Democrats accuse an "insensitive" Bush of talking down a fragile economy reliant on mass psychology. Even some lefty economists say this is bunk.
Topics: Politics News
Democrats aggressively pursued a line of attack on President Bush this week that had been kicking around newspaper Op-Ed pages and cable TV talk shows for a while: Bush, as House Minority Leader Dick Gephardt, D-Mo., put it Monday, is guilty of “a talking down of the economy.” It was a notable shift in tactics from previous weeks, when Democrats alleged that Bush and his staff were making frequent references to a possible recession in order to fear-monger support for Bush’s tax cut. Now, his critics allege, Bush’s move is not only cynical but also harmful. Like a pimply teenager, the economy, we are told, suffers from frail self-esteem. As Jeff Madrick, author of “The End of Affluence,” told Salon last week, “for a president to be talking about us entering a recession is dangerous, highly insensitive,” adding that “economies are built on psychology.”
“The economy is partly directed by mass psychology,” says Robert Reich, former labor secretary under Bill Clinton. “The bully pulpit is a powerful factor in America. A president should not be telling the American public that the economy is sputtering, or tanking, or heading into a recession without good reason.” Sen. Charles Schumer, D-N.Y., warned Bush to “stop talking down the economy.” Gene Sperling, former national economic advisor to Clinton, wrote in the Boston Globe that the “president risks creating a negative self-fulfilling prophecy.” Democratic New York Rep. Nita Lowey, among others, was already preparing to blame Bush should the economy keep heading south. “We had a healthy economy. People were working. We have never seen such a robust economy. Suddenly, Dick Cheney and this president have been causing things to go down in a tailspin.”
Democratic Senate Leader Tom Daschle of South Dakota is even blaming the current malaise on the new administration. “Obviously,” he said, “the result of the rhetoric is an economic slowdown.” That will only improve, he said Wednesday, “if the president and those of us don’t talk down the economy but try to encourage people to be confident again.”
But that’s not obvious at all. Because while most economists — even ideological opposites — generally agree that it’s unwise for Bush to publicly comment about how, as he has put it, “our economy is beginning to sputter,” they seem equally in agreement that it won’t actually hurt the economy, either. As economist James Galbraith, professor of public affairs and government at the University of Texas in Austin and no fan of Bush’s economic policy, puts it, “He certainly depresses me, but it’s hard for me to actually believe that the American public is paying attention to what he says.”
Galbraith goes on to grudgingly give Bush and members of his administration credit for making the right call about the present economic climate. “What they have said about the economy heading into a slump is perfectly true,” he asserts. Rather than ding the president for ringing the alarm bells too early, Galbraith insists that most economy watchers have been a step behind. “I started predicting a slowdown in spring of 2000,” he notes. Christian Weller, a macroeconomist with the Economic Policy Institute, a progressive think tank, also believes Bush’s statements are basically harmless.
Bush first voiced concern in late November and early December, months before he took office. Then President Clinton scolded him for it. Then in February, the Commerce Department released figures that showed that the economy grew at an anemic 1.1 percent during the last quarter of 2000 — a significant slowdown from the 5.6 percent growth rate achieved in the second quarter of that year — and Bush was proven right.
Does that mean America is heading into a recession? Not according to the textbook definition of one, which is two consecutive quarters of negative economic growth. But then, Bush has never used the “R” word himself. The president has consistently stepped around warning of an economic recession ever since Dick Cheney ventured onto that dangerous ground in early December.
That’s not to say Bush hasn’t done his level best to tell everyone in earshot that the economic picture looks bleak. Even when confronted with silver linings, Bush has been careful to point out the big, gray cloud, as he did when he described a rise in January’s retail sales as “one good statistic amongst a sea of some pretty dismal statistics.”
Practically, Bush’s dire talk has given many Americans an opportunity to curtail their boom-time spending. Politically, Bush’s bad-news bonanza serves two purposes: making sure that Americans remember that the economic trouble started on Bill Clinton’s watch, and selling his tax cut plan to a reluctant Congress. Frankly, Bush’s statements seem to have had the desired effect on the Hill. Since Bush began bearing bad economic tidings, his tax plan has gone from being considered dead on arrival by Republicans and Democrats alike to being seen as a viable starting point for the nation’s future fiscal policy.
And this is where the economists take their positions. On the left, Weller finds it annoying that Bush is positioning his tax plan to help America climb out of the economic ditch when a more middle-class tax cut would be a better strategy. “We need to send the money to people who will spend it.” Bill Niskanen, chairman of the libertarian Cato Institute, sneers at that argument. “It assumes that people who save put their money under their mattress,” he says. “Whether people invest that money or put it in a bank, it’s still going back into the economy.”
Though he’s optimistic about portions of Bush’s economic policy getting approved, Niskanen doesn’t expect that the Democrats will be easily deterred from trying to trim the $1.6 trillion price tag by labeling the Bush tax cut a shameless pandering to the rich.
In that anti-Bush strategy, at least, the Democrats might actually be on to something.
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