With Democrats retreating on some of President Obama’s agenda items, the President went on TV last night to try and drum up some grass roots support for his budget and bail out policies.
It’s getting to be a tough sell - both for Congress and the American people. I thought the president did a good job of presenting his case, boiling down complex ideas and concepts into digestible chunks. He did less well in responding to some very pointed questions from the press on AIG, the mess at Treasury, and the building perception that he is taking the country somewhere it doesn’t want to go.
But all in all, I’d grade Obama’s performance a solid B-. And I’m sure, he’d take that grade and run given the dismal fortnight his Administration has endured.
It struck me watching our president last night(and was reinforced after reading the transcript), that President Obama knows about as much economics theory as I do - perhaps less. Ordinarily, this wouldn’t matter because my knowledge of the “dismal science” is slightly above that of a three toed sloth and trying to come to grips with what our government has been doing lately is something akin to watching the above mentioned sloth attempt to climb down from a tree; an extremely slow process with no guarantee I’ll ever make it.
Surely the president couldn’t have been serious when he said this:
Finally, the most critical part of our strategy is to ensure that we do not return to an economic cycle of bubble and bust in this country. We know that an economy built on reckless speculation, inflated home prices, and maxed-out credit cards does not create lasting wealth. It creates the illusion of prosperity, and it’s endangered us all.
The budget I submitted to Congress will build our economic recovery on a stronger foundation so that we don’t face another crisis like this 10 or 20 years from now.
We invest in the renewable sources of energy that will lead to new jobs, new businesses, and less dependence on foreign oil. We invest in our schools and our teachers, so that our children have the skills they need to compete with any workers in the world.
We invest in reform that will bring down the cost of health care for families, businesses and our government.
And in this budget, we have — we have to make the tough choices necessary to cut our deficit in half by the end of my first term, even under the most pessimistic estimates.
Returning to “an economic cycle of bubble and bust” is, I’m afraid, historically unavoidable. If you are going to have free markets, you are going to have periods of prosperity and periods where the markets “correct” imbalances. If Obama wishes to repeal the business cycle, he will need to throw the idea of free market capitalism under the bus - something he has shown great eagerness to do.
As for the rest, how renewable energy companies will avoid being caught in the business cycle he doesn’t deign to tell us. Presumably, these companies will be subject to the same market forces that all other start ups are which means most will fail while the precious few winners will thrive. And since no western country has yet figured out how to get the cost of health care under control without rationing, it’s no wonder that Obama didn’t mention it since most Americans would recoil at some of the practices found in nation’s as diverse as Canada and Japan.
But all this is beside the point. With most inside the beltway pundits having determined Obama’s “honeymoon” is over, the president’s ability to dominate the agenda and pretty much get almost everything he wants is slipping away. His personal popularity remains very high which counts for a lot (despite his supporters ignoring his request for the most part last weekend to sign up their neighbors for Obama’s army). The three million contributors to his campaign are still there, waiting to be activated to put pressure on Congress to enact his ambitious and ruinously expensive agenda. So far, they have been quiescent. It is way to soon to tell whether it’s because the Administration hasn’t made a supreme effort to motivate them or because they were a mirage all along. We shall see.
Even if the president can’t get his supporters off their duffs to lobby for him and even if his short lived honeymoon may be coming to an end, the president still has one weapon in his arsenal that he will apparently continue to use in order to get his budget passed.
And that weapon is fear:
At the end of the day, the best way to bring our deficit down in the long run is not with a budget that continues the very same policies that have led us to a narrow prosperity and massive debt. It’s with a budget that leads to broad economic growth by moving from an era of borrow and spend to one where we save and invest.
And that’s why clean energy jobs and businesses will do all across America. That’s what a highly skilled workforce can do all across America. That’s what an efficient health care system that controls costs and entitlements like Medicare and Medicaid will do.
That’s why this budget is inseparable from this recovery: because it is what lays the foundation for a secure and lasting prosperity.
The fact is, his budget does continue “the very same policies that have led us to a narrow prosperity.” It just shifts the wealth around a bit. To believe that this will lead to an era of “save and invest” is ludicrous. And if it does, our prosperity will be very narrow indeed. Will Obama’s budget change people’s attitudes about “maxing out their credit cards” and piling on debt? I would say that a psychiatrist is called for at the White House if our president believes that.
The “save and invest” model was excellent for the 1950’s and 60’s when America was the workshop of the world and manufacturing was such a huge component of our economy. The American brand was so dominant that people could afford to put something away every week at 2-3% in a savings account because economic growth wasn’t as dependent on spending. Dollars churned through the economy mostly in the same community they were invested.
But we don’t make much here anymore and markets are now global. The economy is based - for better or worse - on consumer spending. More savings and investment would be very good as well as the notion that Americans shouldn’t go into hock up to their eyeballs. But what Obama is calling for is a massive reordering of economic priorities. And since he can’t realistically expect his budget to do that, he is simply fear mongering when he tries and connect the budget to the recovery.
It’s the only weapon he has used since he took office to get what he wants. He successfully frightened Congress into passing his stim bill (which no one read). He has used the specter of economic collapse to bail out his friends in the UAW. And he has deliberately fostered the notion that everyone agrees with him that all of these steps are necessary to “save” the economy. Opposition to his policies are politically motivated and insincere with the GOP hoping for catastrophe.
It has been effective in the past so why not go to the well again on the budget? But his act may be wearing a little thin with Congress and the people themselves may be tiring of listening to their own president trying to scare them into making it his way or the highway.
One thing appears certain - he has a helluva fight on his hands with a budding coalition of Republicans and blue dog Democrats who may eschew Obama’s fear mongering for crafting a budget that they can be re-elected on in 2010. By then, all the fear mongering in the world by the president will not hide the damage he has done to the economy or the violence he has done to the free market.