Vic Socotra

13 October 2008

Fifteen Zeros

I’m bored with the financial crisis. It has determined the results of the coming election, spoiling the anticipation. It has created a perfect storm for the young senator from Illinois, whose opportunity to leap from the state legislature to the national stage was prompted by a sex scandal that bit ascendant Republican candidate Jack Ryan on the butt.
Ryan had cleared the Republican field before sealed divorce documents were leaked, claiming he had a taste for kinky sex clubs and had dragged his then-wife to them. He immediately fell ten points in the polls, and the way was open for the charismatic young Democrat from Chicago.

Ryan was an investment broker, so we probably should have known there was something exciting about him. Senator Obama is riding a run of luck that is quite unbelievable. The economic collapse is most of the nagging social, political and racial issues that could have tripped him up.

I suppose it is good to have a leader who is lucky, though once he actually has to govern, I suspect the luck will have run out. The die will be cast on the rescue package by then. Paul Krugman commented that the way out of the mess might be the one suggested by British Prime Minister Gordon Brown. It is counter-intuitive, and not an answer we have heard from either of the two candidates.

Krugman says the thing is relatively simple. The crisis began with the end of the real estate bubble, and banks with too much debt on the books and too little remaining to loan one another at the end of the day. Trying to sell things off to raise cash has depressed the value of everything. What the politicians are offering is help to the little people out there like me who made idiotic decisions, aided and abetted by delusional investment bankers.

That is popular among those who are not going to be able to pay it back, though it has a tendency to piss off people like me who are going to suck it up and pay off the loans anyway. Besides, helping the little guys is going to take a long time to percolate upward through the economy- a sort of reverse trickle down theory that both candidates seem to endorse.

Krugman says that Gordon Brown’s approach is right: the Brits are going to give thei banks $80 bill ion pounds of guaranteed capital in return for a share of ownership. It is supposed to be temporary. Krugman calls it an “equity injection,” and apparently Treasury Secretary Paulson and Fed Chairman Ben Bernanke are in agreement, even if they did not think of it first.

The Swedes just awarded Krugman the Nobel Prize for Economics, so why not give it a try?

It will be three months before any new grownups arrive in town, and the situation cannot wait.

When President Obama takes office he is going to have a lot on his plate. It is really quite breathtaking. In addition to the recession, there are some long deferred items that need attention and have been waiting in the in-basket.

NASA has delayed the launch of its Shuttle replacement spacecraft for a year, to 2014. The last Shuttle flight is scheduled for May, 2010. That means we are out of the manned space flight business for the first time since Alan Shepard blasted off in 1961. The plan is to use Russian launch capabilities in the interim. How about that for a scheme?

Anyone who thinks new spaceships is going to be on the top of the new Administration’s agenda probably needs a quick course in basic economics.
There are huge problems in the rest of the space program, including the Spook side. The National Reconnaissance Office seems to have forgotten how to put sensors on orbit, and the once-insurmountable dominance of American technology seems to be faltering. New spy satellites?
Hah! You can put that on the back burner with replacements to the nuclear arsenal. It has been nearly two decades since we built any of those, and people have been muttering about stockpile stewardship issues since the Clinton administration stopped making Tritium, the secret sauce that makes the things go boom. The element is fragile, with a half-life of only seven years, just like the Bush Administration.

Defense Secretary Robert Gates and Energy Secretary Samuel Bodman say the current stockpile remains “safe, secure and reliable,” but they have to say that. A deterrent that will not explode is not much of a deterrent, is it?

This is not an all-inclusive list, and doesn’t even get out of the Department of Defense. It does not include recapitalizing the rest of the Defense Department, whose Army and Marine components have been driven into the dirt by five years of continuous combat operations.

The one thing they will not have to fix is the big electric display that depicts the national debt. The clock was put up near Times Square in New York by real estate investor Seymour Durst in 1989.

The debt then was a paltry $2.7 trillion dollars. It was turned off briefly during the 1990s when the debt actually decreased. They ran out of digits to display the total amount we owe last Saturday, when the total clicked over ten trillion. As a stop-gap, they have pasted a “1” where the dollar sign used to go.

President Obama will not have to worry about it. The clock will be replaced next year by one that will be able to track debt up to a quadrillion dollars, which is a '1' followed by 15 zeros.

I don’t know where that puts “quality affordable health care.” See how many contradictions you can find in those four words.

You know the first campaign promise that is going to get broken will be the one about not having any new taxes. Well, maybe not the first. But it will be close.

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