Obama Campaign Strategy: Crystal Ball, Unicorns and Houdini Economics


McClatchy’s Christi Parsons and David Lauter may have thought they were penning a breaking news story when they announced that Obama is shifting the debate about his economic performance to focusing on rhetoric about that endangered species, known as the middle class. This is news? If it weren’t his only obvious choice, considering his unacceptable record of fiscal leadership, Ronald Brownstein already announced his intent to KISS (i.e. keep it simple, stupid) with the predictable tired phrases at the beginning of November…

… and it wasn’t a surprise then either.

Obama strategists say that no matter whom the GOP nominates, the president will deliver the same core message: A Republican president would rubber-stamp the agenda of the GOP Congress and return to policies that caused the crash, favor the wealthy, and squeeze the middle class. Against any Republican, Obama appears determined to stress the populist notes he’s amplified lately about economic inequality.

This election is all about “it’s the economy, stupid”. The Gallup Poll released Dec 22, containing historic trends for US Satisfaction since 1985, doesn’t contain much good news for the temporary denizen of the Oval Office. The “dissatisfied” meter was pegging at 84%, with a pathetic 15% thinking life is just dandy. This is just 4 points better than the 88% dissatisfaction rate three years ago, Dec 2008, at the height of the crash.

Here’s another problem for the community organizer… the class warfare rhetoric isn’t resonating too well either. While 64% of the responders name the economy as the most important problem facing the nation, the top three that concerned them were:

1: The economy in general (26%)
2: Unemployment/jobs (25%)
3: Federal budget deficit/federal debt (12%)

That rich/poor wealth gap? Over rated. Came in at one percent.

Also not of concern, and other “one percenters?” Corporate corruption, fuel/oil prices, taxes, foreign trade/trade deficit, inflation, wages and recession.

Oh my… Alinsky must be turning over in his grave. But it does give a new perspective to the rallying cry… “we are the 99 percent!” , yes? Apparently the real one percenters are the occupy/infestants, who are focused primarily on the “one percent” issues above.

Considering the big three, it’s obvious to anyone not living under a rock that Obama cannot campaign on his domestic accomplishments. He’s running on empty for all three issues, and there’s zero chance that this economy will be turning around in time to give him tailwind for the election.

This leaves him with only one option – to campaign on crystal ball and unicorn economics, with a few Houdini tricks thrown in for good measure.

Crystal Ball Economics

Where would we be without government meddling?
Crystal ball economics is the fine art of convincing the nation that had he not

….blown tons of taxpayer money, plus accruing interest, on the ARRA stimulus…

…continued the bailouts of banks…

….seized a few auto manufacturers as well as control over the healthcare industry…

…had his Treasury Sec’y regularly buy up securities and toxic assets while his Fed Reserve guy keeps the rates so low that the banks can continue to borrow/lend/trade – free of risk …

… we’d be in much worse shape.

Mind you, if you can’t swallow that bowl of porridge, it won’t be hard for Obama to dredge up a few Keynesian economists to make this tarot card reading of a parallel universe palatable to the desperately gullible. (Cue the predictable regulars, racing in here to provide their fave links to those economists.)

But here’s the fly in the ointment…this negative feedback loop of debt in the US, and the global economies, are fueled by these very types of policies, all of which further exacerbate the stagflation and slow recovery here in the US and abroad.

One of the problems with economic crises is that mainstream economists and financial advisors either don’t see them coming or simply won’t admit to them. That’s exactly what happened in the fall of 2008, when the financial crisis kicked off in the United States. Since that time, governments have continued to spend, all while production has slowed and unemployment has skyrocketed. As we enter the fourth year of the post-crisis environment, there is no sign of growth that is impressive enough to get us out of the negative feedback loop in which governments have continued to operate.

A negative feedback loop takes hold when massive government debt loads, a weakening financial system and a slowing economy feed off each other, interrupted by Federal Reserve and other central bank reflationary attempts.

As shown in the chart below, rising debts become unsustainable and trigger austerity measures designed to reduce spending and/or increase taxes or other revenue sources to try and reduce debt.

