Learning not to bad-mouth the economy
Barack Obama is learning a psychological lesson from a former president about the economy and what happens when you keep comparing it to the Great Depression.
For almost two months of his presidency, he has been persistently and politically negative about the economy — even pessimistic, portraying it in near-hyperbolic terms. As a result, the financial markets fell into a deeper nose dive than before and consumer sentiment, already in the dumps, worsened.
Mr. Obama talked repeatedly of the “deepening economic crisis” he inherited, the “big mess” and “fiscal disaster” the economy was in. He seemed locked into his campaign’s New Deal mythology that we were in the 1930s and he was Franklin D. Roosevelt.
In his last primetime news conference, he continued his dangerous allusions to that era, saying we were in “the most profound economic emergency since the Great Depression.”
Wall Street was plunging and the country’s mood was turning darker. His advisers warned that he was talking down the economy too much, scaring the busi- ness community, needlessly stoking fear among already-insecure consumers, and failing to give Americans reasons to believe that as bad as things are now, the economy will get better. In the last couple of weeks, the White House has dramatically changed its tune.
First, all this silly talk about being in another Great Depression was nonsense. Not even close, President Obama’s top economic adviser said two weeks ago. Nearly a third of the country was jobless in the 1930s. Unemployment now is about 8 percent.
The recession we are experiencing, while severe, “pales in comparison” with the Great Depression, Christina Romer, chairman of the President’s Council of Economic Advisers, told the Brookings Institution two weeks ago. Not only were we in nothing that approximated the Great Depression, there were glimmers of faint hope that things might be getting better, said Lawrence H. Summers, director of the White House National Economic Council, and Mr. Obama’s chief economic adviser.
In remarks to a Brookings audience two weeks ago, Mr. Summers ventured to say he was “modestly encouraged” by signs that “consumer spending in the U.S., which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilized.”
“What we need today is more optimism and more confidence,” Mr. Summers said. And that’s what Mr. Obama delivered in a chameleon-like, fence-mending address and question-and-answer performance on March 12 before an audience of business tycoons.
To a large degree the news media ignored the real news in the event, and that was Mr. Obama insisting he, too, believed in free-market economics, capitalist risk-taking, wealth creation, and — brace yourself — “profits.”
In response to business concerns that he will impose draconian rules and regulations on them and slap them with higher taxes, the president said he was willing to deal on carbon emis- sion tax levels and could favor lower corporate tax rates, too.
In an address before the Business Roundtable, whose elite roster is a Who’s Who of the country’s richest companies, Mr. Obama at times sounded like a cross between capitalist crusaders Ronald Reagan and Jack Kemp. Among the statements Mr. Obama rarely, if ever, voiced in his campaign stump speeches before the Democratic faithful:
“I’ve always been a strong believer in the power of the free market. It has been and will remain the very engine of America’s progress.”
“I believe that jobs are best created not by government, but by businesses and entrepreneurs like you who are willing to take risks on a good idea. And I believe that our role as lawmakers is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash creativity and innovation that still makes this nation the envy of the world.”
He doesn’t “want to get the government in everybody’s business. [. . .] I want you guys to do your thing.”
“This is the most dynamic economy on earth, and our capacity [for economic growth] is undiminished. [. . .] Things are going to get better,” he said. “I tend to be pretty optimistic.”
It was a remarkable switch in tactics and tone.
In the depth of the 1981-82 recession, when unemployment was more than 10 percent, Ronald Reagan talked repeatedly of the need to “renew optimism and confidence and rekindle the nation’s entrepreneurial instincts and creativity.” The New York Times said it sounded like “psychonomics,” saying that Reagan seemed to be administering a form of “group therapy” to the business community and the nation at large.
In a radio address in 1984, Reagan talked about the psychology of the economy back then that mystified the Times, saying “I remember saying back when things looked worst that too much pessimism could be deadly. There’s a psychological factor in recession and too much hammering at it makes recession worse.”
Mr. Obama is finally beginning to learn this, too.
Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.