I missed President Obama’s press conference, as I was on an airplane. I’m not sure whether Scott or Paul caught it; maybe they’ll weigh in later. For now, here are a few observations based on reading the transcript.
Obama said, in his introductory statement:
At the end of the day, the best way to bring our deficit down in the long run is not with a budget that continues the very same policies that have led us to a narrow prosperity and massive debt. It’s with a budget that leads to broad economic growth by moving from an era of borrow and spend to one where we save and invest.
This is entirely disingenuous. Obama’s budget plan multiplies the federal deficit far beyond what it has ever been, in any prior administration. So how is he “moving from an era of borrow and spend”? It’s a lie, pure and simple, as this chart shows (note that it begins before the Bush administration and reflects Obama’s budget projections that go beyond his maximum possible term):
When a politician is capable of this sort of bald-faced lie, an alarm bell has to go off every time he opens his mouth. Obama likewise delivered this highly misleading assessment of AIG:
Now, understand that AIG is not a bank. It’s an insurance company. If it were a bank and it had effectively collapsed, then the FDIC could step in, as it does with a whole host of banks, as it did with IndyMac, and in a structured way renegotiate contracts, get rid of bad assets, strengthen capital requirements, resell it on the private marketplace.
So we’ve got a regular mechanism whereby we deal with FDIC- insured banks. We don’t have that same capacity with an institution like AIG. And that’s part of the reason why it has proved so problematic.
I think a lot of people understandably say, “Well, if we’re putting all this money in there, and if it’s such a big systemic risk to allow AIG to liquidate, why is it that we can’t restructure some of these contracts? Why can’t we do some of the things that need to be done in a more orderly way?”
And the reason is, is because we have not obtained this authority.
But there is, in fact, a widely used mechanism to deal with non-bank financial institutions like insurance companies that may become insolvent. It’s called bankruptcy. In bankruptcy, contracts are renegotiated, bad assets are gotten rid of and good assets are sold into the private sector. That system exists, and would have worked perfectly well for AIG if it were not for the federal government’s desire to funnel payments to AIG’s counterparties–most notably, European banks–without taking responsibility for doing so. Under Obama’s proposal, every time an insurance company becomes insolvent it will be another opportunity to expand federal power.
On the whole, Obama’s press conference seems like something of a non-event, except to the extent that it annoys one of America’s largest and most devoted constituencies: American Idol fans.