Your health and the economy's health

Nice to see Michael Moore finally free himself from his illusions about Barack Obama. Too bad he couldn't give up his delusions about Hillary back in 2008.

On other fronts...

Brad DeLong used to scoff at the suggestion that we could enter a new Great Depression. Now he thinks that such an outcome is possible...

We could cushion the impact of another big downward shock by recapitalizing the banks again. But the failure of the Fed and the Treasury in the aftermath of Lehman to grab a share of the upside from its capital injection and purchase operations for the public in the form of warrants means that there is no coalition anywhere for a repeat or anything like a repeat of propping-up the banking system: the right thinks it is an unwarranted intervention in the free market, the left thinks that it is a giveaway to the undeserving and feckless superrich, and the center is bewildered because it is an enormous and poorly-structured intervention in the market, it is a giveaway to the undeserving and feckless superrich, and the optics are terrible.

So if another big bad shock hits the U.S. economy, what could the Obama administration possibly do?

Nothing. The new president had an enormous opportunity in the first half of 2009, and he squandered it. Future historians may one day recognize Obama's refusal to nationalize the "too big to fail" banks as the greatest mistake ever made by an American president -- greater, perhaps, than Dubya's decision to invade Iraq.

AIG was semi-nationalized, but only as a giveaway to the great Wall Street financial firms. So says Neil Barofsky, the Special Investigator General for TARP:

The SIG TARP report noted that "structure and effect of the FRBNY's assistance to AIG ... effectively transferred tens of billions of dollars of cash from the government to AIG's counterparties."

Barofsky seems to be one of the few officials that has to tell us what we already know: TARP is "almost certainly going to be a loss" for taxpayers and Geithner rolled over for Wall Street in the AIG negotiations.

Krugman sums it up:

Brad DeLong says that the loss of public trust due to the kid-gloves treatment of bankers has raised the probability of another Great Depression, because the public won’t support another round of bailouts even if it becomes desperately necessary. I agree — but I think the bigger cost is that we’ve greatly increased the chance of a Japanese-style lost decade, with I would now give roughly even odds of happening. Why? Because bank-friendly policies have squandered public trust in all government action: try talking to the general public about stimulus, and it’s all confounded in their minds with the deeply unpopular bailouts.

By itself, the AIG story would be damaging enough. But it’s part of a pattern — and that pattern has ended up undermining the economy’s prospects, big time.

Even Krugman doesn't see the irony. It's true that the public no longer trusts government action; what's worse is the public sees that the public sees all action as socialism. So tell me -- in what book is kowtowing to Wall Street considered socialism? Well, maybe in some insane book written by Cleon Skousen and hawked by Glenn Beck. But any actual socialist would have been appalled by Larry and Timmy's scheme of transferring public monies over to the world's worst capitalists.

The noxious aroma created by the bailout now perfumes any moves that could actually benefit the working class. Obama turned an historic opportunity into an epic FAIL.

On the bright side: Goldman Sachs has formally apologized for its role in the crisis. Thanks, Goldman Sachs! It's all better now!