Fed-engineered Financial Crisis Will Lead to a One-world Currency and Government

Flashback: In Crisis, Opportunity for Obama

November 21, 2008

Wall Street Journal - As the economic signs grow ever more grim, so do the problems facing the incoming Obama administration.

That's one way of looking at things. Here's another:

As the economic signs grow ever more grim, the opportunities for the Obama administration to drive through its agenda actually are getting better.

The thing about a crisis -- and crisis doesn't seem too strong a word for the economic mess right now -- is that it creates a sense of urgency. Actions that once appeared optional suddenly seem essential. Moves that might have been made at a leisurely pace are desired instantly.

Therein lies the opportunity for President-elect Barack Obama. His plans for an activist government agenda are in many ways being given a boost by this crisis atmosphere and the nearly universal call for the government to do something fast to stimulate the economy.

This opportunity isn't lost on the new president and his team.

"You never want a serious crisis to go to waste," Rahm Emanuel, Mr. Obama's new chief of staff, told a Wall Street Journal conference of top corporate chief executives this week.

He elaborated:

"Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before."

He ticked off some areas where he thought new doors were opening: energy, health, education, tax policy, regulatory reforms. The current atmosphere, he added, even makes bipartisanship easier:

"The good news, I suppose, if you want to see a silver lining, is that the problems are big enough that they lend themselves to ideas from both parties for the solution."

Mr. Emanuel noted, correctly, that the U.S. largely squandered the opportunity the oil shocks of the 1970s presented to make serious, long-term changes in its energy habits -- a failure that has returned to haunt the nation today.

Conversely, history points to examples of leaders who have used crises to seize opportunities. Most obviously, President Franklin Roosevelt took advantage of economic trauma in the 1930s to drive through a new economic agenda, as did President Ronald Reagan with his tax cuts in 1981.

The lesson holds true in foreign policy as well. Only the 1973 Arab-Israeli war, and its shock to the Middle East status quo, made it possible for President Jimmy Carter to move in and negotiate the historic Camp David peace accords between Egypt and Israel.

And so it is for Team Obama now. The risk, of course, is today's opportunities will tempt the administration to overreach, lifting government spending so high that the deficit hangover at the other end of the cycle is intolerable, or injecting government so far into the marketplace that bipartisan support evaporates.

But for now, the call for government action is so universal that the playing field is wide open. With interest rates approaching zero, the Federal Reserve Board is nearly out of interest-rate ammunition to stimulate an economy sinking into recession; Fed policy makers likely are quietly praying for fiscal stimulus to start filling the void.

The chief executives gathered at the Journal conference this week called for the new administration to enact a fiscal-stimulus package of at least $300 billion -- perhaps double the amount of stimulus such a group likely would have called for just a few weeks ago.

That creates an opening through which Mr. Obama can drive a fair amount of his domestic agenda. Certainly the field is open for some immediate form of the president-elect's middle-class tax cut to become part of a stimulus package.

By the same token, the yearning for government spending on "infrastructure" to stimulate economic activity creates an opening for the new president to push the kind of green projects that fit his call for a transition to alternative energy sources, including new kinds of mass-transit systems. And the Obama call for government "investment" in alternative energies will be easier to turn into reality if it, too, can be cloaked as part of stimulus spending.

At the same time, as thousands of additional Americans lose jobs in the recession that lies ahead, they also will lose their employer-provided health insurance and swell the ranks of the nation's uninsured. That will add a bit of rocket fuel to the Obama call for universal health coverage. And certainly the broad dissatisfaction with the way financial markets were regulated will make it easier to rebuild regulatory structures.

The crisis also presents the Obama team with an opportunity that isn't so obvious: using economic distress to step back from the protectionist cliff Democrats edged toward during the election campaign.

A time of global economic distress isn't a good time to construct barriers to international trade. Conversely, it may be a good time to help both stressed American consumers and distressed developing-world economies by lowering tariffs on some goods made abroad. One test of the Obama administration's economic philosophy is whether it is as eager to take advantage of that opening as some of the others now before it.

Listen: Rahm Emanuel addresses leaders at the Wall Street Journal CEO Council