WASHINGTON -- Barack Obama is learning a psychological lesson from a former president about the economy and what happens when you keep comparing it to the Great Depression.
For almost two months of his presidency, he has been persistently and politically negative about the economy, even pessimistic, portraying it in near-hyperbolic terms. As a result, the financial markets fell into a deeper nose-dive than before and consumer sentiment, already in the dumps, worsened.
He talked repeatedly of the "deepening economic crisis," the "big mess" and the "fiscal disaster" he inherited. He seemed locked into his campaign's New Deal mythology that we were in the 1930s and that he was FDR.
In Elkhart, Ind., promoting his stimulus bill, he said he had "inherited an economic crisis as deep and dire as any since the Great Depression." In his last prime-time news conference, he continued his dangerous allusions to that era, saying we were in "the most profound economic emergency since the Great Depression."
And as Wall Street plunged, the country's mood turned darker.
His advisers warned that he was talking down the economy too much, scaring the business community, needlessly stoking fear among already insecure consumers, and failing to give Americans reasons to believe that, as bad as things are now, the economy will get better.
In the past couple of weeks, the White House has dramatically changed its tune.
First, all of this silly talk about being in another Great Depression was nonsense. Not even close, Obama's top economic adviser said last week. Nearly one-third of the country was jobless in the 1930s. Unemployment now is about 8 percent.
The recession we are experiencing, while severe, "pales in comparison" with the Great Depression, Christina Romer, chairman of the President's Council of Economic Advisers, told the Brookings Institution last week.
Indeed, the present downturn in no way approximates the Great Depression. In fact, there were glimmers of hope that things might be getting better, said Lawrence H. Summers, director of the White House National Economic Council, and Obama's chief economic adviser.
In remarks to a Brookings audience last week, Summers ventured to say that he was "modestly encouraged" by signs that "consumer spending in the U.S., which was collapsing during the holiday season, appears, according to a number of indicators, to have stabilized.
"What we need today is more optimism and more confidence," Summers said.
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