Phil Gramm is Right

The other day when Phil Gramm was quoted as saying the country was in a "mental recession" and that "we've become a nation of whiners" John McCain blanched and immediately threw his chief economic advisor under the bus. I, however, thought Gramm was largely correct, if "unartful" in his terminology (to use an Obama term). I'm not alone in that thought:

"In serious consideration for ambassador to Belarus." That's the role John McCain joked that former senator Phil Gramm might have in a McCain administration. Gramm is McCain's most senior economic adviser, the one best qualified to lead the finance team of a McCain presidency. Now, however, Gramm faces political exile because he made the mistake of telling the truth.

What prompted the abrupt demotion? The short answer is what might be called Campaign Econ. Campaign Econ says the American economy is a certain way because Americans think it is. Campaign Econ competes with real economics and often wins -- with damage that extends way beyond, say, the political career of either Phil Gramm or John McCain.

Consider what happened this week. While speaking with the Washington Times, Gramm said that the country was not in a true recession but a "mental recession." He also said, "We have sort of become a nation of whiners" and "You just hear this constant whining, complaining about a loss of competitiveness, America in decline."

Gramm was right about the recession and stood by his recession comments on Thursday. A recession is two consecutive quarters in which the economy shrinks, and last quarter it grew. But no matter. Voters feel they are in a recession, and so they are, at least according to Campaign Econ.


Gramm's second sin was political. Calling voters whiners is to shame them. He later rephrased this comment, saying it was not voters he meant but politicians. That's because shaming voters is something American politicians simply don't do. Campaign Econ is unabashedly populist, and to seek to elicit shame is regarded as unpardonably elitist. Earlier this year, the McCain team was already terrified of seeming elitist. His advisers convinced themselves that the closeness of the primary contest was due to a lack of generosity. In January, when the McCain folks were desperate to win the Michigan primary, they ground their teeth down as Mitt Romney pandered to the auto industry. Romney's promise of unlimited support for carmakers won him that primary -- but not the nomination. Still, since then, McCain's advisers have sought to prove that he understands Campaign Econ; consider their proposal of a summer gas tax holiday.

That Campaign Econ is also calibrating Barack Obama's economic team goes without saying. The view among the nation's political advisers, from far left to far right, is that the economy is in a Katrina. Anyone who disagrees has no role in the 2008 presidential contest.

You can read the rest of it here.

Talking down the economy is a fundamental law of presidential contenders if your party is out of power. George Bush was accused of it in 2000 (though, as it turns out, he was correct and the economy had started struggling six months before Clinton left office), and Obama and the Dems are hard at it now. They desperately need for voters to believe that the economy is in shambles and the only hope of fixing it is higher taxes and more government spending. Sadly, many voters are dumb enough to believe that.