WASHINGTON -- President Obama's speech to Congress has been properly called Rooseveltian -- active, upbeat and unadorned. Like Franklin Roosevelt, Obama is a great explainer -- simple without being simplistic. And the very act of effective explanation is reassuring. Clear exposition implies intellectual mastery, which implies competence, which builds confidence.
For Roosevelt, such confidence was not just a style but also a creed. It is a consistent theme of liberal economics since the New Deal that rhetoric is a tool of policy -- that the soothing of fear and doubt is essential to restoring the normal function of credit and entrepreneurship. As John Kenneth Galbraith said, "By affirming solemnly that prosperity will continue, it is believed, one can help insure that prosperity will in fact continue. Especially among businessmen the faith in the efficiency of such incantation is very great."
But national morale was not economically decisive in defeating the Great Depression (though it came in handy defeating Hitler). Economic historian Amity Shlaes reminds us, "Roosevelt did famously well by one measure, the political poll. He flunked by two other meters that we today know are critically important: the unemployment rate and the Dow Jones industrial average."
And the incantation of confidence is not likely to be decisive in the current economy. Markets, investors, businessmen and entrepreneurs are generally immune to tone and charm. They seek reassurance on three issues of substance: the credibility of the credit system, the eventual return of economic growth and a serious approach to debt.
Obama was strongest when it came to rescuing the banking system, promising to "act with the full force of the federal government" and to do "whatever proves necessary" to assure the flow of lending. This was an assertion of executive power in a time of crisis that Roosevelt would have understood and appreciated. The bank bailout is radical, involving the socialization of private-sector losses and a government plan to "force the necessary adjustments," "clean up their balance sheets" and ensure "continuity." But the alternatives to executive power in this case seem dismal. As an economic pragmatist, I was reassured.
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