November 2010 Election Result Reflections

Let me examine some factors that might be behind some of the November 2010 election results.  When I say “behind” I actually mean a bit more behind and less apparent.

A very big concern voiced from many corners was the huge government spending which resulted in the Republican party making significant gains.  The American public was close to being incensed in seeing it’s government spending huge amounts of the peoples money on huge projects some of which at times appeared to smell like rotting pork.

A view can be raised that the American public failed in their responsibility to get this issue correct.  One might even state that quite a number of voters were just ignorant of some basic economic facts.

When a country’s business economic engine stalls, any remaining component of the total economic equation that is capable of being powerful enough and managed well enough to pull the boat forward should be used.  In most high school and college classes it is taught that government spending is a major engine component that sits in reserve to throttle up to help move the economy forward during hard times.

Obama used government spending to help the United States to recover out of a deep recession.  This program, as it becomes more clear with time, appears to have worked but  only for very large businesses and only part of the economic pie but more on that later.

A number of problems face the president by doing what most economists told him he must do which was to inject massive spending into the economy in attempt to raise the boat.

One of the principal talking points of the Republican Party is to lower government spending.  (their track record fails to match their pronouncements).  President Obama was forced to spend heavily and came under fire from Republicans because that action failed their talking point.

The American public was and is still not educated enough to understand some simple economic principals.  The president and congress was forced by reason and intellect to  spend vast amounts of government money to stimulate the economy.  Behind the politicians were professional economists advising the government officials to increase government spending.   Who’s money is being spent?  It is the tax payers and they viewed this action as excessive.

President Obama might have made some arguable mistakes.  He failed to become a school teacher for the nation and educate the American people about some simple economic principals.  He could have taken some wind out of the Republican talking point that we need to cut spending at absolutely the wrong time.

Congress and the president might have failed to comprehend the importance to get people back to work.  By this I mean our government swung it’s efforts toward large projects and utterly failed to balance small business growth.  Government officials might claim they can not easily core down to small job growth.  I don’t think they even tried but rather pandered to large corporations which is, in reality, their campaign finance constituents.  The administration concocted a much too simple solution and utterly failed to realize the size of the economic pie that they had to deal with.

The Obama administration also lost an opportunity to try a really gutsy tactic and that is to let the large banks fail.  Actually, not fail but to down size them so they would fall out of the category “too big to fail”.  The banks to a large extent got us into this mess and have not suffered any hurt.  The small guy gets the shaft by loosing his job and maybe his home and then, at the same time, sees his government taking care of large banks and is understandably angry.

The administration lowered interest rates to the large banks thinking that this would allow banks to loan money to small businesses and help propel a recovery.  The large banks instead used the low interest rates to further their profits but in ways that did not include small businesses and helping the economy for the individual tax payer.    The  large banks, lacking any real civic duty, purchased long term treasury notes, made acquisitions, hoarded cash, and pursued other self serving endeavors.  They seem to worship profits over what is best for this nation.  The banks are insulated from retribution from the electorate because few Americans understand economics well enough to be able to point a finger.

The banks to a large extent got us into this mess and have not suffered any hurt which seems to be pretty much understood by most Americans.  The small guy gets the shaft, sees his government looking after large financial institutions, auto manufacturing, government housing lenders  and is angry at most of the government actions which left him and her out of any recovery while the very people who caused this fiasco get rewarded.  It is not lost on the electorate that they are paying for the recovery of businesses that caused the economic problems and those businesses can better weather the storm than individuals who lost their job and home.

Another error that government made was seeing a macro problem, using macro actions and utterly missed the point that individuals were not served in the process.  You would think that politicians would understand that the people who vote them into office and keep them in office just might matter a whole lot when elections take place.  Banks, auto manufacturing, and other stimulus recipients are not allowed to vote.  So why did Obama pander to the large businesses and fail the small?

Obama should have found a mechanism for offering low interest rates to smaller banks and stipulate that bank loans be made to small business.  In a recession of this magnitude, one must think of large and small solutions.

Obama missed another opportunity.  He should have gathered all the governors together and tasked each to administer their separate recovery and step back from the process unless a state needed further help.  Different approaches would have been tried, one would expect, and we would learn a lot more about how to recover from future recessions.  We would have a huge test bed running and gain a lot of vital information out of a state run stimulus.  Politically, the White House would have administered a solution closer to the affected people and businesses  which would seem to make more sense than wide sweeping solutions generated from Washington.  The White House could distanced itself from the effort and achieved some measure of deniability when any program failed its target and blame the governor that failed his or her state.

Obama’s administration and congress lives with and is in bed with large business and this pretty much punished the Democratic party.  I am speaking her of the communication and interaction aspect of this problem.  The current economic suffering is seen across the whole economy.  When people loose jobs to such a wide range of occupations, the government, seems incapable of reaching down to the state and community level to provide aid recovery.  Big government seems only capable to  communicating and helping big business.  It is so convenient and less messy to call in a few business leaders and work out solutions for their coverage area.  The trickle down theory, help large businesses to aid recovery can, at times give good results but also utterly fails to help most of the population.  Our economy depends on trickle up, consumer spending,  not trickle down and this is such an inconvenient truth for politicians to follow.

Governments need to develop better core down mechanisms to help small businesses recover, maintain, and grow in recessions.  We need job growth at local level as well as large business.  We need BOTH!  Federal and state governments need to expand their tools to include logistic support to the front lines small businesses.  State and Federal government need to understand what is needed not only by large businesses but also small businesses.

Obama is a very smart man and many of his macro solutions seem to be working but his solutions were not well thought out at the micro level and for this rather important aspect his party has taken a hit.  For this mistake, he has proven to be lacking.

A slight admonishment might be directed to the electorate.  It is too bad the American voting public could not look past their own pain, contain their anger, researched the facts more deeply and not be taken in with the distortions and lies that the Republican party has capitalized on.  For this possible mistake, the electorate just might have swung the trajectory of our future to repeat itself again.

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