Seamanship Quotation

“In political activity, then, men sail a boundless and bottomless sea; there is neither harbour for shelter nor floor for anchorage, neither starting-place nor appointed destination.”
— from Michael Oakeshott's
Political Education” (1951)

Friday, June 24, 2011

America is strong enough for a moderate President

The closer we get to the next presidential election the more the economy will be viewed through partisan lens. The greater the temptation will be to misread what’s going, to radicalize the times to justify radical alternatives.

Karl Rove, the Republican advisor who puts trends before ideas, has neatly tied Obama to the economy:

“At the same time, objective circumstances like an anaemic economy and bad decisions not only matter; they become very nearly dispositive. Mr. Obama is now at the mercy of policies and events he has set in motion. He can't escape accountability, especially on the economy. He's not done yet, but it will be tough to recover.”

This analysis isn’t crazy—high unemployment does discredit incumbents. However, today’s economic data doesn’t justify radical measures—either from the right or the left. For now, an “anaemic” recovery is probably all a highly levered America can ask for and is probably a whole lot better than the alternatives.

It’s been headline news in every self-consciously sober newspaper this week that the US Federal Reserve has lowered its growth forecast for the next two years. The unemployment rate may not fall below 8% by the time of the election in November 2012.

Nevertheless, along with the IMF and the OECD, the Fed predicts that the American economy will continue to recover—to grow slightly above its underlying potential. They shaved their growth forecast by 0.2% because of two significant well known external shocks, the Japanese earthquake and the surge in global crude oil prices.

Nevertheless, America’s vision of open markets and broad-based capitalism is still winning converts and driving economic development globally.  The US dollar is more competitive, manufacturers are exporting aggressively, Asian free-enterprise economies have neither turned protectionist nor collapsed, and America’s three biggest political allies and markets—Japan, Germany, and Canada—are all growing strongly, buying US goods and services and enriching US corporate profits.

The markets are not forcing Washington or presidential candidates to choose between financial bankruptcy, social insurance, modern infrastructure, and the animal spirits of American investors and bondsmen. The capital markets responded well to the bi-partisan federal budget deal earlier this year and aren’t telling the government to tear it up this summer. Trends in public finances and in private job creation and income growth all say: America, you can’t hide from change, but you needn’t panic.

This may be one of those rare moments in America when it isn’t good politics to be optimistic. A Rasmussen survey this week elicited that 65% of Americans think America is on the wrong track. 

Click on:

Millions are unemployed and millions more are unhappy with their jobs and the market value of their real estate. However, we should be wary of political figures that use the phrase “America’s on the wrong track” to display their superior patriotism, to short circuit complex discussion and, while applying the pressure of a presumed emergency, push for extreme change.  

Barack Obama may lose the next election. However, his temperate presidency was quick enough to tame an extraordinarily dangerous recession. His presidency does stand in the way of radical change. Next year, the public will decide whether he is timid or serving their best interests.

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