The Nature Of The Problem

Yesterday may have been the day Barack Obama thought "holy crap".

WASHINGTON - Democratic presidential candidate Barack Obama on Monday blamed "irresponsible decisions" by the Bush administration and Wall Street for the country's economic woes as government officials said the budget deficit would soar to record heights next year [...]

Obama said the economy needs both short- and long-term fixes, including another round of "stimulus" measures from Congress to revive the economy and a longer-term focus on renewable energy to curb high gas prices and on universal health care to trim costs. He said he would move "rapidly and vigorously" to respond [...]

Obama didn't name the Bush administration, but his implication was clear.

"We can't afford, I believe, to keep on doing the same things we've been doing," said Obama. "We have to change course, and we have to take immediate action."

Though the Depression was in full swing by 1932, I don't think FDR campaigned fully on creating a New Deal. He responded to events because he had no choice, and wasn't interested in just putting masking tape on the problem. Obama might be headed to such a reckoning. We know now that the next President will face an immediate half-trillion dollar shortfall, meager growth in the range of 1%, maybe 50 million uninsured, and a crumbling infrastructure that will require hundreds of billions to make safe. Those are the macro trends; at the micro level, people are hurting.

On Wednesday, the Federal Reserve's "beige book" of economic indicators from around the country portrayed consumer spending as "mixed, weak or slowing." The report, which gleans anecdotal information eight times a year from businesses across the nation, added that retail sales were "subdued" in Atlanta and "grim" in Dallas. Amid falling sales for discretionary items, the lone upbeat note was an uptick in electronics purchases.

Automobile sales, usually a reliable marker of consumer readiness to spend and borrow, were "uniformly weak" in every part of the nation, the federal report said.

Adding to the gloom, the National Assn. of Realtors said Thursday that sales of previously owned homes fell in June to their lowest level of the last decade [...]

For Steve Baker, 36, a propane gas service technician in the Indiana town of Warsaw, the $600 rebate was split between paying down his credit card bill and buying a weed-eater to contend with the lawn pests that afflict farmers and homeowners in his rural community.

"It was something I needed but I didn't think I'd be able to get until much later," he said.

The extra stipend came in handy but did nothing to ease Baker's anxiety about the nation's financial doldrums.

"It was like getting an end-of-the-year bonus at the beginning of summer," he said. "It was nice, but it didn't make me feel better about where the economy is going or where my financial picture is headed."

People aren't blinded by quick fixes because the structural problems are simply too big. Obama has to grasp this fundamental truth. His policies are already headed in the right direction, and clearly his knowledge of the economy far outclasses his opponent, who actually thinks we can shame the oil companies into giving some of their profits back.

STEPHANOPOULOS: But (economists) all say that . . . the oil companies, the gas companies are going to absorb … any reduction (in the gas tax).

MCCAIN: … they say that. But one, it didn’t happen before, and two, we wouldn’t let it happen. We wouldn’t let it — Americans wouldn’t let them absorb that.

STEPHANOPOULOS: How would you prevent that?

MCCAIN: We would make them shamed into it. We, of course, know how to — American public opinion. And we would penalize them, if necessary. But they wouldn’t. They would pass it on.

So you have a faith-based economics versus a reality-based economics. You have a tax system that rewards wealth versus one that rewards work. What I hope, however, is that Obama is understanding the actual reality and set to truly reward the working class at the expense of the big money boys who caused this unbalanced, catastrophic financial picture.nationa