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March 6, 2010
Is the White House delusional about 2012?
The title puts the sound of Obamacare into perspective. Orally, it is possible that the speaker means it either way. "Obama care" is the issue that Simon Johnson, MIT economist, explores.
More specifically, "Does Obama care?"
Johnson appears to answer the question with a No. He believes Obama is not trying to remedy the economic mess:
But ever so quietly, you get the impression the Obama team itself is not so very unhappy -- they know the jobs will come back by 2012, they feel that Republican control of the House will just energize the Democratic base, and no one will be able to blame the White House for getting nothing done from 2010 on.
If Johnson is correct in his impression, how competent can this Administration be? How does someone who accomplished nothing in his first two years possibly think that pitching another two year shutout can help in 2012?
According to Johnson, the Administration thinking is that unemployment will not be a crippling issue in 2012:
The inner team apparently thinks that 2012 will go just fine -- as long as unemployment is down around 6 percent.
It would have been interesting to hear Johnson's opinion on the unemployment target. In my opinion, unemployment dropping to 6 percent by 2012 seems extremely slim. Massive tax increases are just around the corner. Higher interest rates probably are as well. A weakening dollar may force Bernanke's to tighten monetary policy. Unemployment does not improve under any of these conditions.
If, in fact, the beliefs communicated by Johnson are correct, the Administration appears to be delusional. Johnson suggests as much:
The Obama team -- both political and economic wings -- seems to feel that their base has nowhere else to go, and all they need to do is drift towards the right in a moderately confused fashion to assure re-election for the president.
A more interesting hypothesis, not suggested by Johnson, is the mental condition of the President. We know there are disagreements within the White House (Rahm Emmanuel being the prime, recent example). We know Obamacare is suicide for the Democrat Party because it is opposed by a strong majority of the public.
Is it possible that staff has just given up? Has frustration overtaken them? Perhaps they recognize the hopelessness of the situation (political, ideological as well as economic) and have just decided to ride out the rest of the term. If you were in a position where nothing you said could sway your boss from chosen and unwise action, and it was not feasible to resign, would you not shut down?
Obviously all of this is speculation. Johnson expressed his opinion, which appeared to imply a form of mass delusion. Mine is not dissimilar to his, except that mass delusion does not occur without cause. I speculated on the cause. Readers may have their own opinions.
Little seems to make sense anymore, at least viewed through the conventional prism that served so well for so long.
Monty Pelerin www.economicnoise.com