Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 2/23) 

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

This was a big week for President Obama. First, he warmed up the nation with a beautifully crafted speech to Congress, then he turned up the rhetorical flame – and scorched a number of industries – with his first budget. I have been reading the fiscal 2010 spending plan and trying to pin down why it makes me so uncomfortable. It isn’t the size, though by any standard $3.55 trillion seems like a monumental amount of money. It isn’t even the deficit of $1.7 trillion, which — he reminds us at every turn — he inherited. (Admittedly, like a good heir, he has surely helped it grow!)

What alarms me is that the president appears to have no confidence in private enterprise and, instead, enormous trust that the government can solve our problems. The proposed budget is Shakespearean in its ambitions – launching all manner of new and complicated long-term programs amid a severe recession. It is also vague. Like Treasury Secretary Geithner’s financial plan, the programs are described in generalities, leaving the details to Congress. Oh, dear.

In fairness, this country does need to tackle our aging infrastructure, and we should encourage alternative energy. It is true that the short-term focus of our government and of our corporations distracts from undertaking important initiatives. And we do have problems that need to be addressed, including improving our education system and reducing our dependence on imported oil.

But instead of encouraging corporations to undertake these challenges, President Obama wants to insert government into every facet of health care, energy production, manufacturing and education with complex and occasionally illogical programs. For instance, the president wants to establish fees for those generating pollutants, in a modified version of Europe’s cap-and-trade program (which has been a complete failure). The plan is expected to generate hundreds of billions of dollars – ultimately becoming the sixth largest source of federal revenues in 2019. In effect, this will be a huge new cost to our industries that are struggling to remain competitive on the world stage. Obama wants to create jobs; this is hardly the way to go about it. In any case, recognizing that such a program will drive up utility costs, (but realistically, all costs will rise as the burden will be shared by all industries), Obama’s team plans to compensate our low-income citizens with tax credits. Imagine figuring that one out.

Similarly, he wants to reduce the deductions on mortgage outlays that homeowners in the highest income tax bracket can take, in effect increasing the cost of buying a home. That seems like an exceptionally poor idea when we’re trying to stabilize the critical housing sector. Not until the overhang of homes disappears can prices hit bottom and mortgage-related securities — the stopped heart of the financial system — end their drastic descent. One of the few bright lights on the horizon for the industry is that homes are more affordable than they have been in decades because of lower mortgage rates and prices. Under Obama’s plan, that trend will reverse for a sizeable number of buyers.

Obama also wants the government to end the subsidies available to companies like Sallie Mae that facilitate low-cost student loans. Instead, he wants the federal government to take on that job. My guess is that, before long, we’ll be graduating people in their 30s, taking into account the years they will need to wade through the bureaucracy in search of funding. Never mind that meddling with the industry has already driven scores of companies out of business and severely constricted the availability of student loans.

He is also considering taxing company-provided health insurance, in an effort to make such coverage more affordable. Try to get your head around that one.