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June 03, 2009

Dick Morris on Obama's Coming Implosion

He talks a lot about this. I think he's right.

He starts by noting the (confusingly worded) Rasmussen poll which seems to ask who is primarily at fault for the recession. As both Bush and Obama now have four months of it on their records, it's still easy to call it Bush's recession.

But it will become increasingly obvious that the large deficit Obama has incurred while pursuing his cure for the recession is, on its own, causing more problems than it solves. As high interest rates and, most likely, inflation, begin to set in -- with no relief in unemployment -- it will be obvious that Obamanomics isn't working and is, in fact, aggravating the economic trouble.

Obama, recognizing the danger, has recently begun to speak out -- without even cracking a guilty smile -- against the huge budget deficit he created. He is trying to blame the deficit, too, on Bush. But voters will not overlook the huge spending sprees of January and February, when Obama quadrupled the 2009 deficit. They will come to see that spending as a huge mistake and will shift their blame to the new president who proposed it.

Obama now faces a choice of poisons.

He can leave taxes as they are and take the poison of high interest rates, rapid inflation and a new recession, all caused by the massive borrowing he has forced on the Treasury. If the Treasury cannot sell enough bonds at a reasonable interest rate, it will, of course "monetize the deficit" -- economics-speak for printing money so that there will be enough to buy the Treasury debt at moderate interest rates. But the process of so vastly expanding the money supply (or even just leaving the current expansion in place without trying to soak up the extra money) will cause its own runaway inflation.

Or Obama can break his pledge and raise taxes on everybody. His soak-the-rich approach will not be enough to cover the deficit. Especially when one factors in his healthcare proposals, big tax increases on the middle class become an increasing likelihood. And when we consider his cap-and-trade legislation, huge increases in utility rates also loom.

Either poison will make it clear that the economy is suffering from the medicine Obama administered, rather than the original disease that started under Bush.

He ends by talking about the possible shapes of the recession -- U-shaped (a drop, and then a recovery), L-shaped (a drop, and then a long period of depressed activity and no recovery) or W-shaped (drop, start to recover, drop again).

Most people (not experts) expect the U-shaped recession, and anticipate a relatively quick recovery. That's why (with a big assist from the media) they actually give Obama higher marks on the economy during a recession than they did Bush during an expansion.

But when it's revealed that this is not like a typical recession, largely because Obama has pursued anti-recovery policies during it, the tide will turn.

Of Course... If Obama's medicine somehow works (or is perceived as "working") then, as Dick Morris says, sell the phones and close down the office, because then it's all over, and we "all become liberals."

Well, we won't. But enough people will that we'll be irrelevant.


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posted by Ace at 02:01 PM

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