In repeatedly insisting that there is "nothing wrong" with the economy, Obama puts himself at odds with both the public's perception and the market's fundamentals
"There is nothing wrong with our country" except for the "broken" political system, President Obama declared at many stops on his Midwest bus tour this week. "We've still got the best workers in the world. We've got the best entrepreneurs in the world. We've got the best scientists, the best universities."
Well, fine. Presidents have to profess confidence about the country and its long-term prospects, even when the news is bleak. But in repeatedly insisting that there is "nothing wrong," Obama put himself at odds with current reality and with what most people think is true.
It's not just that unemployment and underemployment are sky-high. It's also that the economic recovery is sputtering and in serious danger of slipping into a second recession. A wide variety of polling shows that about 75 percent of Americans think the country is on the "wrong track." Consumer confidence is at the lowest level since 1980, and consumer spending is depressed. Global stock markets, which plunged again on Thursday, are more volatile than at any time since the depths of the financial crisis in late 2008. Gasoline prices are still near $4 a gallon, and gold prices have now pushed above $1,800 an ounce.
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Obama's line is eerily reminiscent of John McCain's infamous remark during the 2008 presidential campaign -- during the same week that Wall Street was imploding - that "the fundamentals of the economy are strong."
McCain, like Obama, was simply trying to project an underlying confidence that this, too, would pass. For political and economic reasons, it's not a good idea for a president or presidential candidate to trash the state of the nation. It both deepens the crisis of confidence and projects a lack of leadership.
But McCain's comment seemed so utterly at odds with the financial collapse that he came across as clueless and disingenuous. Obama's comments this week had a similar ring. It's one thing to assure voters that the country still has underlying strengths and will eventually recover. It's something else to say, as the president did on numerous occasions, that only political gridlock was to blame. And Obama didn't just say it once. It was a central line he repeated at his bus stops in Minnesota, Iowa and Illinois.
Does that inspire confidence? It's true that the debt-ceiling fight highlighted a political standoff, and that Standard & Poor's cited the stalemate as the primary reason for downgrading the United States' AAA credit rating.
But it's also true that the economy has real problems. On Wednesday, Morgan Stanley sharply lowered its economic forecast for the United States through 2012 and warned that both the U.S. and Europe were "dangerously close to a recession." Among the reasons: declining business and consumer confidence; weak investment and hiring; and "policy errors" on both sides of the Atlantic in the form of premature budget austerity.
Polls indicate that American voters blame Republicans more than Democrats for the debt-ceiling debacle, and approval ratings for Congress are down as low as 13 percent. But a new Gallup Poll released on Wednesday showed that public approval for Obama's handling of the economy is also down to a new low of 26 percent.
What is the line between projecting confident leadership and out-of-touch cheerleading? Every president since at least Ronald Reagan has declared at one point or another that the fundamentals of the economy are sound, and they usually did so amid signs that the economy had problems.
"The American economy is the envy of the world, and we need to keep it that way," President Bush declared in August 2007, just as the first wave of the mortgage meltdown was wreaking havoc on credit markets. "The fundamentals of our economy are strong.... Job creation is strong. Real after-tax wages are on the rise. Inflation is low."
To be sure, public confidence is crucial, and the truth is that the economy does have an underlying resilience and capacity to recover.
Presidents have to be careful, keeping in mind President Carter's speech in July 1979 about the crisis of American spirit - often referred to as his "malaise" speech, though Carter didn't actually use that word.
"The erosion of our confidence in the future is threatening to destroy the social and the political fabric of America," Carter lectured in prime time. "Too many of us now tend to worship self-indulgence and consumption.... We've learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose."
Carter's speech did nothing to boost confidence and everything to cement his unpopularity. He seemed to be blaming the American people for his inability to push his legislation through Congress and, implicitly, for the nation's deep economic woes.
But happy talk, particularly at a moment when new fears are spiking, can hurt confidence and sour the public too. Bush's bland reassurances in the summer of 2007 did nothing to postpone the crisis, and his administration's belated recognition of it may well have made things worse than they had to be.
Americans have not forgotten. As recently as September 2010, a Gallup Poll showed that 71 percent of respondents still blamed Bush for the country's financial problems. For Obama, that should be a sobering precedent.