Obama in New Hampshire? Recession by spring ?

Jan.7, 2008 4:30pm


As I work through the final stack of exams that I have been grading I find solace and intellectual sustenance in the primary passions in the US and the ill winds in the global economy. It looks as if the wave that propelled Barack Obama to victory in Iowa will do the same in New Hampshire. This despite the best efforts of Hillary Clinton to expose what she and her team see as glaring weaknesses in Obama's policies and preparedness for the pressure cooker of the Presidency.

But despite the strong assault Barack Obama has not wilted nor stepped back from his eloquent rhetoric about the politics of hope. His easy sense of humour and sense of the moment still seems to be carrying the day.

John Edwards continues the game fight but in the end probably will come third in New Hampshire despite having some solid ideas about what to do about the economy.

But while the primaries unfold ill winds are blowing on the economic front. There are headlines everywhere about the impending recession, the rise in unemployment, falling stock and oil prices and the possibility of a major collapse in house and property prices in Britain. Of course, exaggerated pessimism is the nature of a downturn just as exaggerated optimism is the nature of an upturn. The truth usually but not always lies somewhere in between.

President Bush has wisely spoken out against increasing taxes at this time.His critics will claim he is just advocating Republican policy to protect his tax cuts for the rich. But he is correct to say that it would be very unwise to either increase taxes or cut spending or increase interest rates when the economy is on the edge of a precipice. Once again supply side economics has certain affinities with Keynesian thinking.

The Democrats seem likely to inherit an economy somewhat stung by rising unemployment and falling prices in many sectors . Aside from Edwards it does not seem clear that either Obama or Clinton understand what that will oblige them to do when and if they come to power next January. All the talk about fiscal rectitude and responsibility will be old and antiquated by then. The politics of hope will have to be translated into   bold action on both the fiscal and monetary front. They had better start thinking about it now instead of in November when it will be too late. Hope springs eternal but opportunity is more fleeting.