Tactics, Smashtics

You can allow our Democratic friends this. They really know how to do short-term political tactics, using the bully pulpit and the mainstream media to control the political narrative. Now it looks like the president will humiliate the Republicans in the debt-ceiling debate, as the president and the Democrats refuse a debt-ceiling deal with serious spending cuts. Because who could be cruel enough to deny seniors their Social Security Benefits, even for one day?

What the president and the Democrats don't seem to be thinking about is what comes next. It's understandable that they are utterly opposed to any spending cuts before the end of FY2012. But would the president really want to win the election if he knew what is coming after the election?

Sooner or later, after the massive deficits and quantitative easing, the United States government has got to get back to a balanced budget and has got to cut spending. And that means cutting spending on Democratic voters, because there is no other spending. Otherwise we are heading for a sovereign debt default and that is going to hit Democratic voters with a sledge-hammer.

The usual scenario for Keynesian economics is that, after the easy money and the big deficits, the economy is triumphantly back on track and can handle higher taxes and hard money. But what happens if the stimulus fails to bite? Then you are faced either with serious inflation as the easy money really starts to take down the value of money, or a nasty recession as the government gets to the end of its credit and has to tighten its belt. If it then decides to raise taxes as well, then of course, growth will sputter, revenues will decline, and the fiscal situation will worsen.

The big risk for the Obamis is that the economic recovery may not last until the election in November 2012. However the Democrats succeed in blaming eevil House Republicans for starving grannie, the fact is that the average independent voter will be judging the president on the economy. For the average Joe and Jane, the economy is not good, and it's not likely to get better.

Let's close with a military metaphor. In the long retreat of 1943-45 the German Army was still the tactical match of its opponents. The trouble was that it was overwhelmed strategically. And so after every tactical victory it still had to retreat. The same is true of the great Democratic Ascendancy. The trouble with socialism is that it eventually runs out of other peoples' money. And then the people that voted for it are worse of than before. We are seeing this in recent reports of economic Armageddon in the black community.

What does it matter if you can win a tactical victory on the debt ceiling and put off spending cuts? You still haven't solved the sovereign debt problem.