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August 19, 2011

"The White House’s worst-case scenario for the economy on Election Day next year has become Wall Street’s baseline scenario."

We are doomed, but at least we are not doomed alone.

After looking at a string of weak economic reports and Europe’s growing fear of debt meltdown and contagion, JPMorgan – led by Obama pal Jamie Dimon – has just come out with a politically poisonous forecast.

The megabank now thinks the economy won’t grow much faster over the next 12 months than it did during the first half of this year — and that’s assuming Europe doesn’t go all pear shaped. It sees GDP growth at just 1.5 percent this year, 1.3 percent next year with unemployment at … 9.5 percent heading into the final days of the election season. “The risks of recession are clearly elevated,” the bank said...

No president in the modern era has been reelected with the unemployment rate higher than 7.4 percent, much less two percentage points higher.

Obama already announced his campaign plan on his supposedly non-campaign Magical Misery Tour. He announced this publicly. He does that a lot -- he talks about his actual political strategy, without really making any effort to convince anyone he's thinking of the public good.

I've said before that could be attributed to unusual candor, but I suspect the explanation does less credit to Obama: It's that he's so narcissistic and solipsistic he mistakes his own fortunes for the country's.

So here is the plan: He will "challenge" the Republican House to pass a new "stimulus" plan which is (this is my gloss; this he did not say) unpalatable by design to the GOP. That is, his challenge is designed to be rejected.

He's already announced (or his aides did) the sort of Brand New Ideas which will be contained in this new "stimulus:" an extension of unemployment insurance (which famously creates jobs), an extension of the payroll tax cut for low-income workers, and of course "infrastructure spending," such as on roads and, I assume... high speed rail.

Those, um, shovel-ready projects which Obama claims to have discovered belatedly do not exist. (Whether he was so jejune and ill-educated to have not known this, or was simply cynically lying, I do not know; either is plausible.)

I believe they're also thinking about Schumer's old suggestion of some payroll tax break for new hires only, but that seems like a very stingy sort of tax-cut-based stimulus. Seems like window dressing.

Now, a White House source already talked to the press and told them the three possible outcomes from this scheme, all of which would favor Obama politically and only one of which would aid the country:

1. The Republicans cave, and give him his new stimulus, and the economy improves, in which case Obama wins. (Note this is listed first -- I take this as a throwaway line, then, something they don't even expect will happen, but have to mention in order to rigorously list all possible outcomes.)

2. The Republicans cave, and give him the new stimulus, but the economy does not improve, in which case Obama wins because the Republicans joined him in this newest of his many miserable failures and so co-own the result.

3. The Republicans refuse to do the New Improved Stimulus, in which case Obama simply blames them for the stagnant economy, in which case Obama wins because now he's got a sharp differentiating line of attack against the Do Nothing Congress.

You might ask "How on earth could Obama even ask for a new injection of additional spending when we just had a two month battle over the debt ceiling?" Simple. Spend now, pay later. He will ask for some sum of money (how much I don't know-- say, $400 billion at a minimum for anyone to even notice) but promise $400 billion in spending cuts in the out-years of a ten-year window, say, kicking in in six or seven years. So, in theory, it's deficit neutral, at least over time, and if you believe these cuts will ever occur.

Which programs will he suggest cutting? Oh, I know. He didn't say, but I know. A mix of new defense cuts and Medicare cuts.

This is the funny thing -- The Democrats are running on a Mediscare platform while their President and titular leader proposes and propose $500 billion, $1 trillion, and likely a new $400 billion in cuts to Medicare.

The media never reports this. They just tell you how scary the Medicare reform of Paul Ryan is. But they never seem to mention that Obama is simply cutting Medicare, without reforms that might make those cuts less painful, left and right.

So that will be his pitch: Let me spend more and cut Medicare and defense somewhere down the road.

The President will not, of course, offer Republicans the sort of stimulus they could conceivably support, such as a much wider, deeper temporary tax cut. Oddly enough, our supposedly Keynesian president always forgets that deficit spending via temporary tax cuts is a Keynesian response to a recession, too.

Odd, that he only focuses laser-like on the spending side of things, as if he has some overwhelming obsession with increasing the size and power of the State.

So there you go. There's your next three months.

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posted by Ace at 01:03 PM

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