Monday, July 19, 2010
Summer of Discontent
The turning of fortunes for Obama can largely be linked to just how swiftly and soundly independents have turned against him. Poll after poll reveal that those who identify with neither party believe the government is spending way too much money, that the economy would be better off today had the stimulus never passed, that the bailouts were a bad idea, and that the healthcare legislation ought to be repealed. These are people who largely voted for Obama (why?) but whose views are now more in line with those that Republicans have been preaching since his first day in office.
I am not one of those that hate Obama or think he is the anti-Christ. I am one of those who believe his views on government, on human nature, on individual freedom, and (his lack of views) on the role that a free economy plays in preserving those freedoms are deeply misguided, flawed, and simply dangerous. You cannot continue to run World War II-sized deficits during peacetime without eventually reaching that tipping point where investors no longer want to buy US treasuries, or where there simply are no longer any investors left to buy US treasuries: at some point interest rates have to rise to compete with the better rates of return alternative investments are promising, which is what happened under Carter.
And every dollar spent on a new stimulus project, on new unemployment benefit checks, on new healthcare entitlement spending, must first come from a bondholders' wallet - it is a dollar that he no longer has to spend or invest. You simply cannot stimulate one sector of the economy without first unstimulating another sector. I have said that a million times on this blog and I will say it a million more times.
Regardless of just how big Republican victories are in the Fall, the important question is how Obama will react. If he is a survivor, he will follow in Clinton's footsteps and triangulate (i.e., cut deals, cut spending, reform entitlements, abandon liberals) to ensure re-election in 2012. On the other hand, if he is truly committed to what he believes in, he will continue to watch his ratings flounder and Mitt Romney will be the next president.
It likewise depends on just how idiotic and hypocritical the Republicans will succeed in making themselves look should they return to power. Certainly wouldn't put it past them.