The Obama administration has regained the lead in the expectations game on unemployment, having admitted that 10% unemployment is the new metric on which voters should be focused. The expectations game (otherwise known as “spinning”) has centered on the rate of increase in unemployment over the past several months. Shouts of joy have emanated from political camps when the rate of increase in unemployment has simply dropped. That unemployment continues to mount in a relentless manner is ignored as the spinners rejoice that the velocity of the increase has slowed. For those that have no job, and no job prospects, this drop in the rate of increase in unemployment must feel like sitting in a commercial airliner and listening to the captain celebrate that the plane will impact the nearest mountain at four hundred miles per hour instead of six hundred miles per hour.
Spinning economic data has a long bipartisan history. Sometimes it works and sometimes it doesn’t. However, there comes a time when voters begin the process of divorcing themselves from political solidarity (and the forces of spin) and start the process of focusing on their own predicament. That is the point when the water becomes unsafe for a politician of either party. (Wall Street actually has an index that measures this phenomenon as it is manifested in the markets. It’s called the Volatility Index (VIX).)
There is a strengthening undercurrent of worry working its way through what was once known as the Silent Majority. (Nixonesque as it is, the descriptive is accurate.) These are voters that, today, are not inclined to read political blogs, protest at public meetings or become active on either side of a hot political debate. They are, essentially, passive voters that are never at the tip of the political spear on any issue. But they vote. And they pay attention. Increasingly, I am seeing their attention drawn to issues that heretofore might have gone unnoticed, such as:
- The possibility of a failed Treasury auction (what if the U S government can’t sell bonds to finance the budget?)
- The possibility of massive inflation after the crippling deflation that is happening now. (this from the survivors of the late 1970’s)
- The possibility that the public will come to understand that many of the nation’s banks are already insolvent. Local homebuilders and businesses are figuring this out in communities across the nation today.
- The possibility that there will be a double dip recession (assuming that the economy is actually coming out of the present recession).
- The possibility that housing prices may not recover for decades because mortgage lending policies have changed for a generation (or back to early 1990’s standards)
- The possibility that consumer spending habits (which historically make up 70% of the economy) have changed for a generation. More saving (or paying off debt), less spending
Amid the chaos of the political moment it should be noted that there is a huge confidence game being played out right now. At stake are not only the fortunes of politicians but the economy of the United States and voters everywhere.
