Barack Obama won the Democratic nomination and then the presidency by offering
the same program that Peter Pan gave the Darling children: Close your eyes,
think happy thoughts, and you will be able to fly. "Yes we can" in the meantime
has changed to "No he can't," as America lost five million jobs in 2009 and its
effective unemployment rate, including so-called long-term discouraged workers,
rose to 22%, a level unseen since the Great Depression.
Within 24 hours, the voters of Massachusetts may turn the freshly-baked
president into a prematurely lame duck, by electing an obscure Republican to
the senate seat held for a generation by Ted Kennedy. If that occurs, Obama's
veto-and-filibuster-proof
majority in the senate will disappear and faint hearts in his own party will
hedge their bets on the proposed public healthcare program. The Republicans
should be careful what they wish for: no one is voting for the opposition, for
the Republican party has no economic program and no unifying theme except its
objection to Obama. The voters are protesting a radical change in their status
for the worse, and will penalize whoever has the misfortune to be in power.
During December, more than 600,000 workers disappeared from the official count
of the American labor force, erasing the illusion that the employment situation
would recover. But the voters knew that before the economists. The most
reliable index of economic sentiment is the president's deteriorating approval
rating. For a by-the-numbers explanation of why the US economy will not
recover, see my October 6, 2009, essay,
Obama's permanent depression.
America is the world's most successful state, and the one with the greatest
longevity in its present constitutional form. But neither of the major parties
is presently capable of governing it. The Republicans have been hoping that
rage against Obama's failed economic policies would carry the party through the
November congressional elections. But it is entirely conceivable that the Obama
presidency will implode as quickly as the Obama campaign metastasized during
the 2008 primaries, and that the electorate will call the Republicans' bluff.
Americans understood well enough in early 2008 that the traditional leadership
of both parties had led them into a dead-end. As I wrote in January 2008 (Obama
bin lottery) after Obama's surprise landslide in the South Carolina
Democratic primary:
People of modest means do not understand the stock
market, but they are sly: they can read the panic in the eyes of their leaders.
After assuring them for months that all was well, Washington last week offered
an emergency interest rate cut for the first time since September 11, 2001, and
an emergency economic package which will send a small check to every American
family earning less than a certain threshold. Both President George W Bush and
[Bill] Clinton proposed essentially the same program. If that is "managerial
ability", thought the voters of South Carolina, we might as well buy the
lottery ticket.
That is why at that time, January 2008, I
believed America was going for Obama: "America faces not a dip in the business
cycle, but the end of a 25-year run of wealth creation. Rising home prices were
supposed to provide America's retirement nest egg, the substitute for the
savings that Americans never amassed ... Despite massive evidence to the
contrary, they still cling to the delusion that 20 years from now, everyone
will retire by selling his home to his neighbor at double the price. It is like
the passengers on the Titanic selling each other annuities."
Obama appealed to the voters' bottom-dollar hope that a new face in the White
House would reverse the tide of misery. He did not have to offer specific
promises: he only needed to give the voters the opportunity to kid themselves,
which they were eager to do considering the unpleasant taste of the
alternative.
The electorate is like Archilochus' hedgehog, which knows one big thing, rather
than the fox, which knows many things, in the classical aphorism cited by
Russian-British philosopher and historian, Sir Isaiah Berlin. In 2008, the
voters knew that the capital gains and home equity cushion gleaned during the
Ronald Reagan boom were at risk, and that the likes of presidential candidate
John McCain as well as former candidate, now Secretary of State Hillary
Clinton, would not make things different. A vote for Obama under these
circumstances had no downside from the vantage point of the ordinary household,
and they held out the hope that Obama actually might have a magic wand up his
sleeve. The voters were not entirely misguided, for the current economic
situation almost certainly would have been just as bad under a McCain
administration.
The big thing that the American electorate has learned during 2009 is that
Obama is all talk. There are many little things that annoy voters: special
treatment for trade-union health plans, a Treasury secretary who seems to have
given special treatment to Goldman Sachs in the rescue of the insurance giant
AIG, and a confusing foreign policy. But the idling of one-fifth of the
population overwhelms every other issue. Tens of millions of families that only
two years ago felt affluent and secure are now anxious and impoverished. And
Obama can do nothing about it.
When Reagan took office in 1981, the baby boomers were in their 20s and 30s,
America had a 10% savings rate, the current account was in surplus, and America
was the world's largest net creditor nation. Reagan was able to cut taxes and
finance an enormous budget deficit because the world's demand for US Treasury
securities was correspondingly large. In 2010, the baby boomers are in their
50s and 60s, America has saved nothing for a decade, the current account
remains in severe deficit and the world is choking on the existing supply of
Treasury securities. Cutting taxes to stimulate the economy is not as simple
this time round.
Professor Reuven Brenner and I argued in the December 2009 issue of First
Things that fundamental changes in American economic policy are required to
emerge from the Great Recession. We proposed that the United States fix the
dollar to the Chinese yuan and other currencies in order to re-orient trade
flows to the developing world. We added, "We have been borrowing in order to
consume; we need now to save in order to invest. We need to shift the tax
burden, moving it away from savings and investment and toward consumption. We
should replace individual and corporate income taxes with consumption-based
taxes."
Americans need to be told that they will need to invest before they can
consume, and that the cure will take years rather than months to take effect.
It's not a happy message, and no one in politics is willing to deliver it - if
indeed anyone in politics understands it.
Spengler is channeled by David P Goldman, senior editor at First
Things (www.firstthings.com).
(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please
contact us about
sales, syndication and
republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
