darin
02-09-2009, 11:20 AM
From Government Executive Magazine...VERY good perspective. Well-worth the read.
"...once we advance government's power, we tend not to roll it back. So we're not just figuring out how to get through the next four months or the next four years. In all likelihood, we're also permanently redefining the social contract between citizens and their government."
The dangers of building a new social contract between government and citizens by making it up as we go along.
In a couple of weeks last September, the Federal Reserve and Treasury Department made more lightning- fast decisions, involving more government money, than at any time in the nation's history. This was much bigger than a mega-rescue of the nation's financial system. It was a big step toward redefining the social contract about what government does for all of us - and how it does it. The Fed and Treasury jumped in with the hope that the bailout would be brutally tough but relatively short and antiseptic. Sop up the toxic mortgages, free borrowing that had become frozen, and the Bush administration hoped the economy would right itself. But this plan (think of it as Phase I) didn't work. As President Bush later confessed, "This is a difficult time for a free-market person."
That led the administration in its waning days to Phase II: a shift from a hope in a self-correcting market to a conclusion that government not only had to fuel the economy but also to grab its wheel. Then President Obama intensified the shift with his own dramatic plan for the government to devote hundreds of billions of dollars to an economic stimulus program. It's now clear that we've committed ourselves to a process of building a new social contract that will be brutal but also huge and wide. We're escalating our commitments without a plan about where to go or how to get out.
Phase II is about much more than pumping out lots of cash. We also want to do big things with it. We want to save the banks and help individual mortgage holders. We want to bandage state budgets and rebuild local infrastructure. We want to help the auto companies, save employees' jobs, and build a new generation of fuel-efficient cars.
That involves more than an all-lobbyists-on-deck call. Everyone realizes this is a historic opportunity to use government's cash to promote big economic and social goals. But milliseconds after that cash started to flow, demands surfaced for tougher rules to prevent the crisis from happening again. And along with the funding came the irresistible urge to use the money to pursue a wide array of economic and social goals - often laudable, but frequently conflicting.
....
No Exit StrategyBarack Obama ran as the candidate of "change we can believe in." Because of the financial crisis, change is inevitable and epic. We've drifted into a new brand of government-directed capitalism, in which "neither Adam Smith nor John Maynard Keynes, neither Joseph Schumpeter nor today's econometricians, give one a clue about how to track, temper or tame it," University of Pennsylvania political scientist John DiIulio concludes. In just a few months, we've gone from debating toxic mortgages to pushing the government into direct decisions about capital flows and subsidies to big financial institutions in which the government now has a substantial ownership stake.
So far, corporations have resisted pressures to unload their private jets and divulge their market decisions. When pressed about what JPMorgan Chase did with federal bailout money, a spokesman said, "We have not disclosed that to the public. We're declining to." That position, echoed by 20 other banks that received more than $1 billion each from the government, leaves federal officials with two options: Shovel out hundreds of billions of dollars and hope for the best, or view the bailout money as an investment - expecting certain results and insisting on openness about how the money is being used. Both the Obama administration and Congress have made clear they reject the first position and will insist on the second.
But even if that's the case, how will they make the system of accountability work? We know we want to get out quickly, but we haven't charted the path. In the debate over a potential bailout for automakers, one federal official asked a congressional staffer about how the government's proposed oversight would function. "We're too busy to worry about that now," was the reply.
More at link:
http://www.govexec.com/features/0209-01/0209-01s1.htm
"...once we advance government's power, we tend not to roll it back. So we're not just figuring out how to get through the next four months or the next four years. In all likelihood, we're also permanently redefining the social contract between citizens and their government."
The dangers of building a new social contract between government and citizens by making it up as we go along.
In a couple of weeks last September, the Federal Reserve and Treasury Department made more lightning- fast decisions, involving more government money, than at any time in the nation's history. This was much bigger than a mega-rescue of the nation's financial system. It was a big step toward redefining the social contract about what government does for all of us - and how it does it. The Fed and Treasury jumped in with the hope that the bailout would be brutally tough but relatively short and antiseptic. Sop up the toxic mortgages, free borrowing that had become frozen, and the Bush administration hoped the economy would right itself. But this plan (think of it as Phase I) didn't work. As President Bush later confessed, "This is a difficult time for a free-market person."
That led the administration in its waning days to Phase II: a shift from a hope in a self-correcting market to a conclusion that government not only had to fuel the economy but also to grab its wheel. Then President Obama intensified the shift with his own dramatic plan for the government to devote hundreds of billions of dollars to an economic stimulus program. It's now clear that we've committed ourselves to a process of building a new social contract that will be brutal but also huge and wide. We're escalating our commitments without a plan about where to go or how to get out.
Phase II is about much more than pumping out lots of cash. We also want to do big things with it. We want to save the banks and help individual mortgage holders. We want to bandage state budgets and rebuild local infrastructure. We want to help the auto companies, save employees' jobs, and build a new generation of fuel-efficient cars.
That involves more than an all-lobbyists-on-deck call. Everyone realizes this is a historic opportunity to use government's cash to promote big economic and social goals. But milliseconds after that cash started to flow, demands surfaced for tougher rules to prevent the crisis from happening again. And along with the funding came the irresistible urge to use the money to pursue a wide array of economic and social goals - often laudable, but frequently conflicting.
....
No Exit StrategyBarack Obama ran as the candidate of "change we can believe in." Because of the financial crisis, change is inevitable and epic. We've drifted into a new brand of government-directed capitalism, in which "neither Adam Smith nor John Maynard Keynes, neither Joseph Schumpeter nor today's econometricians, give one a clue about how to track, temper or tame it," University of Pennsylvania political scientist John DiIulio concludes. In just a few months, we've gone from debating toxic mortgages to pushing the government into direct decisions about capital flows and subsidies to big financial institutions in which the government now has a substantial ownership stake.
So far, corporations have resisted pressures to unload their private jets and divulge their market decisions. When pressed about what JPMorgan Chase did with federal bailout money, a spokesman said, "We have not disclosed that to the public. We're declining to." That position, echoed by 20 other banks that received more than $1 billion each from the government, leaves federal officials with two options: Shovel out hundreds of billions of dollars and hope for the best, or view the bailout money as an investment - expecting certain results and insisting on openness about how the money is being used. Both the Obama administration and Congress have made clear they reject the first position and will insist on the second.
But even if that's the case, how will they make the system of accountability work? We know we want to get out quickly, but we haven't charted the path. In the debate over a potential bailout for automakers, one federal official asked a congressional staffer about how the government's proposed oversight would function. "We're too busy to worry about that now," was the reply.
More at link:
http://www.govexec.com/features/0209-01/0209-01s1.htm