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By RodgerRafter
February 13, 2009

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Listening to him at the press conference a couple nights ago, it sounded like the President understands what the economy really needs, but doesn't think it's politically possible at this point, so he's trying to sell all that he can get away with.

Rather than trying to completely rebuild the economy toward a sustainable ideal. He's taken a slower approach and tried to appeal to Republicans and "change bad political habits" of partisanship and influence peddling. Meanwhile, he also knows that Wall Street can sabotage any efforts if he undermines their control too aggressively. If he's successful with early stages he hopes to push for more ambitious reforms later.

So far it seems like changing the political landscape may not be possible. He could end up being much more aggressive a year from now to just try and build a filibuster proof senate majority if Republicans continue to be obstructionist and economic conditions don't improve enough.

Obama talks most enthusiastically about things like energy efficiency projects that are good investments and which, "by the way, will also create jobs right now." The same is true for the money he wants to spend modernizing schools.

The tax cuts are part of the stimulus package mainly to get a sprinkling of Republicans on board and partially to buy more loyalty among the voters. Based on how he's talked about tax cuts, he doesn't seem to really believe in their having much real economic benefit (and they won't, IMO).

The size of the package was reduced to try and deflect criticism. There's been a big public backlash that grew up out of the Bush bailout plans. Republicans seem to be trying to capitalize on that and turn it against the Democrats and Obama for political gain. So he hit the road and sold the plan and he'll probably have to do a lot more selling further down the road for health care reform, educational modernization, energy policy and other projects that could have big price tags.

The salary caps for TARP recipients will probably prove to be a meaningless political stunt, as the big firms will either find ways to avoid having them apply or they'll end up taking their medicine for a year or so and then make up for it with bigger bonuses after they get off the dole. Long term, the executives still control the boards and the boards decide on compensation.

Wall Street still controls the Fed, and Geitner is a Fed guy who was acceptable to Wall St. as Treasury Secretary. Obama knows the Fed is too big for him to fight. He's going along with the easy credit approach that the Fed is pushing because he hopes it will ease the contraction and make it look like his policies are working better than they really are.

Monetary policy will continue to work to the benefit of the biggest banks. The Fed will keep funding and purchasing troubled assets. The housing rescue will be mostly about keeping people from defaulting on loans the banks never should have made by using government money and guarantees.

I don't think what has been put in place will be enough to get the economy growing again. As an investor I'm watching to see if all th stimulus is inflationary enough to boost asset prices, and I suspect that it will, especially since the Fed is likely to be more aggressive in monetary ways as fiscal stimulus comes up short.

If Obama had his way, it would probably be all about energy independence, job creation, education reform, health care reform, social and fiscal responsibility and a better quality of life for the masses. Of course I may just be projecting my own views on to the president in a wishful sort of way. It's hard to know for sure what's going on inside his head and behind the scenes