On Christmas Eve, the Senate and the Obama Administration did two things that may not murder the patient–the U.S. economy–but will surely leave it an invalid for a long time to come.
The two events were the Senate’s passage of its version of the Obama health care scheme and the administration’s announcement it would lift the lid on losses incurred by Fannie Mae and Freddie Mac, giving the two a blank check.
The final shape of the health care bill will be determined by a conference committee of the two houses of Congress (if such there is. One report says that Speaker Pelosi and Majority Leader Harry Reid will confer with each other and write the final bill themselves.) . Likely to survive are the Medicare cuts, as well as obligatory medical insurance purchase by about 30 million Americans not now covered. Inevitably, the cuts in Medicare will result in reduced services for seniors just as more baby boomers are retiring and swelling their ranks.
Despite promises by politicians that the cost of the nation’s annual medical bill will not go up, it will. When you add 30 million people (many of them young and healthy) to the ranks of the insured they will use their insurance. Add to this the fact that all the new taxes associated with the scheme will kick in next year, while the ostensible benefits won’t appear until five years later.
Meanwhile, Fannie and Freddie, which between them own or guarantee most U.S. home mortgages, have had big losses from the wave of defaults. How did this happen? A large part of the problem lies with the pressure the Clinton Administration brought on the pair to push banks to ease credit requirements in order to provide mortgages to many people whose income and assets would not have qualified them.
In those seemingly golden days, Fannie and Freddie showed big profits, thus triggering large bonuses for their senior executives. Finally, when the Fannie/Freddie houses of cards began to collapse, the federal government stepped in and has held the two in conservatorship for 15 months now. The Christmas Eve announcement also included the news that the CEOs of the two will be paid as much as $6 million each in 2010. Mr. Obama, backed by his Greek Chorus in Congress, has railed against Wall Street bonuses of lesser amounts but now applies a double standard.
The administration has yet to announce a plan to get Fannie and Freddie off the federal dole. They should come up with a plan, pronto, that not only does that but also systematically reduces the influence of these two in the housing market, leading to their eventual closure.
As to the “suicide” matter, in another Christmas Eve move, the Senate voted to increase the limit on the national debt by $290 billion, enough to last until late February. There will be a fierce debate over raising it again, just as the primary election season gets underway. Republicans are sure to use the debate to demand spending curbs from the overly generous spending bills passed by the Democrats this year.
There are about 40 vulnerable Democratic House members elected from districts carried in 2008 by John McCain. Several retirements have been announced and some Senate seats appear to be shaky as well.
Considering the sour mood of the country over the stubborn unemployment rate, soaring government spending and debt and public opposition to the health care scheme (51 percent “against,” 37 “for” in the most recent polls), these three moves by Obama and his allies make it appear as if they have a political death wish.