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Larry Gellman Headshot

Dumb, Dumber, and Dumbest

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As we watch the actions and listen to the comments of our Congressional leaders, one can only hope that they're really smarter than they seem and that they just can't help themselves.

We now know the reasons that we are facing an economic crisis. Banks and other financial institutions loaned too much money to people who couldn't pay them back so those borrowers could overpay for homes, cars and lifestyles we really couldn't afford. Our government did the same, spending trillions on wars and other stuff while lowering taxes on the richest among us.

At the end of the day, we and our government spent too much and took in too little while the agencies that were supposed to be regulating all this were either incompetent or asleep at the switch. Too many bad investments were made with too much borrowed money by people, banks, and government. The bubble popped, equity disappeared, loans can't be repaid, and people have stopped spending.

So armed with all this insight and with a true financial crisis upon us, our President and Congressional leaders are on the case with a plan to help stimulate the economy. Reasonable people can disagree over whether any stimulus plan will really do any good. But if the government is going to spend more borrowed money, it seems pretty clear that it should be spent on things that will create jobs, build infrastructure, and get that money coursing through the system.

Instead of being smart and focusing on the matter at hand, however, House Democrats have been dumb. Their hard-wired Liberal instincts caused them to lace their proposal with a broad range of spending programs to benefit the arts, education, family planning and other priorities that all make sense but which really have nothing to do with economic stimulus.

Republicans have been dumber. Instead of trying to work with the Democrats, they are lining up to pledge fealty to Rush Limbaugh who has repeatedly stated that he wants President Obama to fail. Instead of learning from the voters who rejected them so sweepingly last November, Republicans have chosen to pretend the last eight years never happened. They continue to harp on the need for lower taxes and then when Democrats compromised, they pledged to vote "no" anyway.

Does anyone with half a brain believe that high taxes are the problem? Taxes are lower than at any time during our lifetime and the economy has fallen off a cliff. People didn't stop spending because their taxes are too high. They stopped spending because they are losing their jobs, losing their net worth, and losing hope.

But dumbest of all has been the media. Instead of focusing on the complexities of the real issues, the media has focused on satisfying the public demand for villains--a handful of people who can be blamed for this mess.

Swindler Bernard Madoff, former Merrill Lynch CEO John Thain, and the Congressional pillorying of big bank CEOs have received 24-7 coverage on all the cable channels, blogs, and print media. Each of the targeted individuals deserve to be blamed for a wide range of irresponsible and perhaps illegal actions. Each of them has a lot to answer for.

But at the end of the day, a few individuals did not create this mess and their firing and/or imprisonment won't solve it. By focusing on blame and anger, the media has made it easier for most people to ignore the wave of schizophrenia that is running rampant in public conversation.

When the depth of and reasons behind the economic crisis began to surface, the banks were harshly criticized for lending too much money to too many people. Now the banks are being criticized for not making enough loans to enough people.

The government was criticized for spending too much money and not collecting enough in tax revenues to pay our bills. Now it is being criticized by Democrats for not spending enough money to get us out of this mess and by Republicans for collecting too much revenue in taxes from companies and individuals.

Individuals were criticized for spending and borrowing too much money and not saving enough. Now we're being criticized for paying off our bills and not spending enough.

None of these non-sequitors is being discussed in any serious way in Washington, in blogs, on the news shows, or in newspapers. Instead, we have dozens of reporters sitting outside Bernie Madoff's apartment and helicopters providing constant aerial TV coverage when he drives to and from the courthouse. We have hundreds of pieces written about John Thain's outrageous $1.2 million office redo and his $15,000 wastebasket. CNBC brought us all seven hours as the CEOs of the biggest banks were publicly whipped by a House committee.

This stuff is entertaining and helps people vent, but is all this coverage really necessary? Is any of it enlightening?

All of the important commentary is coming from the financial markets which are speaking volumes. They are telling us that no matter what we do, it is going to cost more to borrow money going forward and that there is less confidence in the buying power of the dollars and paper currency of all kinds going forward.

After a disastrous nose dive during the fourth quarter of 2008, stocks have done very little during the last few months. But it now costs the U.S. Government 40 percent more to borrow money for 10 years than it did two months ago (rates have climbed from 2.00 percent to 2.80 percent) and gold prices have skyrocketed by more than 30 percent from $700 to $950 an ounce during that period.

And while the news media is telling us constantly about falling real estate prices and rising foreclosures, the stock index tracking prices of the U.S. homebuilders has actually risen by more than 40 percent since November.

The markets are telling us that the government can't spend trillions of dollars that it doesn't have on bailouts and stimulus plans without consequences. They are also looking beyond the public posturing and outrage to the future.

The stocks of our largest banks and automakers are no longer investments but are trading vehicles which often see their prices go up or down 10-20 percent a day. No one is investing in these companies--people are just trading them back and forth from the long and short side. These companies all losing lots of money and owe several times what they are worth and while the companies will probably survive in some form, there may be nothing left for current shareholders.

That's the main reason that nothing has been done to get the toxic assets off the books of our banks. If those assets were bought by an investor at a fair price, the banks would realize such great losses that they would become insolvent. The banks can only afford to sell those assets at an artificially inflated price and, thus far, not even the government has been willing to pay up.

But instead of constructive discussions, all we get from the media is meaningless prattle about good banks and bank banks and instant reviews of the "performances" by Timothy Geithner (he bombed), Ben Bernanke (more of the same), and President Obama himself (still love him).

On top of that, the media and politicians of both parties are constantly repeating the lie that American taxpayers are paying for all this. If we were, then gold prices and interest rates wouldn't be going through the roof.

The fact is that we are paying the lowest tax rates of our lives and the Stimulus Plan being passed by the Senate will have us pay even less in taxes. Taxpayers aren't paying for this and we never will. Instead, the investors and foreign countries who hold our bonds and currency will pick up a big chunk of the tab as they get repaid in dollars that will buy much less than the dollars they loaned us.

We are in a mess and it is becoming increasingly clear that only time--maybe a great deal of time--will enable our financial system to get back on track. But I would certainly feel better if our elected leaders acted like they had a clue. It would also be nice if the media would try to entertain and titillate us less and inform and enlighten us more.