Robert Rubin wrote about his experience as Treasury Secretary to President Clinton in a memoir presciently titled “A World of Uncertainty.”Rubin rose through a distinguished career on Wall Street by understanding risk and uncertainty. On Wall Street nobody was absolutely certain about any outcome and managed risk accordingly. When he came to Washington he expressed his concern about how certain everyone was about the outcome of policies that could have significant outcome on every American.
The fact that his company, Citicorp, under his leadership did about the worst among the dreadful indicates that the collapse was about more than mere greed; it was about technicians who exchanged a philosophical understanding of risk with a delusional sense of mathematical certainty. The results were catastrophic.
Yet this mistake is about to be repeated in President Obama’s atrocious budget.
Obama inherited the worst financial and economic problem since WW II. If he did nothing but guide us successfully through this mess he would achieve a well deserved place among our greatest presidents.
But he has also decided to guide private industries through czars and panels. With the bailout money comes power and control. He has decided to solve the health care problem, extend government control over the energy sector, make college education universal, promote broad unionization, and promote extensive infrastructure development and improvement.It is too much and it comes at too high a price. Few would question the desirability of these programs, but the crux of government is to say ‘no’ to worthwhile programs that we can not afford. You can achieve anything but not everything.
Change is easy, choices are hard.
We have benefited from large scale government programs from the Louisiana Purchase to the highway system to the Pell grants that educated out soldiers returning from WWII. But President Obama is trying to do all of these at once in the middle of a financial crisis with sharply declining tax revenues. This is unprecedented and extremely risky. His defense budget even discounts any potential foreign threat, and may be unduly optimistic on future revenues. Are we that certain that he is that good?
Yet pundits express with certainty that the Bush tax cuts caused this problem, or Wall Street greed, or Greenspan’s monetary policy, or whatever you want to believe. Yet economists argue over the causes of the Depression after 75 years of diligent study.
It may have been necessary to support the banking system through the first TARP program. As unpopular as it was, it focused the money in the most vulnerable area. But once we stabilized the system we would be wise to slow down and understand the problem before we spend trillions we do not have to solve them. The debate on the unprecedented so called Stimulus package was minimal. Nancy Pelosi noted, “We won the election, we wrote the bill.”
The one area of most urgent concern, the banking and financial system, is still waiting on action from empty desks at Treasury. The budget seeks resolution of every problem except the most serious and urgent.
But the most worrisome is the tone of certainty from the President that his budget must solve all of these major problems NOW. Certainty in the markets comes at a very high premium.
Replacing the blind certainty of Wall Street with the blind certainty of Washington is not a solution but an extension of the problem.
James Madison noted, “A crisis is the rallying cry of the tyrant.” Rahm Emanual confirmed that we can not waste this crisis and should use it to enact the administration’s agenda.
Like Icarus who flew to close to the sun, Obama’s ambition can be counterproductive. We can use a big dose of doubt and skepticism. The principles of addition and subtraction do not change just because the numbers are larger.
You can achieve anything but not everything; at least not at the same time.
Change is easy, choices are hard.
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