Obama, Old and New

We are in a fascinating time. This last week, with its plans and hopes and errors, has been a microcosm of the state of the nation and the problems it faces. Obama sees urgency in future health expenses and he is right. And he is right in his concern over potential energy costs. His solutions, however, are reflexive and insincere. Insincere because he plans to hide the Medicare expenses in a larger plan. And reflexive. Like his response to the arrest of the esteemed Professor Gates, there is an overriding philosophical--or better, ideological--template he is working from (or through). His racial response to the arrest is "suffering accomplished black man harassed by bigoted resentful white cop" and his socialist response to the future financial demands are "with our abilities and the power of the government, we can manipulate this." They can't. Our total financial demand on the future labor of the next 15 years is 48 trillion dollars. That's 350% of GDP. http://www.youtube.com/watch?v=at3MNu8BRwQ The only possibilities are an incredible growth effort--and surplus is necessary for growth--or default or inflation. Obama is bringing some bravery to the old arguments; he just is not bringing anything new.

Remember that analogy about Fenway Park. A drop of water doubling in size every minute starting at noon will fill the park at 12:49 but at 12:44 it will be only 7% filled. So it is with compounding debt: It will grow on the exponential curve. Creating more debt makes it worse. Only decreasing debt and increasing surplus will help.

"Panics do not destroy capital, they merely reveal the destruction already created by unproductive work." (Mills) The key is "unproductive work."