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By Dr. Boyce Watkins
www.DrBoyceMoney.com
Let’s be clear: This recession has become President Barack Obama’s personal War on Terror. Like the War on Terror, the enemy is evasive, the challenge is global, international cooperation is necessary, and the battle is unlike any other in our nation’s history. Wars are good for political business: when people get scared, politicians get a blank check to fulfill their legislative agenda. After 9/11, President Bush used fear to get the entire nation to sign onto the Patriot Act, and years later, we are wondering if someone is going to tap our cell phones and illegally imprison us for not eating our Freedom Fries. Bad legislation is like an STD: you can pick it up with a snap decision, but you pay the price for the next 20 years.
As a man and an intellectual, President Obama is nothing like former President Bush. But they do have one thing in common: they are both politicians. Any good politician understands that when people get scared, they are more likely to give you what you want. So, Obama took a page out of the Bush/Rove/Cheney book (which was written by politicians before them) and used fear language to get public support for his stimulus package. He reminded us that if we don’t act now, consequences will be dire. He told us that the recession was going to get worse before it gets better. He even hinted that it might never end if we don’t give him our money. After every Obama speech on the economy, we were ready to hit the bottle and call the suicide hotline. We were scared, sad and worried.
America bought the package (literally – it was very expensive), and all the irresponsible government that came with it. Not to say that an economic stimulus was not necessary, but the tactics used to pass it were not. President Obama achieved one goal of lowering the expectations of his overcharged constituents, but he may have created a nasty boomerang effect on himself. In love, life and politics, one decision often affects another, and if you are too myopic, you can miss the big picture.
You see, economic growth is heavily dependent upon something called “Consumer confidence”. Consumer confidence, measured by an index at The University of Michigan (among other places) captures exactly what it appears to measure: How good consumers feel about the economy. A confident consumer is one who not only feels that her financial situation is positive, but that future prospects are strong as well. She feels that “life is headed up and everything is going to be OK”. Confident consumers spend money, which boosts economic growth. Confident businesses make investments and hire workers, which also stimulates the economy. Confident banks make loans so that consumers can get the money they need to buy cars, houses and big screen TVs. Since no one really knows what their personal economy is going to be like in the future, economic growth can be as much psychological as it is financial. In other words, it’s all about faith.
The problem for President Obama is that hearing fear language from our nation’s leaders does not create much confidence. It makes us say “Well, Obama is the Baby Jesus, which means that if he says the economy is going south, then that must surely be the case.” Fear language makes the media create entire television shows based around how fearful people are and why they should be even more frightened than they were before. The media tells you that if you are out there feeling good about life and expecting good things to happen, then you are clearly delusional. The economy became Barack Obama’s Willie Horton – the scary monster that everyone should fear because you might be his next victim. There is a reason that Franklin Delano Roosevelt said that “we have nothing to fear but fear itself”, because too much fear can be a frightening thing.
So, at the end of the day, the president got his package. He scared us out of our underwear, but now we are all feeling a little naked. Given that Obama has achieved his goal of irrationally reducing personal and aggregate economic expectations, he must now cheer us up as a country. He has to convince 300 million Americans to feel good about life after being inundated by one TV show after another telling them that the entire financial system is near total collapse. Never have the words “hope” and “change” meant so much. President Obama got his package, but instead, he may have gotten his Pandora’s Box.
Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of the forthcoming book, “Black American Money”. For more information, please visit www.BoyceWatkins.com.
