February 10, 2009

President Smart

During Obama's presser last night I was struck by this answer about the financial crisis:

Well, first of all, I don't think it's accurate to say that consumer spending got us into this mess. What got us into this mess initially were banks taking exorbitant, wild risks with other people's monies based on shaky assets. And because of the enormous leverage where they had $1 worth of assets and they were betting $30 on that $1, what we had was a crisis in the financial system. That led to a contraction of credit, which in turn meant businesses couldn't make payroll or make inventories, which meant that everybody became uncertain about the future of the economy, so people started making decisions accordingly -- reducing investment, initiated layoffs -- which in turn made things worse.

Now, you are making a legitimate point, Chuck, about the fact that our savings rate has declined and this economy has been driven by consumer spending for a very long time -- and that's not going to be sustainable. You know, if all we're doing is spending and we're not making things, then over time other countries are going to get tired of lending us money and eventually the party is going to be over. Well, in fact, the party now is over.

Could you imagine the previous President able to explain the economic downturn like this? The Bush version of the above would have been something like "bad bets by bankers, got drunk, um, hangover, now credit clogged up like a toilet, we got to get ourselves a plunger and clean it out." Bush was dumb and talked to the American people like we were dumb. Not this President. He assumes that if giving a real, intelligent answer, not some stupid off-point folksy BS metaphor, they will understand.

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