POLITICAL observations & opinions

* ZAKARIA: the next few days on the stimulus package really matter

Posted by Lew Weinstein on January 29, 2009

Fareed Zakaria writes in NEWSWEEK (1-29-09) …

  •  President Barack Obama will have to quickly start planning for a set of more extraordinary measures to pull the United States out of its current, unsustainable economic condition.
  • The American economy is entering its sharpest economic contraction since 1974—a recession that is likely to be the longest since the Second World War.
  • But that’s not the worst of it. The American financial system is effectively broken. Without a functioning financial system, even a massive stimulus will not restore the economy to a normal growth trajectory.
  • The Obama economic team knows that there is no simple answer to this extraordinarily complex situation. And yet the government has to do something. Without large-scale action, the financial system will keep bleeding.
  • The politics of this are even worse. The American public believes that we have already spent far too much money on bailing out the banks. But the economic fact is that we have not spent enough. Speed is also crucial.
  • There remains a spirited debate over what should be done now. But at its heart everyone seems to agree with former Treasury secretary Hank Paulson’s original diagnosis—the problem is that banks have huge amounts of bad assets (related to mortgages) on their books.
  • Tackling the banks will not be the end of these problems. As President Obama has often pointed out, until the housing market stabilizes, the crisis will continue. Housing is what underpins many of these toxic assets.
  • This current crisis has resulted in a deep erosion of American power that we have not fully understood. I have traveled to Europe, Asia and the Middle East in the past three months and am writing this from Canada. The attitudes of officials and businessmen range from shock to rage at what they see in the United States.
  • The most important way for President Obama restore America’s credibility and influence in the world is to rescue the American model. Obama’s rhetoric suggests that he understands this issue. But does Congress? Can the American political system rise to the challenge?

LMW COMMENT … Fareed Zakaria, as always, offers perceptive and comprehensive analysis. He alone is worth the price of a subscription to NEWSWEEK. On the issue of the economy, I have previously predicted that President Obama’s main problem will be the U.S. Congress, and not just the Republicans, bad as they are. Now that the stimulus package has passed the House (which must be the originator of all revenue bills) the real debate can begin in the Senate. Here we will see if Republicans truly wish to cooperate in the nation’s interest or whether they are limited to narrow ideological political objectives, whether they will be a constructive minority party or just the blowhard organ of Rush Limbaugh and Sarah Palin. Here we will also see if the majority Democrats in Congress can participate in meaningful compromise and adopt at least some of the valid ideas of the Republicans. On both sides of the aisle, we will see if Barack Obama’s bi-partisan initiatives can bear fruit. And it’s not just politics; it really matters for all of us.

Read the entire article at … http://www.newsweek.com/id/181407

 

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