What Obama Should Do - But because of his unbridled arrogance won't

What Obama Should Do - A path out of the continuing crisis.
By Conrad Black
from The National Review Online
February 24, 2009 4:00 AM

The apparent failure of the Obama administration’s first attempts to restore economic confidence gives us the opportunity to look at the whole crisis afresh.

The first thing we need to do, as we reassess the crisis, is realize the extent to which the country was horribly and unimaginably failed by its entire public- and private-sector leadership. The Clinton and George W. Bush administrations, and their Congresses, discouraged savings; legislated non-commercial mortgages in the private sector (a political free ride, as both parties boasted of increasing home ownership at no cost to the taxpayers); raised the ceiling on investment-bank debt leverage on unsecured assets to 30 to one; and acquiesced while consumers piled up debt that enriched Chinese exporters of cheap goods, European and Japanese exporters of luxury goods, and the oil-exporting cartel, including Venezuela and (indirectly) Iran.

The Chinese and Japanese bought over $1 trillion of U.S. Treasury obligations to help finance a completely unsustainable U.S. current-account deficit of over 5 percent of GDP. It was a less morbid version of Lenin’s prediction that the capitalists were so greedy and stupid they would sell him the rope he would use to hang them. The U.S. was the world’s happy bovine, until it became clear that — in the words of President Bush’s customarily eloquent attempt to rally public and congressional opinion — “the sucker could go down.”

He should use FDR’s playbook and stop telling the country how terrible everything is. Half of economics is psychology and he should say that there is a serious, but manageable, problem, that fear and panic should be avoided as the country, united, works on his plan of action toward the solution that awaits. He has to inspire confidence, and to do so must seem adequately confident. Here are some ideas.
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