TJP

The Democrats are failing to Demonstrate Leadership

By Byron A. Ellis – November 07, 2009

Obama’s yearning for bipartisanship has validated Republican ideas and alienated Democratic supporters. If voters wanted Republican ideas, they would have voted for John McCain and rest of the Republican ticket. Mr. Obama failed to understand that voters did not want to continue with the bankrupt Republican ideology.

Politics is akin to a game of chess, you’ve to check mate your opponent to win the game. Why would the Republicans collaborate with Mr. Obama or the Democrats? They’ve no reason to do so. In fact, if the Republicans aspire to regain political power, stalling and opposing everything the Democrats do is their best strategy.

Mr. Obama and the Democrats appear not to understand the game of politics and are in the process of conceding their political platform to the Republicans.

The Democrats must realize that time to demonstrate their ability to govern is now and a suffering public has limited patience. Therefore, they must quickly implement their campaign proposals. Otherwise, the 2010 election will not bode well for Democrats.

Here are a few things that Democrats must achieved: Passing health care legislation in 2009; terminating both wars, Iraq and Afghanistan, prior to the end of 2010 and providing Pakistan with meaningful social and military support; immediate stabilization of energy prices (preventing adverse speculative behaviors); capping credit card interest rates below 12 percent; establish an immediate response to the unwillingness of financial institutions to provide credit and stop providing easy credit to predatory financial institutions; restarting the peace process between Palestine and Israel by regaining the high road as a honest peace broker.

One of Mr. Obama’s major problems is the methodology that the Treasury and the Federal Reserve (Fed) used to monetize (stimulate) the economy. Rather than stimulating consumption, which is 60 to 70 percent of the United States (US) gross domestic product (GDP), they chose to monetize financial institutions. Thus, making inefficient and predatory financial institutions the gatekeepers of the government monetary policy.

So what have the gatekeepers done with the low interest money they received from the government (Fed/Treasury) at close to zero cost (interest rate)? The predatory financial institutions raised consumer credit cards interest rates to as high a 29 percent.

High interest rate is counterproductive to economic growth; it curtails consumer spending. Therefore, financial institutions receiving free loans from the Fed to expand the economy are doing exactly the opposite. However, the public has not heard Mr. Obama or Congress voicing opposition to usurious and counterproductive interest rates imposed on the public by taxpayers’ bailed out financial institutions.

Therefore, the public can only conclude that either the Administration and Congress do not understand economics or they are oblivious to public suffering. And, the fact that the government failed to rescue marginal homeowners from foreclosures only reinforces the perception of limited administrative capacity or the obliviousness to the long term cost of unemployment.

It is perhaps the misidentification of the root cause of the economic crisis that creates the inability to develop efficient and expeditious solutions that serve the interest of the public. The root cause of the economic crisis was inadequate growth of the money supply (M1), which restricts income. And, this can be confirmed from the graph below provided by the Fed. The shaded areas indicate US recessions and are preceded by flat or slow monetary growth (areas within the ellipses).

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