Obama’s dou­ble-dip learn­ing curve

The Washington Times Weekly - - Commentary - Tony Blank­ley

In one of the least-needed re­as­sur­ances in modern po­lit­i­cal his­tory, Pres­i­dent Obama’s top po­lit­i­cal man, David Plouffe, “told Democrats that the White House would not suf­fer from over­con­fi­dence. ‘What I don’t want to sug­gest is that we’re sit­ting around and think­ing every­thing is great,’ he said.”

With the White House’s own economists pre­dict­ing 9 per­cent or worse un­em­ploy­ment on Elec­tion Day, the pres­i­dent at about 39 per­cent job ap­proval, col­lege grad­u­ates un­able to find jobs, a quar­ter of Amer­i­can homes un­der water, no cred­i­ble White House pol­icy or strat­egy for chang­ing things — and with most non-in­sti­tu­tion­al­ized Amer­i­cans con­vinced we are in a re­ces­sion that is go­ing to get much worse — it is sur­pass­ingly odd that Mr. Plouffe, as The Washington Post said, was wor­ried that his fel­low Democrats might think the pres­i­dent and his men think every­thing to be hunky-dory.

And yet, if over­con­fi­dence is not driv­ing White House strat­egy, what is?

If it weren’t over­con­fi­dent, wouldn’t the ad­min­is­tra­tion be chang­ing its poli­cies, staff and strate­gies, as James Carville screamed it ought to do? Mr. Carville says to the White House: “Panic!” And the White House re­sponds: “What — me worry? No, we’re not over­confi- dent.”

Af­ter the Novem­ber 2010 elec­tion rout, many ob­servers (not me) thought they ob­served a ris­ing learn­ing curve in the White House.

The pres­i­dent agreed to sign into law the ex­ten­sion of the Ge­orge W. Bush tax cuts — with the White House even con­ced­ing that one shouldn’t raise taxes dur­ing a re­ces­sion or, from its rhetor­i­cal pos­ture, one shouldn’t raise taxes dur­ing the early stages of a re­cov­ery that is not yet suf­fi­ciently ro­bust.

Yet in the pres­i­dent’s re­cent new “jobs” pol­icy an­nounce­ment, he called for more than $400 bil­lion in new taxes to “pay for” more than $400 bil­lion of Key­ne­sian growth in­jec- tion (not to be con­fused with the banned word — stim­u­lus).

Given that this ad­min­is­tra­tion be­lieves in the Key­ne­sian prin­ci­ple of re­plac­ing a slumped pri­vate-sec­tor ag­gre­gate de­mand with pub­lic-sec­tor mon­eys, why would the pres­i­dent now be call­ing for higher taxes dur­ing an “in­suf­fi­ciently ro­bust early stage of re­cov­ery?”

Ac­cord­ing to the ac­tual John Keynes, when an econ­omy ex­pe­ri­ences con­trac­tion of pri­vate-sec­tor ag­gre­gate de­mand, the govern­ment should both: 1) Spend more govern­ment money — bor­rowed, if nec­es­sary — and 2) lower taxes.

Thus, the White House de­ci­sion to raise spend­ing and raise taxes is nei­ther Key­ne­sian nor ra­tio­nal.

It is, how­ever, sim­i­lar to its de­ci­sion in 2009 to stim­u­late the econ­omy with $825 bil­lion al­most en­tirely fo­cused on govern­ment spend­ing.

At the time, I (and some oth­ers) pub­licly ar­gued that if the pres­i­dent was fol­low­ing Key­ne­sian pol­icy, the logic of that pol­icy re­quired that the stim­u­lus should be in the vicin­ity of $2 tril­lion — not less than $1 tril­lion — to re­place more than $2 tril­lion in lost pri­vate-sec­tor ag- gre­gate de­mand.

Since then, while most of the pub­lic (and most of us con­ser­va­tives) have ar­gued that the stim­u­lus did not work, the White House has made the ar­gu­ment that things would have been much worse if the stim­u­lus plan had not been en­acted — thus im­plic­itly con­ced­ing that if it had stim­u­lated more in 2009, the econ­omy would be even less bad than it is now.

So what can one de­duce has been the White House pol­icy rea­son­ing these past 21/2 years? First, in early 2009, pro­vide Key­ne­sian stim­u­lus to the econ­omy, but not enough to gain ro­bust growth.

Sec­ond, in late 2010, don’t raise taxes for fear of in­duc­ing fur­ther in­suf­fi­ciently ro­bust growth.

Third, in mid­dle 2011, raise taxes even though there re­mains in­suf­fi­ciently ro­bust growth. No won­der the left is as baf­fled, flummoxed and frus­trated as is — for dif­fer­ent rea­sons — the right.

It would ap­pear that the White House’s learn­ing curve is par­al­lel­ing the econ­omy: flatlin­ing, with the risk of a dou­ble dip.

De­spite all rea­son to the con- trary, it may be that Mr. Plouffe re­ally was de­fen­sive, that he and his team re­ally are over­con­fi­dent. Per­haps, de­spite every­thing, they feel no need to ex­per­i­ment or change an iota in their flat-lin­ing pol­icy pre­scrip­tions.

Per­haps, rather than try­ing to change the econ­omy or the world, they are con­fi­dently guided by the ex­pec­ta­tion that the Repub­li­cans sim­ply will choose an un­electable nom­i­nee and solve all the White House’s prob­lems. Blanche Dubois, in the Ten­nessee Wil­liams play “Street­car Named De­sire,” ex­pressed that strat­egy in an other way: “I have al­ways de­pended on the kind­ness of strangers.”

If I were in the White House, I would not rely on the kind­ness of GOP strangers. I would re­mind them that Blanche Dubois re­cited that strat­egy as she was be­ing se­dated and led off to a men­tal hos­pi­tal.

Tony Blank­ley is the author of “Amer­i­can Grit: What It Will Take to Sur­vive and Win in the 21st Cen­tury” (Reg­n­ery, 2009) and vice pres­i­dent of the Edel­man pub­lic re­la­tions firm in Washington.

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