Phil Gramm spoke the truth. The economy is in a slow period, but the recession that many of us (including me) anticipated has not happened. IOW, despite significant structural problems in the economy (housing meltdown, inflation, oil prices, weak dollar and other policy mistakes), the economy is holding up. This is good news.
There is a disconnect between the real economy, which is doing OK, and the media picture of an economy about to fall into steep recession if not depression. It’s obvious what’s going on. First, the media industry is consolidating: old media businesses are failing, their employees either being laid off or worried about their jobs; new media businesses like Google are changing the fundamentals of the media industry. So there is a lot of fear and uncertainty among media people, and that uncertainty gets reflected in news reports and opinion columns.
Second, the big media are, as usual, doing their best to get the Democrat elected. This means that the economy is going to be terrible until the election, after which we will (assuming the Democrats win big) experience a remarkable recovery due to the farsighted policies of President Obama and the Democratic Congress.
Gramm was merely pointing out what was already obvious to serious observers. Maybe, for tactical political reasons, he shouldn’t have been as blunt as he was in the Washington Times interview, but that’s hindsight. The problem is that McCain immediately disassociated himself from Gramm in a way that weakens his campaign. Gramm, a former economics professor, is known for having a clue about economics. Indeed he was brought into McCain’s campaign to compensate for the candidate’s widely acknowledged weakness in this area. McCain’s hasty disavowal of Gramm therefore looked like a political panic. He was behaving like the old McCain, whose primary loyalty often appeared to be to the media and Democratic opinion. The media and Democrats decry what they see as a disastrous economy, therefore McCain could not allow Gramm’s reasonable statements to stand. He didn’t even try to spin them but flatly disavowed them. This was McCain at his worst.
The Gramm incident also showed Obama at his worst. While Obama showed consummate political skill in exploiting the McCain campaign’s missteps, he revealed in doing so the glibness and extreme arrogance that unnerve some of us. Here is the key part of Obama’s response to Gramm:
“Senator Phil Gramm, a top economic advisor to Senator McCain, just recently said that this is merely ‘a mental recession,'” Obama said during a campaign appearance in Virgina.
“Senator Gramm then deemed the United States, and I quote, ‘a nation of whiners,'” Obama said.
“Well, you know, America already has one Dr. Phil,” Obama said, referring to a tough-talking television talk show host and psychologist.
“When it comes to the economy, we don’t need another,” he said.
“I think it’s time we had a president who doesn’t deny our problems or blame the American people for them, but takes responsibility and provides the leadership to solve them. That’s the kind of president I will be.”
Obama, who appears to know little about economics, blames economist Gramm for denying the existence of problems that don’t exist. The arrogance comes through more clearly on video:
I had thought McCain was due for a bounce, but things aren’t looking good. And of course McCain is his own world of bad policies.
Interesting times ahead.