Pres. Obama should model his administration on neither Roosevelt nor Reagan nor Clement Attlee. Instead, he should look to Lady Thatcher, who presided over a huge crisis that affected many people's lives with a steel spine and a sense of reality.
The Obama administration faces a major financial crisis that could result in another Great Depression. The Keynesian approach that solved the last such crisis is precluded by the massive amount of debt racked up by the Federal Government, State Governments, municipalities and individuals, eating much of the seed corn needed for a better future.
No one, here or abroad, will buy our bonds in the event of a huge spending program. There is evidence that our Federal debt may be downgraded to "AA" status, an unimaginable catastrophe which might well lead to an IMF restructuring such as the one that took place in Lady Thatcher's Britain.
The solution lies, to no one's satisfaction, in an austerity regime. The only way to do this, without replicating the mistakes of Weimer, is to cut taxes and reduce government spending.
Otherwise, we must turn on the printing presses and learn that it is possible to have local hyper-inflation in a period of global deflation. A tax cut is the only effective way to put money back into the hands of consumers and businesses.
We have to trust markets: a century of experience has proven that is the only systems that work to create wealth.
On the other hand, the past 30 years have proven, again and again, that markets only work in the context of reasonable regulation and a viable system of commercial law. Our markets must work without cronyism and with predictable, rational rules. We must have a system which protects the alienability and productive use of property, something many on the political Right do not understand when they talk about property rights.
The alternative is to spend tax money, often coming from people of limited means, on bloated and ineffective companies, which have no market value and in which no reasonable person would invest. Such irrational behavior and poor stewardship of the public purse could quickly fray the social contract and lead to tax revolts and worse.
In short, my advice as a citizen is this:
- The circumstances are dire; and
- the model is Thatcher.