Tuesday, January 27, 2009

Obama's First Week

We are one week into the Obama presidency. What should we make of it? First, there are his early executive orders on Iraq and Gitmo. About the only thing that we can say is that he backtracked on some campaign promises. He didn't order our troops to get out of Iraq as fast as possible and shutting down Gitmo while moving the worst of the terrorists elsewhere is meaningless.

So far so good.

Today he made a couple of announcements on environmental policy. He is going to demand higher gas mileage and allow states to set their own environmental policy. In doing this, he has doomed Detroit.

Detroit's problem is that it costs them around $70 an hour in labor to make a car. They don't pay their people that much. Around half of it is being paid to retirees. Rather than invest retirement funds for each worker, the Big Three opted for a pay as you go retirement. They are paying retired workers out of their current earnings (or, to be more accurate, they are adding the retirement pay to their losses). The only way that they can afford to do this is to sell lots of big SUVs with high profit margins. For years they have only continued to sell smaller cars in order to meet CAFE (mileage) standards. They don't actually make money on the smaller vehicles. With new mileage requirements approaching 40MPG, the big SUVs will be outlawed. Worse, the price of smaller cars will go up in order to meet these standards. Every car will be an hybrid or at least turbocharged which will make them more expensive. Smaller, more expensive cars will invigorate the used car market, cutting demand for new cars even more.

Then there is the stimulus. At $825 billion and growing, this should be a scary figure even if it would work. It will not. The economy is projected to start a slow recovery long before most of the stimulus is spent.

Obama and Congress promised that the stimulus would be open and transparent. I'm not sure how they can accomplish that when Congressional leaders insist that it is too urgent to have a single day of hearings.

In reality, the stimulus bill is the mother of all partisan spending. The number are so large that no one notices a few hundred billion extra here and there.

So much for fiscal responsibility.

Finally, Obama has shown that he does not have any class. A presidential inauguration is supposed to be a time to make peace with the other side. Obama used his to chide Bush. He has done this several other times in the last week such as when he said that he was bringing science back to the White House.

Last Spring someone posted to Huffington that Obama would not have to compromise. Instead he would convince his opponents of the validity of his views through strength of personality. Obama must have ready this and took it to heart since that is how he is treating Congressional Republicans.

A week ago Obama's approval ratings were a stratospherically 83%. Now they have dropped to 68%. Still pretty good but no longer in the superhuman range. Now that he has gone from a superman who can do no wrong to a politician making actual decisions, the public is taking another look at him.

No comments: