Mental Recession

John McCain’s former political advisor, Phil Gramm, got himself kicked off of the campaign by saying America is in a “mental recession.” (1) It was a beautiful moment, one of those rare times in politics when someone says what they really think. Gramm cut through the rhetoric and the theory and boiled down the conservative assessment of the economy in absolute terms. Instead of looking at Gramm’s flippant comment as a side-note to McCain’s broader approach to the economy, I think we should examine it more closely. It gives us a glimpse at the real motivations of supply-side economics, and it shows us what conservatives like Gramm really think of the rest of us.

Gramm went on to say “We have sort of become a nation of whiners… You just hear this constant whining, complaining about a loss of competitiveness, America in decline” (2) As hard as it may be to believe, Gramm would consider this a message of optimism. He follows up: “We've never been more dominant; we've never had more natural advantages than we have today.” You see, despite the fact that you are worried about your job, prices have gone up while your paycheck has not, and gas prices are eating away at your savings, everything is great! There are aspects of the American economy which you cannot see—and presumably Gramm can see—that are going gangbusters. You just don’t have the whole picture. If you understood the economy like Gramm does, you would quit your bitching.

You may think Gramm has his head firmly lodged in his own backside, but I do not. He is only articulating a conservative worldview, and one-- if you agree with Thorstein Veblen and other observers of class-- that is inevitably adopted by the rich. This worldview is like Christ’s resurrection to economists who believe in the unfettered free market. Without it, you cannot be saved.

We are all capitalists now. Most liberals in American tend to side with capitalism, though they argue about how much it should be regulated. Conservatives, libertarians, and the promoters of laissez faire, love capitalism very much indeed, and contend that everything would be just fine if only the government would leave the markets alone. Unfortunately, markets sometimes do very bad things. Irrational things. They do things that cause harm to people who have no control over their fate. Conservatives have two standard responses to this: 1.) the bad results don’t really happen, so stop reporting them; or 2.) tough luck, because there’s nothing we can do about it.

Phil Gramm’s comments reflect the first response. When you adhere to an absolutist philosophy based on universal natural law, and the real world refuses to conform to your theories, it is very important to reject the facts! The problem, you see, is not that the economy is in the tank. The problem is that you think the economy is in the tank. Investment is based on expectations of future profits. As long as investors think they’re going to make money, they will keep investing, regardless of whether they actually make any money. This is an incentive for conservatives to say the economy is great, even if it isn’t.

Conservatives have a long history of this. In 1929, after the stock market crash, the Hoover administration took very little real action to stop the slide. Instead, they held meetings in which no business was conducted, and they issued comments reassuring the public that “the fundamental business of the country, that is production and distribution of commodities, is on a sound and prosperous basis.” (3) Of course it was wrong, but if everybody would just believe it, the economy would come back to life. For those who can stretch their memories back to the 1992 presidential campaign, you may recall that George H. W. Bush tried to convince us that, despite our personal hardships, the economy wasn’t really that bad. (4) Who are you going to believe? George Bush or your lying eyes?

While it seems that there is no shortage of sand in which conservatives can burry their heads, sometimes the beach becomes overcrowded, so a few have to resort to the second option. You can occasionally find conservative economists who agree that the markets sometimes behave irrationally and do real damage to people, but their answer is: “too damn bad.” For this set, their mission is not to deny the problem, but to find creative ways of sweeping it under the rug. They are well aware of the dark side of markets; they just want to keep it well out of sight.

John Goodman is an excellent example if this category. Goodman, like Gramm, was an advisor to John McCain, and helped write McCain’s health care plan (if you can call it a “plan”). In a Dallas Morning News story, he proposed a brilliant scheme for solving the health care problem in America: stop counting people as “uninsured.”

"So I have a solution. And it will cost not one thin dime," Mr. Goodman said. "The next president of the United States should sign an executive order requiring the Census Bureau to cease and desist from describing any American – even illegal aliens – as uninsured." (5)

Goodman got himself kicked off the McCain campaign, too. McCain, at least, is not so impolitic as to think the American people will endure insults. We don’t need to be told that our problems aren’t really problems. Of Goodman, McCain’s staff said he was “clearly out of step with John McCain.” (6) He also quickly contradicted Phil Gramm’s comments. What does McCain himself believe about health care and the economy? It is difficult to know for sure, but he apparently surrounds himself with advisors with whom he totally disagrees. At least, he disagrees with them when they open their mouths in public.

In a way, McCain’s bumbling around the economy and his association with bad advisors is encouraging. The words of Phil Gramm and John Goodman are political ammunition because the American people don’t buy it anymore. They’re tired of being told that they’re too stupid to know their own economic condition. They are refusing to join the laissez faire cult that holds an irrational faith in the markets to magically fix everything. If Americans were mostly conservative, they would have no problem with Gramm or Goodman. The fact that Americans are shocked and outraged when conservatives share their true thoughts shows that Americans are ready, at long last, for a change.

© 2008 Bryan Lower

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