Words matter.
BY Irwin M. Stelzer
Americans are fighting what Winston Churchill called “a Black Dog … on his back.” Americans are losing the fight, which is odd since the economy is finally gaining rather than losing jobs, and the manufacturing sector is growing nicely. The new Wall Street Journal-NBC poll shows that the Black Dog is the unwelcome household pet in most Americans’ homes. More than 60 percent say the country is on the wrong track, 48 percent disapprove and 45 percent approve of Obama’s job performance, and 50 percent disapprove of the way he is handling the aftermath of the Gulf oil spill (42 percent approve).
The unhappiness is due to several factors. The Greek financial collapse, which ordinarily would be a yawner here, has focused Americans’ minds on the perilous state of our nation's finances. Lay the relevant fiscal facts of Greece and the U.S. side by side, and there isn’t much difference in such things as the deficit relative to the size of the respective economies. Of course, there is no prospect of an American default -- we can always print money -- but it has come home to many Americans that the large deficits being run up by the Obama administration bode ill not for our grandchildren, as we thought until recently, but for our children. That’s why a Democratic Congress last week turned down the president’s request for a second stimulus -- just as he was preparing to head for Toronto to try to sell his G20 colleagues on the need to spend and spend.
No longer can the administration claim that America is only one of many debtor nations willing to increase stimulus spending. The president sent a letter to his G20 partners in advance of this weekend’s Toronto meeting, urging them not to abandon their stimulus programs just yet. He received a frosty response from German chancellor Angela Merkel to his request that she stimulate domestic demand, an implied rebuke from Chancellor of the Exchequer George Osborne, whose budget began an attack on the UK deficit, and a public although oblique rebuttal from the head of the European Central Bank, Jean-Claude Trichet, who argued that only deficit reduction can maintain the recovery and produce sustained growth. Deficit-shy voters noticed that their president is now virtually alone in his addiction to red ink.
The business community also has taken notice of what is going on in Europe. Firms hoping to increase exports -- Obama’s preferred path to prosperity -- are finding the going tougher now that the euro has dropped some 20 percent. And U.S. firms competing with made-in-euroland products notice that any pricing power they might have been acquiring as the economy strengthened is suddenly constrained by the lower dollar prices their overseas competitors can charge.
The Federal Reserve Board’s monetary policy gurus added to the gloom. In an earlier report they had been what passes for cheery among central bankers. Last week they turned gloomier. The earlier statement that financial conditions “remain supportive” of economic growth became “financial conditions have become less supportive of economic growth.” Chairman Ben Bernanke, who only a few weeks ago said that the turmoil in Europe would have little effect here, reversed course and now contends that there might indeed be more than a minor ripple effect on our financial markets.
My own conversations with knowledgeable observers lead me to believe that the most important problem weighing on people’s minds is the economic policy of the Obama administration. The American Enterprise Institute’s Karlyn Bowman, probably the most astute poll analyst in Washington, tells me that Americans feel “nothing is going right...They don’t like the economic program of the administration.” The inability of the president to control the Gulf oil spill -- something he led voters to believe he could indeed do when he declared himself to be in charge of the disaster; his refusal to bring the deficit under control; and his insistence on focusing on his new, costly energy program rather than on jobs have voters feeling that they have no influence about what an anyhow inept government does.
Businessmen in particular are increasingly worried about the direction of the administration. The Business Roundtable, a group of very establishment big businessmen who have in the past avoided direct confrontation with any president so as to maintain access to the White House, are suddenly willing to criticize a sitting president. The head of the group, Ivan Seidenberg, whose day job is running Verizon Communications, claimed that Obama is creating “an increasingly hostile environment for investment and job creation.”
One top administration official tells me he spends a lot of time trying to persuade the president that his anti-business rhetoric has serious consequences at a time when the continuation of the economic recovery rests heavily on inducing businesses to invest. The government is now too much in debt to add much demand to GDP. Consumers, too, remain heavily indebted and too worried about their financial condition to increase spending very much.
That leaves the business sector, its cash pile high and rising, its entrepreneurs ever-ready to innovate and invest. Unfortunately, those animal spirits have been tamed, aggressive business tigers reduced to fearful pussycats by the prospect of increased regulation, tax increases that the president has promised to levy on the rich and their legatees, and naming and shaming by the president should they do something of which he disapproves. You don’t have to be an insurance company executive to identify with those hauled into the White House last week and told by the president that although he has no legal authority to do so, if they raise premiums to reflect the increased costs imposed by his health care bill, he will make them regret it.
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