Obama fancies himself an alchemist who can heal the economy painlessly and without consequence. His crash landing back to reality will be difficult and painful.
At 2 P.M. Washington time, Barack Obama will be sworn in as the 44th president of the United States. Expectations of him are spectacular. He is the prophet of sweeping change, the dawn of a new spring, the symbol of hope.
Obama is not looked upon as a political leader but as an exalted father (despite his young age) who comes to heal all of society's ills. The attitude toward him is built on emotion and love. This week 79 percent of Americans said they felt a great sense of optimism about his term in office that begins today.
For his part, Obama does not hesitate to nurture the aura surrounding him. He began his journey to Washington four days ago by train, reenacting the trip made by Abraham Lincoln, the emancipator of the slaves, 147 years ago. He and Lincoln. Along the way, thousands stood at railroad stations, cheering him enthusiastically in the bitter cold. In one of his speeches this week, Obama called for "a new declaration of independence from ideology and small thinking, prejudice and bigotry." He knows very well how to deliver a speech.
His promises are astounding, from exiting Iran to solving the global-warming crisis. There is one promise that outdoes them all: solving the economic crisis and restoring the color to the cheeks of the American public.
Obama has inherited a problematic situation from Bush: a huge budget deficit - $450 billion - and a gargantuan public debt of 81 percent of gross domestic product, $11.4 trillion. But Obama is unmoved. After Bush won Congressional approval of a $700 million bailout plan, Obama plans to pass an even larger lifeline that will cost upwards of $800 billion, as if to say: If my predecessor provided it to you in buckets, I'll give it to you in barrels.
This additional spending will inflate the 2009 budget deficit to $1 trillion, or 7 percent of America's GDP, unprecedented in scope, and which will also sharply increase the public debt.
There is nothing politicians love more than to increase spending, particularly when they are convinced there is no price to pay for it. There is nothing more satisfying than to print money and distribute it to the masses, who will then reward you with adulation. There is nothing more popular than to "do well by the people," and Obama is doing this in droves.
At the start of the campaign, Obama spoke of a bailout plan that would cost $175 billion, but now he is talking in terms of $800 billion. One month ago, he declared that his goal was to create 2.5 million new jobs, but now he is speaking of 3.5 million. What's another million jobs for him?
As such, Obama plans to increase public spending in all areas, cut interest on mortgages and prevent the seizures of homes by banks so that all Americans will own a home of their own. What? Don't they deserve it? He plans to give tens of billions to the failing auto industry in Detroit, without requiring a real recovery plan.
He also intends to give each American family a $1,000 tax benefit to encourage consumption, and create a health insurance plan first for those laid off and then for all U.S. citizens. He plans to invest hundreds of billions in highways, schools and hospitals; to provide federal guarantees to states to dissuade them from cutting essential services; to expand unemployment insurance; to raise the minimum wage; to give incentives to industries that run on alternative energy; and to strengthen the trade unions.
The United States faces a huge crisis because it has lived beyond its means and has done so quite irresponsibly. Obama seeks to continue on the exact same path, though on a much larger scale.
So the next crisis is inevitable. Whoever increases spending will end up with a broken water trough while the world agrees to lend more money, though at beggars' prices. This will also happen to the United States. Inflation will rise, the dollar will weaken, interest rates will jump sky-high, and economic growth will be buried in the ground. In other words, stagflation.
Obama thinks he has discovered the philosopher's stone. He fancies himself an alchemist who can heal the economy painlessly and without consequence. His crash landing back to reality will be difficult and painful.