Posted by lex, on February 5, 2009
As I’ve pointed out before, one of the divides between our two great national parties is where they journey seeking dragons to slay. The Republican Party has traditionally had a reputation as the daddy party when national security is in the forefront of the popular mind, while the Democrats enjoy a public preference for solving economic issues. Republican politicians express a preference for hands off, market-driven results in the domestic economy, while Democrats prefer to hand off national security to the UN.
Since each party prefers to play to their strengths, there is an innate tendency to exaggerate the nature of the perceived threat. Thus it was that the Bush administration was accused of exaggerating the threat of religious extremism the better to solidify their political control. Thus it it may be that the Obama administration is sounding an economic dive klaxon to extend the reach of government at home:
Obama painted a bleak picture if lawmakers do nothing.
“This recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse,” Obama wrote in the newspaper piece titled, “The Action Americans Need.”
As early as April 2007 media pundits were declaring that wage-crippling inflation was about to break out because there was very nearly full employment. Inevitable wage pressures would set off an inflationary spiral. By December of 2007, the talk had turned to recession. As late as April of last year we had still not experienced the technical definition of recession even though we’d been hearing a relentlessly negative drumbeat of negative economic news.
Our economy is largely driven by consumption. Fears of an impending recession drive consumption down. Bubbles burst (rather than deflate) because people are afraid about being the last fool out. Credit markets freeze because fear replaces trust.
This is not to say that there were not, are not, organic problems with the underlying economy. Nor is it to deny that capitalist markets are prone to crises. But I do wonder to what extent our current economic issues were driven by those organic issues, and to what degree we were driven towards them.
Fear: Look at it as a jobs program.