlling stake of 51% in from GM a year earlier. Of course back in 2006 and 2007 when Cerebus made these acquisitions, the US and world economies were growing quickly and money to finance risky acquisitions was easy to get. But Cerebus Chairman and CEO John Snow, President Bush’s former Treasury Secretary, and Cerebus Capital’s wealthy private investors also knew there were risks associated with such acquisitions. As such, I don’t think it’s fair to provide more government loans to help Cerebus unless Cerebus Capital’s investors decide to invest more of their own money in Chrysler as well.
The US government also has some even more recent experience dealing with the toxic assets of America’s financial institutions. The Resolution Trust Corporation (RTC) was a US Government-owned asset management company created by Congress in 1989 to deal with the savings and loan crisis of the 1980s. It was charged with liquidating the assets of savings and loan associations (S&Ls) declared insolvent by the Office of Thrift Supervision, mainly real estate and mortgage loans. The RTC also took over the deposit insurance duties of the Federal Home Loan Bank Board. So what kind of job did it do?
Congress initially gave the RTC $50 billion to clean up the S&L mess, but the RTC wound up needing three additional infusions of taxpayer funds over six years because the situation proved to be much worse than Congress originally thought. In the end, according to one study, taxpayers took a $124 billion loss on the RTC’s total assets of $394 billion. That means taxpayers lost 31 cents on each dollar of assets handled by the RTC, an institution that was simply disposing of the property of failed institutions.
So using this recent US government toxic asset disposal history as a guide, if the US government has to end up taking over a total of $3 trillion in toxic bank assets, then a more realistic worst case scenario is that the ultimate cost to tax payers will be at most $1 trillion or about $150 billion a year over the next 6 years. I also think the same calculus could be applied to toxic bank assets in Ireland, the UK and the rest of the world. But just as there was a silver lining to those US government loans to Chrysler back in 1980, I also think it’s possible that taxpayers in the US and other nations could actually end up seeing a profit from a judicious acquisition and subsequent disposal of these “toxic assets”.
While government officials will have to spend a lot of money to show the market that they won't let their banks fail, taxpayers won't have to end up on the hook for the entire amount of money that's being injected into these banks. Governments could get warrants when they acquire toxic assets that would convert to bank stock when the government sells them, and hire private equity managers to oversee the assets to ensure that they’re sold only when the time is right.
I think these kinds of arrangements will allow governments to extract some gains for taxpayers once the recession ends so that taxpayers can actually profit from the financial bailout.
Published on February 26th in Metro Éireann By Charles Laffiteau
Today I want to discuss the additional government loans being proposed for GM and Chrysler and expand on my comments in last week’s column about my belief that the US and other governments’ must take ownership of their banks “bad assets”, in order to get them off their books so that banks can start raising and lending new capital again.
I recognize that taking these kinds of radical actions sounds to many observers like I am proposing that taxpayers should get stuck with the bill for the mistakes of these US automakers and the lending excesses of financial executives around the globe. Indeed, in a worse case scenario, taxpayers may end up footing a large part of the bill. But history tells me that if the automaker loans and the disposal of toxic bank assets are handled in a judicious manner, then there is a very good chance that taxpayers won’t be stuck with much if any of a tab, and might even profit from these so-called “government bailouts”.
As regards the loans for Chrysler and GM, the very same issues; that such help rewards failure and could cost taxpayers a lot of money, were debated 30 years ago prior to the US Congress approving the first such government loan for Chrysler. The US was also in the midst of a severe economic downturn and the bankruptcy, of what was then America’s 10th largest manufacturer was considered unthinkable to many US citizens. In fact, in most respects, the current situation involving GM, and to a lesser extent, Chrysler, mirrors that which existed in 1979. So what was the end result of that government loan?
First Chrysler proceeded to develop and produce its first front wheel drive small cars, which in turn helped Chrysler double its automobile line-up’s corporate average miles-per-gallon of petrol. Then Chrysler paid off the US taxpayer guaranteed loans in 1983, resulting in a net profit for US taxpayers of over $350 million. Excuse me, but I happen to think a $350 million profit on a 4 year, $1.5 billion loan sounds pretty good.
