Old weapons for new wars

As the bear roars and the economy reels, white horses gallop with politicians astride and taxpayers in tow. A tumble over cliff’s edge cannot be far behind. The latest recipient of taxpayers’ coerced benevolence: Citigroup, infused Monday with $20 billion in cold cash sucked from a reservoir thought infinite though it shrinks. Next rides President-elect Barack Obama with a $500 billion package of spending and tax cuts. No end evinces as means proliferate.

President George W. Bush, with one hand on the door, continues with the other turning bailout spigots to full flow. Obama’s Democratic allies, meanwhile, are in full scramble to prepare a stimulus bill with the dotted line awaiting the scrawl of his signature amid the echo of other shoes dropping. Obama has determined to cast aside earlier thoughts of restraint in favor of a plan that Lawrence Summers, Obama’s National Economic Council director, promises will be “speedy, substantial and sustained.”

Haste also applies to Obama’s entry into the fray, heralding a cessation of another element of reserve at which he hinted shortly after his historic election, when he declared that America could only have “one president at a time.” Chiefly, this change in thinking takes its form in the selection of Timothy Geithner as treasury secretary.

As president of the New York Federal Reserve, Geithner has worked closely with Fed Chairman Ben Bernanke and Bush Treasury Secretary Hank Paulson on the bailouts – or rescues, the preferred term among White House spinners. Geithner played an integral role in the $85 billion rescue of AIG, which was augmented by an additional $40 billion as taxpayers raged over the insurance monolith’s executive soirees in California, England and Phoenix. Because Geithner already is a player in the bailout game, Obama’s selection of him appears to signify the president-elect is wiggling toes, if not wading, in the business of rescuer-in-chief already. 

Still, murk lingers. What of President Bush’s tax cuts, due to expire year after next? Obama the candidate, swooping hard from the left, dutifully declared the cuts anathema because, in the writing of party lines, they favored the rich. But governments in free markets hoping to spur floundering economies do this best by slashing taxes to help spur investment. Will Obama yield in redistributing wealth long enough to allow the economy to awaken?

Another potential recovery tool is increased government spending, which Obama already has promised. In these strange, fluid times, tea leaves make for interesting reads but perhaps not accurate ones. Obama has provided ample material for musing and prognosticating. A sampling: He vowed during the campaign to “jumpstart job creation” by “rebuilding our crumbling roads and bridges, modernizing schools ... and building wind farms and solar panels, fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil.”

Here, complications emerge. The problem, principally, is that the free-spending of Bush had doubled the federal debt even before onset of the current crisis. Federal bailouts have encumbered government and taxpayers with others’ liabilities and strained to the point of fatal crack a budget already swelled.

The Beltway’s knights, including the one who will be king, seek to slay dragons wielding increased spending as a solitary weapon. The economy’s deepening malaise indicates that tactic, like warriors rushing enemy lines brandishing cudgels, may be as ineffectual as it is medieval.