Another Telling Skirmish

We aren't going to get the Clausewitzean decisive battle until the fall of 2012. But if Sunday's tentative debt-ceiling deal holds we just saw another telling skirmish on the march to 2012. The new Republican House made a difference. Again. You can tell that because Paul Krugman is outraged.

Well, he would be anyway because the President is forced into at least token spending cuts in return for an increase in the debt ceiling. So the president can't do a big spending stimulus to tide him over the election.

Of course what the economy needs is repeal of ObamaCare to take the weight of uncertainty off the backs of business, repeal of Dodd-Frank to re-energize the credit system, and income tax rate cuts to end the capital strike. But it won't get that until the Republican president is inaugurated in 2013 and the Republican Senate is seated.

Well, maybe, as the economy continues to splutter into next spring, the president will get religion and propose some tax rate cuts. God only knows what Paul Krugman will think of that.

But the fact is that, going forward, the issues favor the Republicans.

This is confusing to Democrats who think that they are the party of the little people. Here is pollster Stan Greenberg feeling confused.

I see clearly that voters feel ever more estranged from government — and that they associate Democrats with government...

Oddly, many voters prefer the policies of Democrats to the policies of Republicans. They just don’t trust the Democrats to carry out those promises.

Yes. Of course voters like the idea of free services. They just don't like paying for them, and they really don't like paying for them when the economy is in the tank.

The fact is that the Democrats have blown it. They really believed their Keynesian economic fantasy. They really thought you could blow through a big recession on a debt wing and a spending prayer. Now they have crashed into the ground and they are dazed, and really don't know what has happened to them.

But we know what went wrong. We know what the problem is.

When you have a big easy-money boom the boom ends in a crash. Then the bad debt has to be liquidated and the credit system repaired before growth can resume. Unfortunately, there is still plenty of bad housing debt around, and plenty of unsold homes. Until we turn the corner on that, the economy will continue to languish.

Sorry Dems, but you created the mess with your stupid "affordable housing" policies and you deserve to pay the piper for it.

In my view the chances are 60-40 that the Dems will suffer a punishment similar to the experience of the Republicans in the Great Depression. But don't worry, Dems. Republicans won't be able to invoke the name of Obama to frighten the voters, as Democrats did with President Hoover, for the next 50 years. Dems have a good cheering section in the media and the academy, so I expect they will be able to rehabilitate President Obama within 20 years, tops.