Tuesday, March 20, 2012

Misleading Us, Again

Nine months later, it is still happening, now on a different topic.

Back in February, 2010, President Obama employed the "belt" metaphor, maintaining at a town-hall style meeting in Nashua, N.H. "responsible families don't do their budgets the way the federal government does.   Right?   When times are tough, you tighten your belts."

The White House's obsession with fighting debt rather than recession continued throughout 2010.    David Corn in Showdown, detailing the debt negotiations between the Administration and Speaker John Boehner, writes, according to Greg Sargent

Plouffe was concerned that voter unease about the deficit could become unease about the president. The budget issue was easy to understand; you shouldn’t spend more money than you have. Yes, there was the argument that the government should borrow money responsibly when necessary (especially when interest rates were low) for the appropriate activities, just like a family borrowing sensibly to purchase a home, to pay for college, or to handle an emergency. But voters needed to know — or feel — that the president could manage the nation’s finances. The budget was a test of government competence — that is, Obama’s competence. 

The White House focused even more on the deficit following following the drubbing Democrats took in the off-year elections in 2010, when the following February

With Sperling sitting in on the presentation, Garin reinforced the White House view that Democrats had to up their game on deficit reduction. His firm had conducted extensive polling and focus groups. He told the senators that voters saw jobs as the most pressing priority. This might seem to support those Democrats who believed Obama had gone too far overboard on the deficit-reduction cruise. But when asked what the president and Congress should do to boost job creation, most voters said reduce the deficit and the debt. They had imbibed the GOP message; the problem with the economy was governmental red ink.

That was not accurate. The financial crash that triggered the economic collapse was unrelated to federal deficits. But Garin measured voter perceptions, not whether voters were correct. And he told the senators that voters would not listen to what the Democrats — including the president — had to say about jobs and investments if they did not sense that the Democrats were willing to wrestle the debt monster to the ground.

Nearly a year and a half later, in mid-2011, President Obama was still at it, claiming in a presidential address

Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.

At the time, Paul Krugman explained

That’s three of the right’s favorite economic fallacies in just two sentences. No, the government shouldn’t budget the way families do; on the contrary, trying to balance the budget in times of economic distress is a recipe for deepening the slump. Spending cuts right now wouldn’t “put the economy on sounder footing.” They would reduce growth and raise unemployment. And last but not least, businesses aren’t holding back because they lack confidence in government policies; they’re holding back because they don’t have enough customers — a problem that would be made worse, not better, by short-term spending cuts.

Recently, Krugman has criticized the "belt" analogy, observing

maybe we can use Greece as a quick illustration of the point.

After all, you could view Greece as being like a family that overspent, got itself into debt, and whose members now have to do all the things families do when they get in that position: slash spending on inessentials, postpone medical care and other big expenses, quit their jobs and reduce their incomes — oh, wait.

That’s the key point, of course. When a family tightens its belt it doesn’t put itself out of a job. When a government tightens its belt in a depressed economy, it puts lots of people out of jobs; and this is a negative even from the government’s own, narrowly fiscal point of view, since a shrinking economy means less revenue.

Now, you might argue that slashing government spending doesn’t actually cost jobs — that is, you might argue that if you spent the past few years in a cave or a conservative think tank, cut off from any information about how austerity is working in practice. For the results of austerity policies in Europe have been as good a test as you ever get in macroeconomics, and without exception big cuts in government spending have been followed by big declines in GDP.

Right before our eyes, it is happening again.

Republican presidential candidates are thoroughly irresponsible.     Newt Gingrich, having the time of his life, promises $2.50 a gallon gas.     Mitt Romney says "solar and wind is fine except it's very expensive and you can't drive a car with a windmill on it.     That's where the dog crate goes"  (maybe not the last sentence.)    

President Obama is much better, declaring members of Congress "can either stand up for oil companies, or they can stand up for the American people.”      But he maintained his faith in austerity, contending

It’s easy to promise a quick fix when it comes to gas prices. There just isn’t one. Anyone who tells you otherwise – any career politician who promises some three-point plan for two-dollar gas – they’re not looking for a solution. They’re just looking for your vote.

Obviously Gingrich is merely a mixture of showmanship and opportunism and there is no "quick fix," as in poof! gas prices are halved.        But with oil supplies up and demand for gas (at least in the U.S.A.) down, higher prices at the pump are not merely- or primarily- a function of  declining supply or increased demand in Asia.

The President stated additionally "If we don’t develop other sources of energy, and the technology to use less energy, we’ll continue to be dependent on foreign countries for our energy needs."      While that's undeniably (unless you're a Republican) true in the long run, there is another factor at play at present, one which the President could point out and possible effect.

That is, euphemistically speaking, investors, doing a good imitation of speculators:  

"I don't think the oil companies are driving up the price of oil, but they like it," says Gordon Weil, of Harpswell. Weil is the former director of the Maine Energy Office and advisor to the U.S. Department of Energy, and id now a contributing writer for the Maine Center for Public Interest Reporting.

"Clearly one has to be mindful of supply disruptions, but I think that the financial markets, or speculation is artificially driving the price up, that speculators latch on to any news, or prospect of bad news as an excuse to drive up the price of oil," Weil says.

Veteran Oil trader Dan Dicker agrees. He says when geopolitical flare-ups occur that involve major oil-producing countries such as Libya, or Iran, there's lots of talk about potential disruptions to the world's oil supplies. 

"And that drives alot of people who are investors and speculators to bet on a very strong price of oil going into the summer," Dicker says. "And when you have a number of new buyers coming in and a lack of sellers, you're going to have a price rise." 

The President has been loathe for the American people to understand the role of Wall Street in jacking up the price of petroleum; or that cutting budgets in an economic downturn is a drag on wages and job formation; or that if an assault weapons ban still had been in effect, the lives of six individuals may not have been snuffed out in January, 2011 in Tucson, Arizona.        Leveling with the American people and pointing us in the direction of productive change is a test of leadership President Obama has failed miserably.

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