Randomly Noted

Walk up 7th Avenue and as you approach 41st street you see the most stunning billboard of the U.S. President in front of the Great Wall of China. It’s breathtaking. In this morning’s semi-darkness, I had to stop and look at it. As Peggy Noonan recently wrote, there’s a deep reservoir of hope that the new (he’s only one year in) President succeeds – even as one feels rather irritated by some of his domestic policy stumbles. Nearby this billboard diptych (there are two large Obama-Great Wall panels) is a crass Calvin Klein billboard featuring greased and scantily clad bodies – classic soft-porn marketing. The contrast between the two images is stark, and if Weatherproof wanted to sell its jackets, it found the formula – whereas Calvin Klein won’t get my hard-earned money. The Weatherproof ad has generated some controversy – the company apparently didn’t have the president’s consent to flog their garments. That’s for the lawyers to sort out. What I want to discuss is this: The Dodd and Dorgan Senatorial resignations have spurred a flurry of speculation about the Democrats’ autumn 2010 chances. I think their plight is overstated. As a decidedly centrist voter, and thereby an “average” one, I reckon, I view the political landscape this way: American voters know what the Democrats stand for; Obama’s agenda is transparent; we have seen the administration’s policy ambitions move inexorably toward the center – whether it pertains to Iran or healthcare reform. What I don’t know is what the Republican Party stands for. There’s is no clear party leader and no evident agenda, and the splinter-group agendas are either incoherent or fringe-y. The Democrats may lose some ground come November 2010, but it won’t be dire. And between now and then the U.S. economy will continue recovering; a fairly palatable healthcare bill will get passed; and only if the Grand Old Party acquires some discipline will it make noteworthy Congressional and Gubernatorial gains.

In another sign of Washington, D.C.,’s scatter shot approach to policy and fiscal management, it seems we will now have a tax on Botox. Yes, we’ll dig our way out of our indecent indebtedness by gouging people who occasionally pay up to get rid of their crow’s feet. As DJN colleague Martin Vaughan reports, Senate Democrats want to slap a 5% excise tax on optional cosmetic procedures to help fund health-care reform. This would raise about $5.8 billion over a decade in order to help defray some of the $849 billion bill. Right. it’s a sloppy, cynical move – and it bodes ill. Continue reading…

Is CIT’s demise an opportunity for the Republican Party to score some quick political points? Not really. Here’s why: The Obama administration’s decision to withhold a federal helping-hand from the lender comes with few political risks. The millions of small and mid-size CIT customers that will have to scramble for new credit lines may well curse the Democratic president and his advisers. But the Republican Party won’t be able to attack Obama for damaging the nation’s precious entrepreneurial fabric by neglecting to bail out CIT. Doing so would put them at odds with the GOP’s “moral hazard” and small government planks.  The principle risk to the Democratic president and party is if a CIT bankruptcy has unforeseen ripple effects by 1)  unexpectedly weakening the U.S.’s financial system due to some presently-unknown interdependence between the lender and other banks or 2) driving too many small firms out of business, thereby aggravating already dismal unemployment levels. One hopes that the Federal Reserves so-called stress test of CIT, conducted earlier this week, was broad enough to include a measure of the damage a CIT collapse would do to apparel firms, retailers, restaurants and others which depend on the lender’s credit to pay their bills. Should the Republicans attack the administration for inconsistency in its handling of failing companies (financial, automotive or otherwise) the criticism could rebound on them. Consider that some of the most haphazard decisions occured in the final months of the Republican Bush administration when then-Treasury Secretary Henry “Hank” Paulson chose to save AIG but let Lehman Bros. die. As DJN colleague Emily Barrett recently wrote: “Consistency is already a problem for officials accused of conducting industrial policy in their allocations of government support. The distribution of congressionally approved funds under former Treasury Secretary Henry Paulson drew heavy criticism for a lack of transparency and potential favoritism. The current Treasury must tread carefully, as the tally of bank failures this year alone climbs above 50.” Conclusion: The politics  of CIT are fairly benign for the Democratic administration and offer few hay-making opportunities for the Republicans.

Indonesians have something the Thai don’t:  A convincingly stable political economy. Peaceful parliamentary elections appear to have robustly supported the Democrat Party of President Yudhoyono. Shares are up today (Monday) and the Indonesian rupiah’s firm. There really was no reason for Indonesians to punish Yudhoyono’s party, given the respectable trajectory the country’s been on from an economic and security standpoint. Could this sprawling archipelago of wondrous natural resources with a majority Muslim population be emerging as a smart play for foreign investors who hitherto would have avoided it due to perceptions of political risk? The WSJ cites a Jakarta-based political analyst named Kevin O’Rourke saying continuation of coalition-party government will stymie needed economic reforms as Yudhoyono will have to negotiate with his partners.  In contrast to O’Rourke, an economist named Helmi Arman at Bank Danamon tells DJN investors expect “continuity on the implementation of market friendly policies” if Yudhoyono is re-elected in July presidential elections.  More broadly, the WSJ story notes: “Overall, the results showed Indonesia, a country that has only recently been grappling with homegrown Islamic terrorist groups, is becoming a deep-rooted secular democracy. In 2004, Islamic-based parties, some of which had espoused Islamic law for Indonesia, did better than expected.”