Just one week ago, I asked the question, "Will the Recovery Have Legs?" What I absolutely did not expect was the very real possibility that our "recovery" may be so short-lived in 2010 that we don't even notice it. This past week was more than a little scary, and I believe we are entering an important moment.
Who would have seriously predicted just two weeks ago that the Democrats would lose their super majority with a Republican winning Ted Kennedy's Senate seat in Massachusetts? Ironically, along with the surprise, the Democrats can no longer jam through the health care bill which was so emotionally tied to Kennedy's very own crusade. And now, a young and inexperienced President can celebrate his first year in office with the fact he needs to change direction before he's really even begun. Clearly, this is a major challenge for an inexperienced President, but I wonder if he understands this is a tipping point on so many levels.
Not only was his push on health care and alignment with the Democrats in Congress a huge mistake, it was also a major drain of political capital. While he has already softened his position, he has not demonstrated the awareness of how he needs to pivot to avoid rattling the markets. In fact, he seems to believe that changing his focus from health care to punishing the banks is the answer. Perhaps the timing was just coincidence, but can you believe he would sermonize on "never again will the American taxpayer be held hostage by a bank that is too big to fail". Are you kidding me? We're trying to build confidence in the recovery not threaten it with saber-rattling.
In the very same week, Warren Buffet comes out and says "the tax on banks just doesn't make sense", and two additional Democrats on the Senate Banking Committee announce they plan to vote no on Bernanke's confirmation. Really? Is Congress so oblivious to the fact that a "no confidence vote" on Bernanke is completely irresponsible right now? So, in spite of very solid earnings announcements from a host of companies, the equity markets sell off and will probably end the week with the Dow off by nearly 5%. Sure the markets have gotten out ahead of themselves and were bound to experience some correction, but you'd at least expect that to happen based on some economic news. The data looks good, but our leaders look terrible and that's the problem.
Obama had best figure out that punishing the banks and tongue lashing them in public is even more stupid than trying to push through a massive health care plan when we just went through the Great Recession. Forget the political consequences for Obama and the Democrats, we can't afford more destabilization. Somebody in Obama's camp better help him pivot and change direction or we're not going to like what's on the other side of this tipping point.
Let me know what you think.
