FYI | Feb 25 2009
By Greg Peel
“We will rebuild, we will recover, and the United States of America will emerge stronger than before”.
(Cue standing ovation.)
President Barrack Obama channelled his Democrat predecessor JFK this afternoon (Sydney time) as he delivered a speech to the joint houses of Congress, billed as a quasi State of the Union Address. It was an occasion punctuated by frequent ovations and much cheering, and one was at times left wondering whether this was the most powerful parliament in the world on display, or the Academy Awards.
In a nod to “Ask not what your country can do for you, but what you can do for your country”, Obama declared “Dropping out of high school is not just quitting on yourself, it’s quitting on your country”. In a nod to “We hold in our power to destroy all forms of human poverty, and all forms of human life”, Obama declared “In our hands lies the ability to shape the world, for good or ill”. The inspirational words were many, the ovations long and enthusiastic, although one side of the chamber was not quite so eager to jump to its feet as regularly as the other. Speaker Nancy Pelosi, however, carried off an incredibly accurate impersonation of a jack-in-the-box.
The crux of the speech was an unveiling of a plan to bring down the US$1.3 trillion fiscal deficit, although again detail was sparse and on several occasions legislation was requested from Congress. In many cases, it was an appeal to the American people. The greatest ovation was saved for an acknowledgement of the sacrifices of US troops abroad, but a close second was Obama’s pledge to not leave American children with the burden of debt.
Three specific areas of reform policy announced in the speech were energy, healthcare and education.
The energy policy included specifics about investment in alternative energies, a promise to re-tool the US auto industry to adapt to such (apparently America invented the automobile, which might be news to a Benz or a Daimler), and to introduce a carbon cap scheme. Health reform was all about making health insurance affordable, but there was no detail, and education reform was all about keeping Americans in school and college, although this was more of an appeal.
In the case of the latter, however, Obama did announce tax breaks for college funds, along with tax cuts for all but the wealthy (who will receive tax increases), an extension of unemployment benefits, and spending on infrastructure, including everything from bridges to broadband. It is unclear how this is intended to bring the deficit down, but Obama declared that he had already found US$2 trillion in savings. These included such measures as abandoning tax breaks for companies that outsource jobs offshore, and ending the infamous “no-bid” contracts which have “wasted billions” in Iraq.
That last measure was a clear dig at Dick Cheney and co, and while the Democrat side of the chamber whooped and hollered over that one, the Republican side sat stoney-faced.
Most important of all, the President declared, was to get America lending again. This was not a policy intended to help the banks and their executives, the President was quick to point out, but intended to help the American people. Obama declared he was not a fan of “big government”, but that something needed to be done.
Exactly. What?
In the matter of reigniting lending, Obama announced three policy measures. The first is to establish a “new” lending fund for college, car, consumer and SME loans. If this is “new” it is an adjunct to the Term Asset Lending Facility (TALF) which forms part of the TARP and is controlled by the Fed. The TALF was created under Paulson’s Treasury reign. The second was the mortgage support policy, as announced last week. The third was a policy to support the banks such that they will begin to lend again.
At this point, Wall Street traders leant just a little closer to their teles.
But that was it. “Support”. It seems we are still going to have to wait to see just how this is intended to be implemented. What will be the level of government capital stakes in banks? What is going to happen to the toxic debt? We still don’t know. Perhaps it is intended that Treasury Geithner fill us in tomorrow, or at least soon.
It is unlikely that this speech in particular will soothe Wall Street, and lead it to change its view on a President big on promises but small on detail.
Aside from that, as an entertainment spectacle it was a cracker. We laughed, we cried, we nodded solemnly. God bless America. “It’s time for America to lead again,” said the President. It had better hurry – China is knocking on the door.
