Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 5/25) 

Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics.

Treasury Secretary Timothy Geithner is trotting off to China next week to reassure our creditors that the U.S. isn’t the spendthrift careless nation that Beijing imagines us to be. He is, we might say, growing into the job. Remember that one of his first acts upon taking charge of our country’s purse strings was to accuse the Chinese of “manipulating” its currency. That was an oops; Mr. Geithner has since learned that you don’t kick your banker in the knee.

He’s not the only member of the administration that’s recently had a reality check or two. Yesterday President Obama phoned his still-eager network of campaign volunteers from Air Force One, hoping to rev up enthusiasm for his health-care initiative. His message? “If we don’t get it done this year, we’re not going to get it done.” He’s right.

Americans – and the financial markets – are beginning to assess the costs of not only the health-care program, but of the dozens of other undertakings that have Mr. Obama glued to the teleprompter almost daily. The Congressional Budget Office delivered a sobering message yesterday when it announced that undue federal control of the health-care apparatus would lead it to consider the industry part of the government. (I wonder what their stance is on  autos and banking?) This could undermine the president’s ability to “reform” the sector, since the government’s financial health is already under stress.

Universal insurance coverage is estimated to cost as much as $150 billion each year. The administration has promised to buffer those outlays by cutting the cost of health care, a notion that is popular but puzzling. Where are those savings going to come from? The president is giddy over electronic record keeping, which is undoubtedly a good idea. But let’s face it – that’s not going to overnight reduce the cost of having a baby or getting a knee replacement. Hospitals and medical practices are surely not tightly managed organizations. Spend a few days in the hospital and you’ll become a rabid reformer. But the reality is that large cuts in expenditures will only come about by rationing care, or by limiting pay to doctors. You can bet that other health-care workers, most of whom are union members, will not feel the pain.

So, while celebrating a continuing stream of green shoots that signal some steadying of the economy, the markets also have begun to discount mounting government borrowings. That’s the message from the backing up of Treasury yields that has so shocked the markets. On Wednesday, yields hit their highest level in six months. The reason? The Obama administration has been long on spending initiatives, and short on how to pay for them.

One source of potential revenues, which I discussed last week, would be a gasoline tax. Another possibility that would more broadly (and more beneficially) impact energy choices in the U.S. would be an oil-import fee. If we truly want to lessen our need for imported oil – and we should – we could enact a fee designed to keep imported oil prices at about $70-$80 per barrel. At this price, according to most energy economists, consumption is discouraged and alternatives are encouraged. This  measure would give investors in windfarms and solar panels reassurance that such ventures, if competitive at that price, would be viable regardless of the ups and downs in oil markets. It would also encourage domestic exploration and production that quickly lost steam as prices slid below $50 per barrel in recent months. And it would raise revenues.