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January 08, 2009

Nearly 700,000 Jobs Lost in December; Far Worse Than Expected

The perfect storm in Obama's favor, as he will ride the "Bush destroyed the economy, I can't be held responsible" horse until it dies of exhaustion.

As James Pethoukis points out, this will work... up to a point.

But can a repetitive "Blame Bush" mantra allow Democrats to hold their huge Congressional majorities in 2010 and get Obama reelected in 2012 if they economy is as bad they think it will be? The latest iteration of Obama's stimulus -- I mean "economic recovery" -- package indicates that Team Obama has its doubts about voter patience and the economy. The larger-than-expected tax cuts, even if they are really just disguised government spending, are an effort to rejigger the plan to provide more economic oomph this year. Indeed, as the CBO said when Obama adviser Peter Orszag ran the joint, using infrastructure spending to juice the economy is "totally impractical." There just aren't enough "shovel-ready projects" to make effective use of the hundreds of billions Obama wants to throw at the recession.

And Obama has good reason to doubt the patience of voters. Recall that bad economies propelled Ronald Regan and Bill Clinton to the White House -- and both gentlemen saw their respective parties suffer badly in the very next midterm election because of voter economic anxiety. To quote Oscar Rogers, the impatient "financial consultant" on Saturday Night Live, American voters want Washington to "Fix it!" and fix it fast.

And, really, how can Obama avoid taking responsibility when he will be so actively meddling in the economy? It will be his decision to forego deep and permanent new tax cuts, his decision to not extend the Bush tax cuts, his decision on how to spend the remaining $350 billion in TARP money, his decision to quasi-nationalize healthcare, his decision to push a cap-and-trade carbon emission program and his decision to spend hundreds of billions on a "green" industrial policy. It might even be his decision to try and reunionize the American laborforce. Obama will "own" the battered economy, perhaps almost literally, given Uncle Sam's bailout binge.

So what standard should voters hold Obama to? How about this one: The 1981-82 recession last lasted 16 months and was followed by an explosive recovery thanks largely to the Reagan tax cuts (even though they were slowly implemented). The current downturn, according to the National Bureau of Economic Research, started in December 2007. Mr. Obama better hurry.

The expected deficit for this fiscal year (beginning late in 2008 ) is $1.2 TRILLION dollars. Supposedly deficits will get smaller in the following years, but I doubt that.

All restraints on spending have been lifted. This works like gangbusters in Obama's favor. Like a CEO who only cares about next year's bonus and not about what happens after he leaves the company, Obama can bust the budgets like there's no tomorrow to prove he's "doing something" about the economy, hoping the public doesn't realize that 1) he may actually be doing something bad to the economy and 2) that the price of his attempting to over-juice the economy with lots of newly printed bills in time for his reelection will be significantly reduced growth and significantly higher inflation and significantly higher interest rates and significantly higher inflation, not for the duration of a recession, even a long one, but perhaps for an entire generation.

20 years.

But he is fixed on 2012. He's not running in 2016 (or rather we hope he's not running in 2016). Or 2020. Or 2024. He can spend money we don't have and reduce the prosperity of this nation for 20 years as long as it buys him some traction for 2012.

Other presidents have this same fact driving them, of course. They too are, selfishly but understandably, looking their own reelection prospects and not the mess they'll leave ten or fifteen years down the road.

But most presidents face considerable checks on such impulses. In this crisis-all-the-time environment, this Greatest Depression Since the World Was Young era, economists are now claiming that Obama may, and should, spend like there's no tomorrow, because, as they claim, perhaps there won't be a tomorrow.

As difficult as it will be for Republicans to resist this superheated talk of impending doom, it is crucial we resist and at least put some check on these bankbreaking plans of "stimulating" the economy with $1 Trillion more, in addition to all the bailouts (also running in the near-trillion range). This isn't merely a partisan imperative. It isn't just to deny Obama his easy 2012 win, paid for by the misery and decline of the next generation. It's to save that next generation, and convince the public that a country which has come to a crisis due to overspending and too much fake money can't get out of it, at least not without serious damage to the economy later, by overspending more and flooding out even more fake money.

The calls to do something, do anything will be cacophonous and Cassandrian. But the GOP, if it is to survive at all, cannot allow Obama to spend trillions in newly-printed dollars each year simply to goose his chances for 2012.

Red Ink Unlike Anything Since WWII: A projected 8.3% deficit will shatter all records since the Good War.

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posted by Ace at 02:34 PM

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