Hypocrite in Chief

Obama recently told Congress that, with respect to making a deal to raise the debt ceiling, they needed to suck it up, "rip the bandaid off", and deal with making the hard choices which were beneficial for the country in the long run. Personally, I tend to agree with the sentiment, even as I take issue with the specifics: although I'm not at all convinced that writing another blank check we can't possibly afford to the spend-happy democrats is either "right" or "necessary", it does seem to me that it would be the job of Congress, and the President, to do what's best for the country overall, rather than what's most politically expedient and popular at the time. However, to see if Obama is serious about the sentiment, and is not just using it in this case to push his political agenda (and the title might have some foreshadowing as to which it is), it's important to look at some other instances where Obama and/or his party in Congress had the chance to "rip the bandaid off", and do the right thing for the country.

Banking Industry

As banks got incredibly leveraged leading up to the collapse of Lehman Brothers, Congress and the Treasury Department were both well aware of the pending problems. Congress had ample opportunity to fix the laws to prevent catastrophic collapse, but did nothing. Treasury had ample opportunity to intervene in ways which stabilized the markets, but did not reward the participants, but did not. Congress could have instructed the fed to end the leveraging practices through oversight, but did not. Instead, the administration first selectively let some institutions fail, then saved others, creating the concept of "too big to fail" and a nightmare for future generations.

So... a big failure on that one, but it might be an isolated incident. There were certainly more opportunities to show leadership, and do what was right even if it was hard.

Auto Industry

As GM collapsed under the weight of non-competitiveness brought on by years of mismanagement, union largess, and a brazen lack of care for customers, the administration was faced with a decision point. Would they follow the law, and allow GM to fail as the market forces dictated, preserving the legal rights of the various creditors and the integrity of private enterprise in the US? Or would they bow to the pressure of their primary political supporters, subvert the entire legal system by creating new quasi-legal bankruptcy measures to confiscate and transfer wealth, and prop up the company using taxpayer dollars which they were certain to lose, while preserving all the factors which drove the company into the ground and virtually guaranteeing that the company is never competitive again?

Yeah, well... I guess we had another abject failure there. Perhaps the record will get better as we look further.

Housing Market

Ah, yes, the housing market; I great example of a golden opportunity to do the "right" thing, even if it's not the "popular" thing. Back when the country was inflating the bubble, there was ample evidence that the so-called "innovative" financial products which were allowing people to borrow way more than they could afford had the potential to blow up; Warren Buffet even noted it publicly. The Fed was well-aware that banks were under-capitalized for the leveraged risks they were taking, and could have easy used its oversight authority to make sure they were resilient against a decline in asset values. Failing that, Congress could have taken steps to ensure that a default in one or more of those banks would not threaten the financial system as a whole.

Okay, so they failed there, but there was still time to make it up. As the bubble started to burst, it became clear that the GSE's (Fannie and Freddie) were taking too much risk, getting away from their role of providing an exchange market for stable safe mortgages in pursuit of higher profits. Congress could have stepped in and made sure they didn't take on too much risk, or made it clear to investors that if they failed, their bonds would not be covered by the US government. The president could have urged Congress to ensure that if they failed, the taxpayers wouldn't be in the hook. Hm, I wonder what happened... oh, right: Congress and the administration raised their limits so they could do even more damage, socialize more losses, and disrupt more of the market! Then, as if that wasn't enough, Congress also explicitly guaranteed their bonds, inducting them into the "too big to fail" debacle.

Dear god, they really f-ed that one up... but there was still one more chance to do something right. As the bubble started to burst, the housing market essentially froze up: nobody knew how many people were going to default, how long it was going to take, or what "real" prices should be. Development and commerce basically stopped, as people waited for the market to fix itself, and establish a new normal. This was the quintessential opportunity to take some short-term pain for long-term prosperity: flush all the "bad" loans, turn the properties back around (through foreclosure as appropriate), expedite the correction process by streamlining the bureaucracy, get rid of all the subsidization, and get the entire housing industry working again, as fast as possible. Tell, me, please, Mr President, you at the very least did this.

Yeah... not so much. The government, primarily at the behest of the administration, did virtually the exact opposite of what would have been optimal for the country. Instead of flushing the bad loans, it propped them up, wasting taxpayer dollars prolonging the problems. Instead of turning properties around, it delayed the foreclosure process, stripping lenders of their rights and imposing impediments. Instead of expediting the process, the government imposed barriers, turning a one-year problem into a decade of economic malaise. Instead of getting rid of the subsidization, the government increased it, generating more taxpayer losses through the GSE's, and making the FHA the de-facto standard for subprime lending. Instead of getting people back to work in a functioning market, the market continues to drag, trying to fix itself but being hamstrung every step of the way by a government which is simply incapable of doing anything beneficial in the face of public opinion calling for short-term misguided "fixes".

The Bottom Line

President Obama is a hypocrite. He had many opportunities already to do the "right" thing, and failed to take any of them. Now, only when it's politically expedient to use the terminology as a catch-phrase to push his agenda, is he at all interested in "taking the bandaid off", and even then in word only. If we really wanted to take our medicine, so to speak, we would not do anything, and force Obama to spend only what the country takes in, while prioritizing as appropriate. That's the only real "painful but necessary" choice, and I seriously doubt our government, and especially Mr Obama, has the courage to make it.