The Placebo President Practices Placebo Economics

Hugh Hewitt

8/26/2010 7:10:14 AM - Hugh Hewitt

House Republican Leader John Boehner's call this week for the resignation of Treasury Secretary Geithner and senior White House economics advisor Lawrence Summers was more than a brilliant stroke of political gamesmanship, though of course it did underscore the vast disaster that is Obamanomics just as the fall campaigning season gets underway.

It was also the very first recognition that even as the election of 2006 forced the resignation of Donald Rumsfeld as Secretary of Defense, the looming electoral rebuke to the Democrats should result in the rapid exit of both Geithner and Summers. You cannot fire the president, but a clean break with failed policies can only be signaled by the dispatch of the senior-most officials responsible for a failure or in this case, a fiasco.

Unlike the "supply side economics" that lay behind the Bush tax cuts as well as those of Reagan and Bush, there was no coherent theory behind President Obama's toxic mix of massive spending on special interests, an enormous expansion of the regulatory burden on business via Obamacare, and the job-killing insistence of the enormous tax hikes scheduled for 1/1/11. Obamanomics are genuinely "placebo economics," never intended to actually cause a cure for the country's economic ills so much as to perhaps trick Americans into feeling like the country was past the fallout of the housing bubble and the panic, and thus to resume the pattern of investment, risk and return that fuels democratic capitalism. The equivalent of a "sugar high" fueled by $850 billion in "stimulus" as well as the massive hikes in baseline spending from 2007 forward was supposed to trigger real economic growth. So what if census jobs and spikes in federal and state employment aren't the sort of jobs that raise real national GDP and thus real growth --placebo economics was supposed to induce recovery through a sort of mass psychological pump-up.

It didn't work. It couldn't work. Because capital isn't sentimental. And it isn't anchored to America. It can flee to China or India or anywhere where real economic growth is encouraged. Just as Saudi sheiks head to the Cleveland Clinic when real hearts need real surgeries, capital seeks governments with real growth policies, not incentives to winterize homes.

Now Americans are staring massive tax hikes in the face, and the Geithner/Summers team is insisting that those hikes must occur. Obamacare is rolling out across the land, crushing incentives to expand workforces under its tower of ambiguous mandates and almost certain hikes in per-employee costs for those businesses that don't dump their people into the state exchanges.

And ruinous cap-and-tax ideologues like Barbara Boxer remain committed to their extremist plans to manage every business in America from the EPA, just as soon as the elections pass.

The placebos didn't work, so Team Obama is embracing a new approach, call it "Kevorkianomics.". The president's inner Alinsky will not allow him to see what any reasonable investor already knows, which is that this team of advisors has no more idea of how to grow an economy than the president knows how to fly a jet.

We will get a dozen more speeches from now until November 2 on how the stalling economy is all Bush's fault, even after the president got everything he wanted. but voters already know the only way to change the outcome is to change the team. And the only way to do that is to send an unmistakable message, just as voters did about the war in 2006.

A lot of Republicans defeated in the wave of 2006 were angry with President Bush for not replacing Secretary Rumsfeld before the vote. They can commiserate with unemployed Democratic members of Congress in 2011 if President Obama does dump the architects of placebo economics after the fall elections in favor of anyone who knows how real jobs are created and real economic growth sustained.

But if those changes do occur and the massive tax hikes scheduled for January are repealed and the work of repealing and replacing Obamacare begun, the country will be cheering the wonderful message-delivery system of off-year elections.