Having said this, while I am supportive of giving GM more government loans, I’m not so sure US taxpayers should also do so in the case of Chrysler. That is because unlike GM, Chrysler is no longer a publicly held stock company like it was back in 1979. Cerebus Capital Management LP, a huge private equity fund owned by a large group of well heeled private investors, bought Chrysler from DaimlerChrysler 18 months ago. It actually acquired Chrysler’s automaking operations free of debt, so it could get its hands on Chrysler’s lucrative auto finance subsidiary, Chrysler Financial Corporation.
Cerebus wanted to combine Chrysler’s much smaller finance operation, with the GM finance subsidiary, General Motors Acceptance Corporation, that Cerebus had bought a controlling stake of 51% in from GM a year earlier. Of course back in 2006 and 2007 when Cerebus made these acquisitions, the US and world economies were growing quickly and money to finance risky acquisitions was easy to get. But Cerebus Chairman and CEO John Snow, President Bush’s former Treasury Secretary, and Cerebus Capital’s wealthy private investors also knew there were risks associated with such acquisitions. As such, I don’t think it’s fair to provide more government loans to help Cerebus unless Cerebus Capital’s investors decide to invest more of their own money in Chrysler as well.
The US government also has some even more recent experience dealing with the toxic assets of America’s financial institutions. The Resolution Trust Corporation (RTC) was a US Government-owned asset management company created by Congress in 1989 to deal with the savings and loan crisis of the 1980s. It was charged with liquidating the assets of savings and loan associations (S&Ls) declared insolvent by the Office of Thrift Supervision, mainly real estate and mortgage loans. The RTC also took over the deposit insurance duties of the Federal Home Loan Bank Board. So what kind of job did it do?
Congress initially gave the RTC $50 billion to clean up the S&L mess, but the RTC wound up needing three additional infusions of taxpayer funds over six years because the situation proved to be much worse than Congress originally thought. In the end, according to one study, taxpayers took a $124 billion loss on the RTC’s total assets of $394 billion. That means taxpayers lost 31 cents on each dollar of assets handled by the RTC, an institution that was simply disposing of the property of failed institutions.
So using this recent US government toxic asset disposal history as a guide, if the US government has to end up taking over a total of $3 trillion in toxic bank assets, then a more realistic worst case scenario is that the ultimate cost to tax payers will be at most $1 trillion or about $150 billion a year over the next 6 years. I also think the same calculus could be applied to toxic bank assets in Ireland, the UK and the rest of the world. But just as there was a silver lining to those US government loans to Chrysler back in 1980, I also think it’s possible that taxpayers in the US and other nations could actually end up seeing a profit from a judicious acquisition and subsequent disposal of these “toxic assets”.
While government officials will have to spend a lot of money to show the market that they won't let their banks fail, taxpayers won't have to end up on the hook for the entire amount of money that's being injected into these banks. Governments could get warrants when they acquire toxic assets that would convert to bank stock when the government sells them, and hire private equity managers to oversee the assets to ensure that they’re sold only when the time is right.
I think these kinds of arrangements will allow governments to extract some gains for taxpayers once the recession ends so that taxpayers can actually profit from the financial bailout.
President Obama's Economic Stimulus package
Republican Politics, American Style
Published on February 19th in Metro Éireann By Charles Laffiteau
I closed last week’s column, about how President Obama has performed during his first weeks in office; by saying I would discuss President Obama’s economic stimulus measures in detail in this week’s column. But as you read this I will be winging my way across the Atlantic Ocean back home to Ireland from a conference in New York City, so some of what I discuss here may have already been rendered obsolete based on whatever actions the US Congress has or hasn’t taken on this very important piece of legislation.
With that caveat I will now discuss what I believe will be the likely outcome of the US Senate debate about the cost of the economic stimulus package, as well as what I believe the US government (and other countries and their governments) will eventually have to do to bring the world economy back from depths it has so quickly sunk to. As a lifelong fiscal conservative I must confess to being aghast at the almost one trillion dollar price tag of the stimulus package. But I’m also aware that the world is confronting the worst economic crisis since the Great Depression of the 1930’s, so extraordinary measures seem to be appropriate under the circumstances.
I am pleased to see Republicans arguing against some of the new federal spending programs that will continue long after the current economic crisis is over. But I must also note that many of these so-called fiscal conservatives’ voices were no where to be heard while former President Bush was running up half a trillion dollar annual budget deficits to finance his spending programs and the Iraq war. Since America wasn’t confronting such an enormous financial crisis during those years, Republican opposition to Obama’s deficit spending plans strikes me as being a bit like “the kettle calling the pot black.”
