The Obama administration is ready to announce a completely new direction in its attempts to rescue the economy, according to new information from Christina Romer, the head of the President's Council of Economic Advisors. In an interview with David Gregory, to be aired Sunday on Meet the Press, she discussed the idea, originally put forth by the President's newest advisor, Gunduz Caginalp. Caginalp is a mathematician from the University of Pittsburgh and past editor of the Journal of Behavioral Finance.
Obama was intrigued, according to Romer, by Caginalp's work, and by the idea that the economy is driven by human nature as much by "invisible" market forces. Within a month of entering the office, the President launched a behind-the-scenes project to see if psychology could be leveraged to help solve the current economic crisis.
If it works, it will certainly be a first in human history.
Nobel winning economist Paul Krugman, not a fan of the President's efforts so far to fix the economy, accused Obama of being nothing more than "an armchair psychologist". "There are real problems here," Krugman said, "problems that have been fueled by over two decades of bad policy. If the President thinks he can just click his heels together and wish the problem gone, he is indeed living in the land of Oz."
Romer, paving the way for the President's new plan, was definitely upbeat. "The American workers are sound," she said. "We have a good capital stock. We have good technology. We are just temporarily in a mess."
When asked how Obama's new plan would work, Romer would not give specifics, saying that the details would be given in a speech to the nation next week. But she did give Gregory an outline of some of the key points.
Obama intends to explain to the American people that the economy truly is sound. Nothing has changed since a year ago, when people weren't worried about their houses and jobs. The only thing that has changed, Obama will tell us, is that people got worried. They stopped spending, they stopped borrowing, they stopped hiring.
Romer would not tell Gregory exactly what the President's full message to the people would be. But she hinted that Obama would tell us that the future of the economy is not in the hands of Congress, it is not in the hands of Wall Street, it is not in the hands of the bankers. Any improvement in the economic situation will depend on the actions of all of the American public.
So, apparently, the President is going to tell us all to go out and spend, borrow, hire, invest, build, and pretend that this whole economic meltdown never happened.
"That's just crazy," Krugman said of the plan. People are hurting because of wishful thinking. And now the President of the United States, possibly the smartest man to hold that office in the past hundred years, is wishing on a star, crossing his fingers, and saying the magic words, hoping that we all won't notice what is happening behind the curtain."
Caginalp has not been available for interview by anyone. But one of his former colleagues, economist Vernon Smith, and like Krugman a Nobel laureate, said, "This is just crazy enough that it might work." But he added, "Of course, it would be nothing more than a smoke screen. If we were lucky, it could last to the end of Obama's term in office, and hs successor would be left with double the mess to clean up."
But Romer summed up what many people are privately thinking: "Let's wait to see what Obama has to say." We know he is a great salesman, and it may be that a great salesman is exactly what this country needs right now.
And so the country waits to see if the man behind the curtain can really give us a heart, a brain, and some courage.
Labels: business, consumers, economy, media, Obama, politics
