BLANKLEY: Double-dip learning curve

Obama about-face on tax hikes flummoxes both left and right

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In one of the least-needed reassurances in modern political history, President Obama’s top political man, David Plouffe, “told Democrats late last week that the White House would not suffer from overconfidence. ‘What I don’t want to suggest is that we’re sitting around and thinking everything is great,’ he said.”

With the White House’s own economists predicting 9 percent or worse unemployment on Election Day, the president at about 39 percent job approval, college graduates unable to find jobs, a quarter of American homes under water, no credible White House policy or strategy for changing things - and with most non-institutionalized Americans convinced we are in a recession that is going to get much worse - it is surpassingly odd that Mr. Plouffe, as The Washington Post said, was worried that his fellow Democrats might think the president and his men think everything to be hunky-dory.

And yet, if overconfidence is not driving White House strategy, what is? If it weren’t overconfident, wouldn’t the administration be changing its policies, staff and strategies, as James Carville screamed it ought to do? Mr. Carville says to the White House: “Panic!” And the White House responds: “What - me worry? No, we’re not overconfident.”

After the November 2010 election rout, many observers (not me) thought they observed a rising learning curve in the White House. The president agreed to sign into law the extension of the George W. Bush tax cuts - with the White House even conceding that one shouldn’t raise taxes during a recession or, from its rhetorical posture, one shouldn’t raise taxes during the early stages of a recovery that is not yet sufficiently robust.

Yet in the president’s recent new “jobs” policy announcement, he called for more than $400 billion in new taxes to “pay for” more than $400 billion of Keynesian growth injection (not to be confused with the banned word - stimulus).

Given that this administration believes in the Keynesian principle of replacing a slumped private-sector aggregate demand with public-sector moneys, why would the president now be calling for higher taxes during an “insufficiently robust early stage of recovery?”

According to the actual John Keynes, when an economy experiences contraction of private-sector aggregate demand, the government should both: 1) Spend more government money - borrowed, if necessary - and 2) lower taxes.

Thus, the White House decision to raise spending and raise taxes is neither Keynesian nor rational. It is, however, similar to its decision in 2009 to stimulate the economy with $825 billion almost entirely focused on government spending. At the time, I (and some others) publicly argued that if the president was following Keynesian policy, the logic of that policy required that the stimulus should be in the vicinity of $2 trillion - not less than $1 trillion - to replace more than $2 trillion in lost private-sector aggregate demand.

Since then, while most of the public (and most of us conservatives) have argued that the stimulus did not work, the White House has made the argument that things would have been much worse if the stimulus plan had not been enacted - thus implicitly conceding that if it had stimulated more in 2009, the economy would be even less bad than it is now.

So what can one deduce has been the White House policy reasoning these past 2 1/2 years? First, in early 2009, provide Keynesian stimulus to the economy, but not enough to gain robust growth. Second, in late 2010, don’t raise taxes for fear of inducing further insufficiently robust growth. Third, in middle 2011, raise taxes even though there remains insufficiently robust growth. No wonder the left is as baffled, flummoxed and frustrated as is - for different reasons - the right.

It would appear that the White House’s learning curve is paralleling the economy: flat-lining, with the risk of a double dip.

Despite all reason to the contrary, it may be that Mr. Plouffe really was defensive, that he and his team really are overconfident. Perhaps, despite everything, they feel no need to experiment or change an iota in their flat-lining policy prescriptions.

Perhaps, rather than trying to change the economy or the world, they are confidently guided by the expectation that the Republicans simply will choose an unelectable nominee and solve all the White House’s problems. Blanche Dubois, in the Tennessee Williams play “Streetcar Named Desire,” expressed that strategy in an other way: “I have always depended on the kindness of strangers.”

If I were in the White House, I would not rely on the kindness of GOP strangers. I would remind them that Blanche Dubois recited that strategy as she was being sedated and led off to a mental hospital.

Tony Blankley is the author of “American Grit: What It Will Take to Survive and Win in the 21st Century” (Regnery, 2009) and vice president of the Edelman public relations firm in Washington.

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