I am particularly disappointed in Senator John McCain, who has made absolutely no effort to try to forge the kind of compromises he has in the past with Democrats on economic and other issues. Having been soundly defeated by Obama in his bid for the Presidency, it appears John now wants to upstage President Obama and thereby salvage what’s left of his political reputation among his fellow Republicans in the process. John and other Republicans, who seem to have suddenly found their fiscal conservative voices now that they are out of power, are also playing a very dangerous game here.
But fortunately for America and the rest of the world, I don’t believe that McCain and his other so-called fiscally conservative Republican allies will win this particular dust-up with President Obama and the Senate’s Democrats. There are a few much more statesmen like Republicans in the Senate who have decided that now is not the time to be playing these kinds of dangerous political games. This group includes veteran Republican Senators like Arlen Specter of Pennsylvania and George V. Voinovich from economically depressed Ohio, as well as the three female Republican Senators, Lisa Murkowski from Alaska and the two Senators from Maine, Olympia Snow and Susan Collins.
These five Republicans have been working behind closed doors with some moderate Democrats like Ben Nelson of Nebraska, Evan Bayh of Indiana and Colorado’s newly elected Senator Mark Udall, to trim or eliminate some of the new spending programs from the stimulus bill in order to ensure its eventual passage this month. This alliance of moderate Senate Democrats and Republicans is reminiscent of the so-called Gang of 14 Senators, who banded together four years ago to halt attempts by the then Republican controlled Senate to ram Bush’s judicial appointments through the Senate.
Make no mistake, there are many very worthwhile spending programs included in the Congressional Democrats economic stimulus package which have been endorsed and supported by President Obama. But now is not the time and this legislation is not the place to provide additional funding for the Head Start program, prisons, education for the disadvantaged, school improvements, child nutrition and violence against women.
President Obama has wisely avoided getting involved in the negotiations being conducted by Senate moderates about what specific programs should be cut from the stimulus bill. He has instead focused on the urgent need for a substantial package of tax cuts and infrastructure spending to address America’s economic crisis. To that end, President Obama has repeatedly urged members of Congress from both parties to rise above partisan politics and work together on the specifics so that he can sign the new bill into law immediately after it has been approved by both houses of Congress.
While I support most elements of the economic stimulus package and believe that it will be passed and signed into law before the end of February, I don’t think this and similar economic stimulus measures by other countries will resolve the current economic crisis in America or anywhere else in the world. Nor am I alone in my opinions about what additional steps the US and other governments will eventually have to take to get their economies moving again. Some respected economists as well as members of Obama’s economic team have also come to similar conclusions.
The world’s banks won’t be ready or able to start lending money again until the US and other governments’ take ownership of their banks “bad assets” to get them off these banks’ books. Once this has been done, these newly “washed” banks can raise private capital which they’ll be eager to lend to credit worthy businesses and consumers.
Mind you, these “bad assets” our governments will then be stuck with are not actually worthless. But unwinding these “securities”, which are actually packages of debt containing both good and bad mortgage or consumer loans, to figure out which elements have value and which ones don’t will be a long and time consuming process. But the world’s economy is dependent on banks and private investors who can’t afford to wait and find out what these securities are worth. Therefore, our governments must do so.
Published on February 19th in Metro Éireann By Charles Laffiteau
I closed last week’s column, about how President Obama has performed during his first weeks in office; by saying I would discuss President Obama’s economic stimulus measures in detail in this week’s column. But as you read this I will be winging my way across the Atlantic Ocean back home to Ireland from a conference in New York City, so some of what I discuss here may have already been rendered obsolete based on whatever actions the US Congress has or hasn’t taken on this very important piece of legislation.
With that caveat I will now discuss what I believe will be the likely outcome of the US Senate debate about the cost of the economic stimulus package, as well as what I believe the US government (and other countries and their governments) will eventually have to do to bring the world economy back from depths it has so quickly sunk to. As a lifelong fiscal conservative I must confess to being aghast at the almost one trillion dollar price tag of the stimulus package. But I’m also aware that the world is confronting the worst economic crisis since the Great Depression of the 1930’s, so extraordinary measures seem to be appropriate under the circumstances.
