These words are a paraphrase of the famous comment by James Carville, the political adviser to President Clinton. After his inauguration, President Clinton had launched an ambitious agenda and First Lady Hillary Clinton had been charged with reforming the American Health Care system. The Bond Market reacted with the worst sell off in history. The specter of interest rates shooting upwards and the anger of the bond market vigilantes intimidated the Clinton Team. That is when James Carville said “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”
The Clinton Brain Trust were smart politicians. They listened to the Bond Market. The result was a pragmatic economic policy, a strong economy and great stock & bond markets for the next 4 years.
Today, it is clear that the Stock Market is sending President Obama and his team a strong message. The Dow is down nearly 20% since President Obama’s inauguration. After his election in November, the market went down 1000 points in just about 3-4 days. In contrast, when President-Elect Obama went into a public silence mode in late November 2008, the stock market had a 20% rally into the first couple of weeks of January.
Now it seems that as soon as President Obama starts speaking, the stock market begins sinking.
So far, the Obama Administration and its media friends have been content to mock the stock market as a “tracking poll” and to utter their standard polarizing shaap* “We now know that what is good for Wall Street is not really good for Main Street”. His advisers point to his sky high approval figures and express nothing but disdain for the stock market’s message.
This is wearing thin even for CNN, one of the early and ardent Obama believers. On the AC360 show, CNN’s money correspondent Ali Velshi said “you can take the tracking poll parallel too far” and went on to point out that tracking polls do not destroy retirement funds.
In his ardor to publicly lash all Wall Street types, President Obama seems to forget that Main Street is linked to Wall Street in a very real manner. Retirement 401(K) funds, Children’s Education funds, Public Pensions are all tied to the stock market in a real way. The Police, the Firemen, Local Government employees, Teachers, Labor Unions depend on their pensions for their retirement and these pensions are linked to the health of the American Stock Market. So, when President Obama publicly disparages the stock market, he publicly disparages the real critical needs of American Families.
President Obama and his advisers also seem to forget that the stock market is a predictive organism that seems to forecast events about 6-12 months in the future. They need to wonder whether the stock market is a leading indicator of what might happen to President Obama’s approval ratings a few months down the road if the economy continues in its current direction.
Perhaps, we should not judge President Obama and his team too harshly. The enormous adulation that carried Barak Obama to the White House, the enormous crowd that attended his inauguration are enough to fill any politician with pride and a sense of great achievement. Historically, such adulation fills politicians with a sense of “I can’t do anything wrong”.
Unfortunately President Obama does not have this luxury. America is in trouble, its economy seems in a free fall and on the cusp of a depression. This week, Robert Barrow, a Harvard Professor, said on CNBC’s Fast Money that his study suggested a 30% chance of a depression in America. Gary Shilling, a noted economist, said on Bloomberg TV that America is getting “close” to a depression.
President Obama has responded to criticism of his budget plan with a simple “I Won” comment, a comment eerily similar to the “I have political capital” comment by President Bush in 2005. Mr. Bush ended up spending his capital on ambitious, transformative and deeply partisan adventures like privatizing social security that were the pride of the American far right. Mr. Obama risks spending his political capital on his own ambitious, transformative and deeply partisan adventures that are the pride of the American far left.
The political advisers of President Obama are fond of making statements like “A crisis is not something to be wasted” to defend their single minded pursuit of their agenda. We remind them that the advisers of President Bush made similar statements after the September 11, 2001 crisis. They did not waste that crisis; instead they used that crisis with single-minded determination to further their agenda of invading Iraq. In fact, media sources had reported, we recall, that the morning after September 11, Defense Secretary Donald Rumsfeld opened his meeting with a question “How do we use this against Saddam Hussein?”.
President Clinton faced a political crisis in 1994 when the Bond Market trashed his spending plans and political opposition made him rethink his far left agenda. James Carville might have complained bitterly about the Bond market, but he and the rest of the Clinton team heeded the message. They changed their policies, adopted a centrist economic policy and became pragmatic. The result was the strongest economy in decades, a four year period of strong growth, high productivity and low inflation.
So far, President Obama and his political adviser, David Axelrod, seem to be following the Bush model – retain deep conviction in their agenda, scoff at the critics & opposition and build a list of enemies in the media.
To the Obama Team, we recommend the Clinton model than the Bush model. President Obama should immediately begin heeding the message of the Stock Market and jettison his extreme agenda for a pragmatic, centrist policy that focuses on the American economy.
The American Economy and his Presidency depends on it.
* Editor’s Note: The Sanskrut word Mantra has become a part of the American and English lexicon. A “Mantra” is a positive, benign phrase or couplet chanted to do good. The opposite of Mantra is “Shaap“, which is like a negative, malicious phrase that is chanted to cause harm. It is time, we think, that Shraap becomes a part of the American lexicon just as Mantra has.