TJP

The Democrats won the election, but the Republicans control the agenda. What does this outcome tells us about the Democrats? It indicates that their capacity to bring about results is highly questionable, as well as their ability to set the proper priorities.

The country recognizes that health care is important. However, it is less important than the economy: employment and foreclosures.

The Democrats failed to recognized the nation’s priority and set their own. And, that is why their constituents are unenthusiastic and many are considering not supporting the party in the next election.

The Democrats have yet to recognize the mechanism for employment creation. Furthermore, they have yet to understand why the economy collapsed.

They constantly point to the housing crisis as the source of the nation’s economic problems. They fail to understand the role of money and the banking system in an entrepreneur economy.

Had they understood the role of money, they would have use fiscal policy more wisely. For instance, banks bail out would be contingent on the banks expanding credit, and hence the money supply.

Furthermore, had hey understood how the nation’s income works, and the income drivers, they would have prevented mortgage foreclosures.

The Democrats had a great opportunity to demonstrate their administrative capacity. Unfortunately for the party and the nation they failed to capitalize on a once in a lifetime opportunity: the failure of the Bush-Cheney administration.

It is unquestionable that the diffusion of bank money stimulates the economy. And, when the monetary authority (the Federal Reserve) failed to expand the monetary base, recessions occur.

Recessions occur because there is insufficient income. The nation’s income is contingent on the amount of money supplied by the Federal Reserve (Fed). When the Fed tightens the money supply, banks cannot lend. And, if banks cannot lend, entrepreneurs and business cannot invest and hire workers.

Job creation and expansion requires capital availability. And, thus far, Democrats and the Obama administration have failed basic economics.

There is, however, some glimmer of hope. It appears that the administration is finally, albeit too late, recognizing that it is essential to prevent mortgage foreclosures. President Obama on Friday, in Henderson, Nevada, rolled out a $1.5-billion mortgage program meant for a handful of states, including California and Nevada, that have endured waves of home foreclosures during the recession.

Next, we should expect President Obama to provide a mechanism for expanding the credit market and to reduce banking uncertainty. Banking uncertainty reduces credit availability; without credit there is no monetary expansion, hence no increase in employment.

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