I am pleased to see Republicans arguing against some of the new federal spending programs that will continue long after the current economic crisis is over. But I must also note that many of these so-called fiscal conservatives’ voices were no where to be heard while former President Bush was running up half a trillion dollar annual budget deficits to finance his spending programs and the Iraq war. Since America wasn’t confronting such an enormous financial crisis during those years, Republican opposition to Obama’s deficit spending plans strikes me as being a bit like “the kettle calling the pot black.”
I am particularly disappointed in Senator John McCain, who has made absolutely no effort to try to forge the kind of compromises he has in the past with Democrats on economic and other issues. Having been soundly defeated by Obama in his bid for the Presidency, it appears John now wants to upstage President Obama and thereby salvage what’s left of his political reputation among his fellow Republicans in the process. John and other Republicans, who seem to have suddenly found their fiscal conservative voices now that they are out of power, are also playing a very dangerous game here.
But fortunately for America and the rest of the world, I don’t believe that McCain and his other so-called fiscally conservative Republican allies will win this particular dust-up with President Obama and the Senate’s Democrats. There are a few much more statesmen like Republicans in the Senate who have decided that now is not the time to be playing these kinds of dangerous political games. This group includes veteran Republican Senators like Arlen Specter of Pennsylvania and George V. Voinovich from economically depressed Ohio, as well as the three female Republican Senators, Lisa Murkowski from Alaska and the two Senators from Maine, Olympia Snow and Susan Collins.
These five Republicans have been working behind closed doors with some moderate Democrats like Ben Nelson of Nebraska, Evan Bayh of Indiana and Colorado’s newly elected Senator Mark Udall, to trim or eliminate some of the new spending programs from the stimulus bill in order to ensure its eventual passage this month. This alliance of moderate Senate Democrats and Republicans is reminiscent of the so-called Gang of 14 Senators, who banded together four years ago to halt attempts by the then Republican controlled Senate to ram Bush’s judicial appointments through the Senate.
Make no mistake, there are many very worthwhile spending programs included in the Congressional Democrats economic stimulus package which have been endorsed and supported by President Obama. But now is not the time and this legislation is not the place to provide additional funding for the Head Start program, prisons, education for the disadvantaged, school improvements, child nutrition and violence against women.
President Obama has wisely avoided getting involved in the negotiations being conducted by Senate moderates about what specific programs should be cut from the stimulus bill. He has instead focused on the urgent need for a substantial package of tax cuts and infrastructure spending to address America’s economic crisis. To that end, President Obama has repeatedly urged members of Congress from both parties to rise above partisan politics and work together on the specifics so that he can sign the new bill into law immediately after it has been approved by both houses of Congress.
While I support most elements of the economic stimulus package and believe that it will be passed and signed into law before the end of February, I don’t think this and similar economic stimulus measures by other countries will resolve the current economic crisis in America or anywhere else in the world. Nor am I alone in my opinions about what additional steps the US and other governments will eventually have to take to get their economies moving again. Some respected economists as well as members of Obama’s economic team have also come to similar conclusions.
The world’s banks won’t be ready or able to start lending money again until the US and other governments’ take ownership of their banks “bad assets” to get them off these banks’ books. Once this has been done, these newly “washed” banks can raise private capital which they’ll be eager to lend to credit worthy businesses and consumers.
Mind you, these “bad assets” our governments will then be stuck with are not actually worthless. But unwinding these “securities”, which are actually packages of debt containing both good and bad mortgage or consumer loans, to figure out which elements have value and which ones don’t will be a long and time consuming process. But the world’s economy is dependent on banks and private investors who can’t afford to wait and find out what these securities are worth. Therefore, our governments must do so.
How is Obama doing so far
Republican Politics, American Style
Published on February 12th in Metro Éireann By Charles Laffiteau
I am heading back to the states tomorrow to present a paper at an international conference in New York and to take the pulse of citizens in my homeland regarding President Obama’s performance in office less than one month into his first term. So today I want to discuss what I think of President Obama’s first three weeks in office.
As I mentioned in previous columns I generally applaud the kind of people President Obama has selected to run the US government and various federal agencies and indeed the Congress has moved swiftly to approve the nominations of the vast majority of President Obama’s Cabinet nominees. But that isn’t to say President Obama hasn’t stumbled in a few cases, most notably with the nomination of Tom Daschle as both Secretary of Health and Human Services and White House Health Insurance Czar.
