Todd Buchholz, September 6. 2011
The President has until Spring 2012. If by May, it’s not “Morning in America,” it’ll be good night for Barack Obama. The job market is miserable and the economy is limping along while economists feel for a faint pulse. Obama has painted himself into a “Keynesian Corner.” He sincerely believes that only government spending can help – but the cupboard is bare. The deficit-to-GDP ratio looks stuck in a reckless 8-10% crater. (Funny to recall that in 1983 Keynesians slammed Ronald Reagan as irresponsible when the deficit reached merely 6%, after an even higher, 10.8% jobless rate.)
Can Obama perform a swift 180-degree U-turn? It’s been done before. He should look to France and re-crown himself Barack Mitterrand Obama. Like Obama, Francois Mitterrand was elected with strong left backing. In 1981 he plunged into Keynesian prescriptions: fat pay raises for government workers, a wealth tax on the rich, more vacation time for workers, and a boost in the minimum wage. Union members got bigger voices at the bargaining tables. Mitterrand even attracted four communists to his cabinet. Happy Days were here again. The Socialist Mitterrand would leave the bumbling Reagan in the dust. Or so they thought.
Two years later, the French economy was a flattened soufflé. Inflation hit double digits, while Mitterrand’s policies boosted the jobless rate above 10%. Smart French businessmen hopped aboard the Concorde and fled the crumbling regime. The French franc was evaporating.
Mitterrand was no fool. By 1983, he began to push aside his socialist ideas for a French version of Reaganomics. Suddenly, budgets were frozen, government payrolls shrunk, monetary printing presses shut down, and a Socialist government made it easier for firms to fire feckless workers. Mitterrand called this “La Rigueur.” Political observers called it the “Great Turn.” The people called it a success, as the inflation rate plummeted and jobs came back to France.
Can Barack Obama follow the French pirouette executed so gracefully by Mitterrand? I doubt it. Though Mitterrand was an avowed and proud Socialist, he was also a nimble rascal. Some insiders referred to him as the “Florentine,” as if he was tutored by Machiavelli himself. Hell, he successfully covered up his work for the Vichy collaborators during World War II!
Obama strikes me as a true believer. What he believes may be wrong, but it’ll take a Great Depression to change his mind. Unfortunately, a Great Recession with a 9.1% unemployment rate just doesn’t seem serious enough to do the trick.