Commentary: Is Obama channeling Cal?
This article first appeared in the St. Louis Beacon, April 9, 2009 - This month's award for the most apt metaphor goes to MSNBC's Keith Olbermann who, upon learning that the president had gone into the business of guaranteeing auto warranties, promptly dubbed him "Cal Worthington Obama." Le mot juste.
As anyone who has traveled to southern California in the past 40 or so years is no doubt aware, Worthington is the cowboy-car dealer famous for his ubiquitous television ads and billboards featuring his dog, Spot. Normally, Spot looked suspiciously like a Bengal tiger although he occasionally morphed into an elephant, a boa constrictor, a killer whale (promising "a whale of a deal") or some other specimen of exotic wildlife.
Worthington, an accomplished acrobat who served with distinction in the Army Air Corps during WW II, faithfully pledged, "I'll stand on my head till my ears turn red to sell you a new ..." Dodge, Ford, or whatever else he happened to be hawking.
And he sometimes made good on his threat, deftly executing a spry handstand, his signature Stetson hat notwithstanding.
He's now 88 years old and rarely appears in public; but in his heyday, Worthington was a lovable huckster whose goofy flamboyance typified a time when California was still a fun place to visit. Back then, the Golden State evoked visions of sunshine and movie stars, pristine beaches and babes in bikinis. If you lacked a sleek convertible to tour paradise, all you had to do was heed the slogan and "Go see Cal."
Worthington and his ilk exuded youthful optimism in a place that was synonymous with optimism and youth, long before it devolved into the dismal polyglot of self-obsessed sensitivities and free-floating angst that it is today.
At any rate, Cal's latter day namesake, Mr. Obama, has made a pledge of his own: He's placed the full faith and credit of the U.S. government behind any warranty issued by a soon-to-be bankrupt automaker. That government, incidentally, is the same outfit that plans to borrow $1.2 trillion ($1,200,000,000,000) this year just to pay its bills.
While it's no doubt comforting to know that the Marine Corps now vouches for the water pump on your new Chevy, you can't be blamed for wondering what the hell is going on.
The slump in auto sales has nothing to do with the quality of the product. American cars are made better today than they've ever been. Indeed, foreign firms like Toyota and Honda, which are famous for the mechanical reliability of their autos, are also experiencing sharp declines. The problem is one of credit -- and that brings us back to the problem with the banks.
Economists now peg the beginning of the current recession at December 2007, but I heard nobody mention the "R" word until last September's banking crisis. Just as the Great Depression kicked off with a 1929 crash on Wall Street, our present miseries revealed themselves in the same venue.
The government responded to this latest train wreck of deregulated capitalism by authorizing the Treasury to pump $700 billion of public money into erstwhile bastions of private enterprise, hoping that this windfall would spur lending.
The bankers accepted the largesse and used it to pay each other exorbitant bonuses and fund extravagant junkets for the executives who'd caused the crisis. Then, in the newfound spirit of responsible sobriety, they tightened credit regulations.
Tougher credit made for a precipitous drop in consumption, causing record job losses. Maxed-out consumers facing unemployment are understandably reluctant to make major purchases. With fewer people buying, fewer people are needed to produce and sell, making for even further job losses -- the classic downward spiral of economic collapse.
Quite simply, there's too much debt in circulation for a stimulus package to fuel recovery.
Maybe we should take a lesson from our recent past. During the 1980s, the government conducted two dramatic interventions into the private sector. The second of these succeeded brilliantly, while the first appears to have merely delayed the inevitable.
The Chrysler bailout allowed that wounded giant to stagger through another quarter century of unprofitability, though it can hardly be considered a smashing success. As of this writing, the firm has less than 30 days to engineer a merger with Fiat or face its long overdue date in bankruptcy court.
It is unclear how Fiat -- an Italian automaker whose name is said to be an acronym for "Fix it again, Tony" -- will manage to pull Chrysler's bacon from the fire after a previous merger with prestigious Daimler-Benz failed to do so.
On the other hand, the government's creation of the Resolution Trust Corp. to restructure bad debt in the savings and loan industry not only averted immediate financial disaster but eventually resulted in the full repayment of the public's investment.
If we're going to pattern our actions on one of these models, let's pick the one that worked. Establish a Resolution Trust for consumers to allow people to refinance their consumer debt at a low fixed rate.
Freed from the usurious interest rates and the arcane fees and penalties of the credit card racket, consumers would suddenly have money to spend while the banks, now deprived of the income they garner from existing debt, would be forced to lend at attractive rates.
One way to stimulate consumption is to give money to consumers. Alternatively, the government can take over the auto industry so that it can make fuel-efficient, eco-friendly vehicles that nobody can afford to buy.
To his credit, the president has vowed to do whatever it takes to turn the economy around. If we persist on our present course, I guess we'll eventually find out whether Cal Obama can stand on his head.
M.W. Guzy is a retired St. Louis cop who currently works for the city Sheriff's Department. His column appears weekly in the Beacon.