Given his legislative and lobbying experience on healthcare insurance issues and close personal relationship with President Obama, Tom Daschle was and, I believe, still is the best person for these critical positions in President Obama’s new administration. Unfortunately, Tom Daschle made a crucial error as regards paying his personal income taxes and the decision to withdraw his nomination for both posts in President Obama’s administration is the price Daschle and Obama now have to pay for this transgression.
Regardless of the whether or not one believes that Tom Daschle knew or should have know that having a gratis driver and limousine (courtesy of Washington DC insider and corporate media mogul Leo Hindery) at his disposal for the past three years had income tax consequences, that was not his biggest mistake. What sunk Tom Daschle’s chance to play a significant role in the President Obama’s new administration was his decision to wait until January of this year, just days before his Senate confirmation hearings, to write a check for the back taxes he owed. There is no excuse for this delay.
Even if one buys Daschle and President Obama’s contention that failing to declare the driver and limo perk as taxable income was an innocent mistake, the fact of the matter is Daschle knew he owed income taxes for this “oversight” over six months ago and yet waited until he was about to be grilled about this matter by members of the US Senate to pay up. This action alone calls into question whether or not Tom Daschle was acting in accordance with the “spirit” of President Obama’s administration’s new ethical standards.
As President Obama himself later acknowledged, there cannot be two sets of ethical standards for people who work in President Obama’s administration, one for those who have been his closest advisors and friends and another for those outside his inner circle. While President Obama should have recognized the ethical lapse and never nominated Daschle, it was still refreshing to see President Obama “fess up” and admit he had made a mistake trying to get Tom Daschle approved as a member of his Cabinet. President Obama’s admission stands in marked contrast to former President Bush, who could never admit that any of his administration’s personnel choices had been faulty.
But President Obama’s nomination of moderate Republican Senator Judd Gregg as his Commerce Secretary to replace his first choice, Democratic Governor Bill Richardson, demonstrated President Obama’s considerable political savvy in two ways. It underscored President Obama’s commitment to run the US government in a bipartisan manner by adding a third Republican and a fiscal conservative to his Cabinet, while also creating an opportunity for the Democratic Party to capture another open Senate seat in 2 years. Although another Republican, Gregg’s former Chief of Staff, Bonnie Newman, has been appointed to fill Gregg’s seat for the next 2 years, she will not be running for re-election in 2010, thus making it much easier for a Democrat to take over this Senate seat.
I also applaud many of the executive decisions and actions taken by President Obama during his first days as America’s Chief Executive. Following through on his campaign promises, President Obama signed a succession of executive orders which among other things, closed Guantanamo Bay as a terrorist detention facility and ended the separate but not equal justice system the Bush administration had tried to use to try terror suspects. President Obama also ordered his generals to develop a plan to withdraw American troops from Iraq within 16 months and a plan to deal with a resurgent Taliban insurrection and stabilize the deteriorating security situation in Afghanistan.
President Obama also chose to make his first televised international media interview with a Muslim TV network and dispatched former Senator George Mitchell, who helped settle the conflict in Northern Ireland 10 years ago, to the Middle East to put a renewed focus on settling the Arab-Israeli conflict. Obama also reversed Bush directives that stopped the flow of US aid to NGOs that provided abortion assistance.
Closer to home, President Obama moved quickly to mandate an end to the use of questionable interrogation techniques by the CIA, opened federal coffers to provide more money for stem cell research and signed a bill to increase the number of uninsured children covered by a special SCHIP health insurance program.
President Obama also began a concerted push for a very large economic stimulus program that he hopes to sign into law the same day I arrive back in the states. Most Republicans say this 800 billion dollar package of tax cuts and infrastructure spending is too large and decry the effect it will have on America’s already huge budget deficit.
But I can’t help but wonder where these same fiscally conservative Republicans were, when George Bush was President and he sent Congress a variety of bills an increases in Defense spending that doubled the size of that deficit in only six short years. My fellow Republicans appear to have very short memories and are obviously hoping American voters do as well. But I will discuss President Obama’s economic stimulus measures in detail in next week’s column.
Published on February 12th in Metro Éireann By Charles Laffiteau
I am heading back to the states tomorrow to present a paper at an international conference in New York and to take the pulse of citizens in my homeland regarding President Obama’s performance in office less than one month into his first term. So today I want to discuss what I think of President Obama’s first three weeks in office.
