Government and business in America: Piling on

The original story is available here.

May 28th 2009
From The Economist print edition

In his zeal to fix capitalism, Barack Obama must not stifle America’s dynamism

Illustration by KAL

 

DEFENDING American capitalism these days is a thankless job. Reckless lending by American financiers produced a crisis that has pushed the world into its worst recession since the 1930s. Tales of greed and fraud during the boom years abound.

Small wonder that although Americans still prefer their government neat and local, they are a little less hostile to federal activism these days (see article). Such sentiments, last November, helped propel Barack Obama into the White House and his Democratic Party to bigger majorities in both houses of Congress. As Rahm Emanuel, the president’s chief of staff, says, Mr Obama does not want to waste this crisis. He is using it to create a bigger role for government throughout the economy, from education and health care to banking and energy.

He, and Congress, risk overreaching.

Government v market in America: The visible hand

The original article is available here.

May 28th 2009 | INDIANAPOLIS AND WASHINGTON, DC
From The Economist print edition

Americans have grown slightly more receptive to the idea of an activist government. Will they go along with Barack Obama’s aspirations?

Alamy

 

THE demonstrators thronging the steps of the war memorial in central Indianapolis are a small but spirited bunch. Steps away from the head office of one of the country’s biggest health-insurance companies, they chant slogans calling for a single government-run health plan and wave signs with slogans like “One plan one nation” and “Patients not profits”. One cheekily advises: “Accept personal responsibility. Do your own colonoscopy”. After pursuing their cause for years, advocates of universal health care got a jolt of energy when Barack Obama took office. “Something happened in January that changed our cultural story for ever,” a folk singer tells the crowd before launching into a song, “If not now, tell me when.”

Across the street, an argument breaks out. Dennis Majewski, a public-defence lawyer, agrees with the protesters. “We’ll never rebound until we have national health-care insurance.” But should the government look after “a known druggie whose drug habit gets him to the point he is seriously ill?” queries his cousin, Tom Majewski, a retired executive. Well, yes, says Dennis: “That person has a serious illness.” Tom shoots back: “But it’s a choice!”

The debate in Indianapolis is a microcosm of a broader re-examination by Americans of government’s role in the economy.

The federal budget: Phoney war

The original story is linked here.

 

May 14th 2009 | WASHINGTON, DC
From The Economist print edition
The real battle, over health care, is just beginning

 

THE first hundred days were busy, Barack Obama noted, but the pace would be just as hectic in the second hundred: they would be spent building “a library dedicated to my first hundred days”. The president delivered the joke at the White House press corps’ annual shindig, but it makes an apt metaphor for the past week. He and his officials have released a blizzard of tax and health-care proposals that largely repackage, or add detail to, the ambitious draft budget he released in February.

American consumers: Off their trolleys

The original story is linked here.

May 7th 2009 | WASHINGTON, DC
From The Economist print edition

Consumer spending may have hit bottom, but America’s mountain of debt means the climb back up will be slow and painful

Illustration by Peter Schrank

 

CONFLICTING news this week from California, one of the centres of the housing bust. Just north of Los Angeles, a Texas bank was tearing down a half-built development of luxury houses that had fallen into its hands. With the market for flashy homes dead, the bank reckoned it made more financial sense to destroy them than to complete them.

Farther south, Jeffrey Mezger, boss of KB Home, a well-known LA-based home builder, was calling a bottom to his segment of the housing market. But KB Home’s secret, he said, was to sell custom-built homes that were smaller and cheaper than before, and priced to compete with a flood of cut-rate foreclosure properties. “Homes must change with the times,” he believes.

Deflation in America: The greater of two evils

The original story is linked here.

May 7th 2009
From The Economist print edition

Inflation is bad, but deflation is worse

MERLE HAZARD, an unusually satirical country and western crooner, has captured monetary confusion better than anyone else. “Inflation or deflation,” he warbles, “tell me if you can: will we become Zimbabwe or will we be Japan?”

How do you guard against both the deflationary forces of America’s worst recession since the 1930s and the vigorous response of the Federal Reserve, which has in effect cut interest rates to zero and rapidly expanded its balance-sheet?