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Hard Lessons for Dems in Politics and Political Economy

Concerning the economy, the consistent narrative coming from the Obama administration has been that increasing government control involvement in that economy is not only necessary to suspend or turn back a recession, but that it is the long-hoped-for and desired fulfillment of the American promise.  "Spreading the wealth around" and the idea of justice responsible for the occasional careless and revealing speech of Obama and his surrogates has been the back-story and the underlying motivation of their approach to this recession.  In their minds, it ought to be true that we can spend our way to prosperity because (again, in their minds) such spending is the just and noble thing to do.  Even when the the tax revenues rewards generated from this kind of virtue might prove to be less impressive than the rewards of leaving well enough alone (as Charlie Gibson [!] argued to Obama might be the case with capital gains tax increases), Obama firmly insisted that this kind of "virtue" could be its own reward.

So it should come as no surprise that Obama's economists appear to have the assignment of justifying economic policies not actually designed to improve an economy.  Michael Barone takes note of this today by pointing to yet another arrogant assumption of the Democrats, rooted in yet another misunderstanding of human nature and the facts.  They thought voters would flock to them because in previous business-cycle driven recessions many voters were grateful for government spending--such as unemployment insurance or public works projects that gave them a direct benefit.  But, more important, the timing of the end of these recessions--though resulting from a natural turn in the business cycle--plausibly could be argued to be related to the benefits so many voters enjoyed.  The dubious case for cause and effect did not need an elaborate public defense because the recessions ended and people then had better work to do than armchair political economy.

It's not working out that way this time for the Democrats.  High unemployment lingers--even if the recession is "technically" ending--and people therefore have had a lot of time to think.  It's increasingly clear that this recession is not a simple "business-cycle" recession, Barone argues, but a recession resulting from a financial crisis.  Voters know that aside from the pain of losing jobs, most of their own pain came from spending money that they did not have.  It's obvious to them--in ways that it is not obvious to Obama's elite team of economists--that the federal government's problems are just a large scale reflection of their own.  We do not have a situation here where we just need to be patient and allow the expansion of the economy to catch up with the spending we're doing.  Just like in our own lives, we need to scale back the spending!  Some debt can propel ambition and stimulate healthy growth, but too much weakens a body . . . and a body politic too. 
 
Contra Barone and those who say that Keynesian ideas are everywhere dying, I think it is still unclear whether the electorate has finally come to reject the narrative that government spending can turn around an economy.  We have much reason to be optimistic that persuasion on this point is now more possible than ever, but interest has a way of attaching itself to thinking when it comes to politics, and I think that when this kind of spending is not so obviously insane (e.g., someday when we have yet another ordinary business-cycle recession and after we finally work through this financial crisis), voters will be more susceptible to the wiles of a Democrat who can tell them that taking from rich is not only their right but also something good for the rich and poor alike because it improves the economy.

Be that as it may, I do think that something even more powerful is happening.  There is more hope this go around to expect that Americans will become much more suspicious of American politicians like Obama who let the mask of their concern for the economy slip and expose an underlying and consuming ideology of justice that is fundamentally at odds with the American idea of justice in equal opportunity.   The nature of this recession and his failure to understand it certainly hurt him and it laid the groundwork for his defeat tomorrow (and make no mistake, it is HIS defeat).  But mistakes caused by ignorance do not make people angry and the Americans excited about voting tomorrow are nothing if not angry and fired up.   They want to punish the Democrats.  Punish them for their failures, yes . . . but more than that they want to punish them for their stubborn and ideological arrogance.  These Dems thought they understood American justice better than the people did and they told us that we ought to be grateful for their superior wisdom in passing legislation that was manifestly unpopular and counter-productive.  It will be an expensive mistake for them tomorrow . . . but the effects of that mistake will last long into the future for the Democrats. 
Categories > Politics

Discussions - 7 Comments

Terrific post. I'm not sure Obama ever thought that the stimulus would turn the economy around (though I think he thought it was better than nothing) so much as give him credit and improved ideological strategic position (see, Big Government brings prosperity!) when the cyclical turnaround came. There is still time for some of that to happen by 2012.

I am not an economist (obviously) but I think the larger point of Barone's piece here was that Obama completely miscalculated if that was his plan because this one isn't going to get turned around by a mere cyclical turn. This one actually required some smart moves on the part of government--because so much of the problem actually stemmed from too much government interference (e.g., Freddie & Fannie pushing the requirements for borrowing to new lows). Instead, Obama and the Dems doubled down on liberalism and we're doing a lot of things that are digging the hole even deeper. We need to stop that--in part because it's bad economics but more because its bad government and a violation of our principles. This election could be a beginning to that . . . but it will need a follow through in two years.

Since we are a nation built on relatively free economic principles, that kind of bad economics by government is the same thing as bad government.

It is a good post.

The only way your conclusion will be true, though, is if Republicans do not make counter-productive mistakes of their own. I wish I felt your sureness about that.

Don't know if there won't be enough GDP growth and enough decline in unemployment (not according to the standards of 1985-2008, but expectations might be different now) in 2012 to where Obama might have a plausible argument that his policies have benefited the economy. His job approval isn't that bad under these very unfavorable circumstance and the turnout model for 2012 will be different. Doesn't mean the Republicans are doomed, but explaining better and sustainable policy in the least scary way is tricky.

Increasingly confident that the alternative will not be Dems v. Squishy Republicans . . . next time. It will be Dems vs. chastened and refreshed Republicans or it will be Dems vs. a new party.

Yes, Julie, to that last.

But about 2012 and the probability of an improving economy: once people feel the ground stop moving under their feet, they will do all they can to prosper again. We were discussing in a thread last week the possibility/probability of the Fed inflating the economy. There are ways to prosper with inflation if you plan for it and cope with it correctly. The WSJ and Forbes (or maybe it was one of the other of my husband's many such magazines. My poor memory....) have already had articles about how to do that. It is not matter of "Get Ready! The World is Coming to an End!" it is just a matter of planning for a messier world than usual. Individuals plan on prospering and will find a way to overcome adversity.

If the new Republicans in Congress can achieve some perceptible stability -- get out of the way of the economy as most of those guys say they intend to do. Then, in 2012, can't Republicans (or whoever) run on the basis of "things were ghastly, then you elected Republicans/conservatives and just look!" I think that could be a winner.

Indeed, I expect there will be more than just a hook there . . . I am more than hopeful that there will be some truth in it. Keep the change a' comin'!

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