As I mentioned in previous columns I generally applaud the kind of people President Obama has selected to run the US government and various federal agencies and indeed the Congress has moved swiftly to approve the nominations of the vast majority of President Obama’s Cabinet nominees. But that isn’t to say President Obama hasn’t stumbled in a few cases, most notably with the nomination of Tom Daschle as both Secretary of Health and Human Services and White House Health Insurance Czar.
Given his legislative and lobbying experience on healthcare insurance issues and close personal relationship with President Obama, Tom Daschle was and, I believe, still is the best person for these critical positions in President Obama’s new administration. Unfortunately, Tom Daschle made a crucial error as regards paying his personal income taxes and the decision to withdraw his nomination for both posts in President Obama’s administration is the price Daschle and Obama now have to pay for this transgression.
Regardless of the whether or not one believes that Tom Daschle knew or should have know that having a gratis driver and limousine (courtesy of Washington DC insider and corporate media mogul Leo Hindery) at his disposal for the past three years had income tax consequences, that was not his biggest mistake. What sunk Tom Daschle’s chance to play a significant role in the President Obama’s new administration was his decision to wait until January of this year, just days before his Senate confirmation hearings, to write a check for the back taxes he owed. There is no excuse for this delay.
Even if one buys Daschle and President Obama’s contention that failing to declare the driver and limo perk as taxable income was an innocent mistake, the fact of the matter is Daschle knew he owed income taxes for this “oversight” over six months ago and yet waited until he was about to be grilled about this matter by members of the US Senate to pay up. This action alone calls into question whether or not Tom Daschle was acting in accordance with the “spirit” of President Obama’s administration’s new ethical standards.
As President Obama himself later acknowledged, there cannot be two sets of ethical standards for people who work in President Obama’s administration, one for those who have been his closest advisors and friends and another for those outside his inner circle. While President Obama should have recognized the ethical lapse and never nominated Daschle, it was still refreshing to see President Obama “fess up” and admit he had made a mistake trying to get Tom Daschle approved as a member of his Cabinet. President Obama’s admission stands in marked contrast to former President Bush, who could never admit that any of his administration’s personnel choices had been faulty.
But President Obama’s nomination of moderate Republican Senator Judd Gregg as his Commerce Secretary to replace his first choice, Democratic Governor Bill Richardson, demonstrated President Obama’s considerable political savvy in two ways. It underscored President Obama’s commitment to run the US government in a bipartisan manner by adding a third Republican and a fiscal conservative to his Cabinet, while also creating an opportunity for the Democratic Party to capture another open Senate seat in 2 years. Although another Republican, Gregg’s former Chief of Staff, Bonnie Newman, has been appointed to fill Gregg’s seat for the next 2 years, she will not be running for re-election in 2010, thus making it much easier for a Democrat to take over this Senate seat.
I also applaud many of the executive decisions and actions taken by President Obama during his first days as America’s Chief Executive. Following through on his campaign promises, President Obama signed a succession of executive orders which among other things, closed Guantanamo Bay as a terrorist detention facility and ended the separate but not equal justice system the Bush administration had tried to use to try terror suspects. President Obama also ordered his generals to develop a plan to withdraw American troops from Iraq within 16 months and a plan to deal with a resurgent Taliban insurrection and stabilize the deteriorating security situation in Afghanistan.
President Obama also chose to make his first televised international media interview with a Muslim TV network and dispatched former Senator George Mitchell, who helped settle the conflict in Northern Ireland 10 years ago, to the Middle East to put a renewed focus on settling the Arab-Israeli conflict. Obama also reversed Bush directives that stopped the flow of US aid to NGOs that provided abortion assistance.
Closer to home, President Obama moved quickly to mandate an end to the use of questionable interrogation techniques by the CIA, opened federal coffers to provide more money for stem cell research and signed a bill to increase the number of uninsured children covered by a special SCHIP health insurance program.
President Obama also began a concerted push for a very large economic stimulus program that he hopes to sign into law the same day I arrive back in the states. Most Republicans say this 800 billion dollar package of tax cuts and infrastructure spending is too large and decry the effect it will have on America’s already huge budget deficit.
But I can’t help but wonder where these same fiscally conservative Republicans were, when George Bush was President and he sent Congress a variety of bills an increases in Defense spending that doubled the size of that deficit in only six short years. My fellow Republicans appear to have very short memories and are obviously hoping American voters do as well. But I will discuss President Obama’s economic stimulus measures in detail in next week’s column.
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