No single image better sums up Obamanomics than the familiar rainbow of red ink comparing the projected Obama deficits to the actual Bush deficits. One more time for soon-to-be-old-times’ sake:
Like the poet’s “thing of beauty,” that’s just about all we need to know on this political Earth. There’s only one problem. We’re gonna need a bigger graph, soon, one that fades the pinkish Obama-bars the rest of the way out and pinks the obsolete CBO-reds, then adds some new reds or maybe some psychedelic paisleys in the honor of Baby Boomers and their worthless retirement portfolios, since economic growth and unemployment figures have already negated the chartmaker’s assumptions, since major spending initiatives have not yet been incorporated, since major financing mechanisms (like the Obama version of cap-and-tax) are in grave political doubt, and since in this context the inevitable failures of prognostication dynamically and exponentially undermine all attempts to prognosticate.
Robert J Samuelson, who’s been doing this stuff a long time (and whose recent book The Great Inflation I highly recommend to my fellow economic amateurs interested in the longer view on how we got here), put it this way in a column today:
Even these totals may be understated. By various estimates, Obama’s health plan might cost $1.2 trillion over a decade; Obama has budgeted only $635 billion. Next, the huge deficits occur despite a pronounced squeeze of defense spending. From 2008 to 2019, total federal spending would rise 75 percent, but defense spending would increase only 17 percent. Unless foreign threats recede, military spending and deficits might both grow.
The rest of Samuelson’s article, in language that’s mostly as restrained as its import is most alarming, teases out the implications. You almost have to read it several times, mentally highlighting the key terms and phrases: “gigantic changes,” “more threatening,” “weaken economic growth,” “shatter confidence,” “worldwide consequences,” “ultimately backfire,” and so on.
If a President McCain had put out a budget like this one, Samuelson concludes, “There would almost certainly have been a loud outcry: ‘McCain’s Mortgaging Our Future.'” Yet amidst this conspicuous shortage of outcriers, we do have one lone voice with access to the public podium who has sounded the alarm: That would be President Obama. In a schizoid self-indictment late last week, Obama himself described his own fiscal prestidigitation as “unsustainable“:
But the long-term deficit and debt that we have accumulated is unsustainable. We can’t keep on just borrowing from China, or borrowing from other countries — (applause) — because part of it is, we have to pay for — we have to pay interest on that debt. And that means that we’re mortgaging our children’s future with more and more debt, but what’s also true is that at some point they’re just going to get tired of buying our debt. And when that happens, we will really have to raise interest rates to be able to borrow, and that will raise interest rates for everybody — on your auto loan, on your mortgage, on — so it will have a dampening effect on the economy.
As the President accurately summarizes, but hardly even begins to explicate, the feedback effects of such unsustainability – the vicious synergy of higher interest rates, reduction in economic growth and therefore in receipts, creditor revolt, but also inflationary pressures, higher taxes, decline of the dollar, high unemployment, etc., etc. – suggest the spiraling waters of a broken fiscal toilet bowl, with our national life – the savings, hopes, and dreams of Boomers, Crashers, and Gens X, Y, and 0 – all flowing down the drain and disappearing.
If the President knows that his plans and projections may equate with assisted national economic suicide, well then why is he planning and projecting as he is? Some say he’s a dolt. Some say he’s a leftwing Samson gaily pulling down the temple. I think there may be a little in both uncharitable depictions, but I think he’s also probably just a lot like all the rest of us. He doesn’t understand enough, and, the moment he begins to, denial mechanisms (and old reflexes) take over. He’s Scarlett O’Bama, and will worry about it tomorrow.
In the meantime, what he does know is American politics, which has turned on a consensus going back 60 years, possibly setting aside the Reagan-Volcker interlude of 1981-2, to require more of economics than economics has on offer. It’s a commitment and an assumption – that we as Americans are born with the inalienable right to a frictionless prosperity – that has made us vulnerable to every snake oil pitchman who comes along. It even fools the pitchmen themselves.
In this light, trying to make economic sense of the Obama program is quite like trying to make waking world sense of a vividly complex fantasy – and that’s because Obamanomics is a political, not an economic program.
For the same reason, making political sense of it is easy. As the phase-in of the “emergency” stimulus program underlines – 10% for the supposed emergency, 90% for later on, especially 2010 – the audacious hope revolves around stemming the usual first mid-term electoral losses, and consolidating political if not economic capital along the way. Afterward, even if the Fed, recognizing inflationary and other dangers, starts to roll back its money super-ultra-over-supply and push the Prime Rate up by integers, the appearance of restored normalcy may boost presidential approval and re-elect #s heading into 2012, with further support from increasingly dependent and fearful client constituencies being built up in health care, energy, environment, finance, manufacturing, and everything else owned or tacitly commanded within the exploded public sector, including the public-private and private-only-in-name sectors. Incumbent advantages and the Grand Army of the Permanently Obamatized should push him and his party back over the top.
It’s a strategy anyway – a Chicago on the Potomac praxis – and no one can say with absolute certainty that there’s not some statist steady state, pleasing to Gaia and all her green children, with liberty to praise Obama and justly distributed entitlements for all, at the end of the all-consuming red and pink rainbow. The thing is: Neither President Scarlett nor anyone else is fully in control of the global alarm clock. As ever larger numbers of investors, creditors, competitors, adversaries, and prospective state dependents extend their time horizons beyond the next quarter – a for us novel outlook, but suitable to the coming low-growth, hard-credit, non-consumerist epoch that seers such as Treasury Secretary Tim Geithner have outlined; even more suitable to an epoch whose apocalyptic revelations may have only just begun – the buzzer could sound at any moment.
It could even come… now… or now – a turn of events that might be to the President’s political and our national advantage if it gives him a reason to junk the script, announce a la Monty Python’s Flying Circus that it’s time for something completely different, and, crucially, handle it all beginning this day, here, rather than tomorrow or in the land of Nod. If he turns out instead to be the bumbling sleepwalker on everything that matters that his critics see in him, then he’ll stagger in his stylish PJs right out of office, more Hoover, Buchanan, or Carter, than Roosevelt, Lincoln, or Reagan.
And our work-day in the real world, whatever’s left of it, can finally begin.