Head Fake from the Left

Sports aficionados know the term. It's essentially about misdirection; trick the opposition into looking one way, and then move quickly to the other. Peyton Manning is a master at staring at the receiver on the right side of the field, and then at the last minute shifting to that deep out on the left; as is the basketball forward who focuses on his guard with the ball, getting his defender to do likewise while he darts back door to get the pass for a layup. Politics is no different; three examples.

Previews of the SOTU, fueled by White House leaks, have Obama moving toward centrist-reasonable corporate taxes, sensible regulation, deficit focus, spending cuts, waste/fraud reduction, smarter government, etc. Lost in the spin however are the progressive elements, most notably massive "investment" by the federal government in education, innovation, and green jobs. Under the cover of supposedly increasing the competitiveness of the USA and creating jobs, the philosophy that only big government can achieve it is there for all to see.

I deal regularly with early stage companies looking for funding, and whenever the prospect of big government intervention rears its head, the business plans all seem to change to incorporate fed subsidies into the projections; and the energy of the entrepreneurs shifts from developing the competitive characteristics of their businesses to how best to game the system to win government grants. I am still waiting to see the first of these plans that is economically viable without continued subsidies, so the progressive wish becomes self fulfilling as private capital says no thanks, and the government becomes the only game in town.

The recent financial news has been full of outcry over how taxpayers are funding the legal bills for those individuals deemed at least in part responsible for the financial meltdown. The poster child for this are the law suits against Fannie and Freddie that also wrap in the former management of those companies. Estimates of the personal legal bills have run to tens of millions of dollars, and either directly or through insurance, the companies are footing the bill; since the taxpayers essentially own these entities, we are indeed covering the management legal bills.

These may be good sound bites, but they are focused in the wrong place. Managements of all major companies are indemnified against legal challenges, usually except for the very high standard of having a court find that they engaged in willful misconduct or gross negligence. While the suits are in motion, management legal bills are paid. This is customary, and corporations wouldn't be able to function without it. But you wonder why this story has leaked now, and where the leaks are coming from; it's not exactly a subject high on the ratings meter. My sense is that it's a head fake from the left side of the aisle.  

Fannie and Freddie are going to come under greater scrutiny as part of any debate on deficit reduction. The last thing the Democrats want is to have the spotlight tossed on their politicians who used F/F as both the primary vehicle for advancing progressive control of home lending by mandating distorted lending criteria, and the dumping ground for rewarding Democrat loyalists with cushy management jobs. In classic survival mode, the Democrats are prepared to throw the very management they appointed under the bus to keep the publicity focused elsewhere.

The precarious financial conditions of many states has also been in the headlines recently. In an interesting shift of loyalties, the Media is portraying outrageously generous public employee union contracts as the prime culprit, and targeting as the real villains the union bosses who negotiated the deals in the first place and are resisting modifying the contracts. Now the unions certainly deserve their share of blame, but the last time I checked a contract requires at least two participants; and it's the party on the other side of the table that makes the scheme complete.

Does anyone have any valid reason why government employees need to be unionized? While you are pondering that one, consider that the game forever has been for politicians to trade concessions to union leaders in exchange for campaign contributions from union dues that kept them in power.  The incentives to bargain hard for the benefit of those paying the bills were totally swamped by the self dealing trading of favors. Financial reality has struck, someone is going to be the dart board, and the politicians are perfectly willing for the unions to play that role to deflect the obvious conclusion that government was as much a part of the problem as the unions. The most interesting guessing game could be whether the union leaders will remain silent. With union membership at an all time low, they may have little to lose, so the blame game could get interesting.

As those of us who made great use of the "head fake" during our playing days know, things aren't always what they seem, particularly in politics.