In significantly depressed economies, the drag continues and a recession or even depression like conditions hit. The more production and employment falter, the more lending contracts, causing further harm to the economy, missed budgets and higher bond yields. The result is a downward spiral of business and financial activity and a banking crisis usually ensues.

Under pressure to stimulate the market, the Federal Reserve and other central banks carryout band aid fixes by printing money and governments implement additional austerity measures which starts the vicious cycle of the feedback loop all over again.

Is that the sound of the hammer hitting the nail’s head I hear?

So it matters little to me whether Obama, or his O’faithful, drag out some Nobel Prize winning economist(s) to assure me that his crystal ball says life would be so much worse if we didn’t keep spending, and perpetuating this vicious cycle. Solutions like this are dangerous bandaids with short lived relief and false euphoria, and merely postpone genuine solutions that are needed.

While many would say this is an example of how capitalism and the free market is a failure, I would respond that they’ve never given capitalism, or the free market, a chance. Instead, this illusion that governments and central banks perpetuate as the quintessential financial system is nothing more than a state managed fiat money socialist fiasco.

One of the best observations I’ve read of late is Detlev Schlichter’s Christmas Eve piece, The Nightmare After Christmas/. The Cobden Centre’s economist has, IMHO, the money quote: this state managed fiat money financial structure – which methodically and perpetually nationalizes money and credit – leaves out the two most efficient regulators of capitalism… profit and loss.

The desire for constant inflation and constant credit expansion requires that the banks be shielded from the effects of their own business errors. Allowing capitalism’s most efficient regulators, profit and loss, to do the regulating, would mean that banks could face the risk of bankruptcy – this is, of course, the ultimate disciplinary force in capitalism. This could then lead to balance sheet correction and thus periods of deflation.

Ergo, banks cannot be capitalist enterprises at full risk of bankruptcy as long as constant credit growth and inflation are the overriding policy goals. The constant growth of the banking sector must be guaranteed by the state through the unlimited provision of bank reserves from a lender-of-last resort central bank.

That banks get ever bigger, that they routinely hand out multi-million dollar bonuses, and that they frequently get bailed out, is not a result of the greed of the bankers – a stupid explanation anyway, only satisfactory to the intellectually challenged and perennially envious – but is integral to the fiat money system.

Banking under state protection ultimately means banking under state control. In the end it means state banking. And this is where we are going.


A system of state fiat money is incompatible with capitalism. As the end of the present fiat money system is fast approaching the political class and the policy bureaucracy will try and defend it with everything at their disposal. For the foreseeable future, capitalism will, sadly, be the loser.

Being as the entire concept is unsustainable, the “end” of this state managed fiat money system may be coming sooner that we all think. Morgan Stanley has one such opinion, calling 2012 the year that is likely to be the “Payback” For Three Years Of “Miracles” And A US Earnings Recession.

This dependence upon central banks as the “lenders of last resort” may be valuable for artificially propping up assets and prices but, according to Morgan Stanley, it also makes it more difficult to trade and invest. With the safety net of the central banks, injecting cash to stave off the inevitable, the market concept of betting on a product cycle’s appeal is all but gone.

And this has become obvious when you view the pendulum performance of the stock market. It goes up when money is injected, and swings drastically the other way when “… the flow of money slows and when the intoxicating influence of the latest money injection wears off.” The volatility has been breathtaking, and yet watching the market swing 26-29% in either direction – a historical aberration – has become almost commonplace.

What MS sees on the horizon for the US is an “earnings recession”. . And that’s the good news, by assuming that Europe doesn’t implode. The omens can be seen in the 20-25 companies that report early – prior to the earnings kick of season – showing a distinct increase in negative earnings.

Fed Reserve Bernanke, who just last month was warning that weak growth and high employment will be the norm for years, is just about out of tricks. The rates are already so low, and two rounds of quantitative easing have done little to effect a recovering economy, his last magic act may be to announce the futures of rates – when they will be raised, and by how much, in hopes that it will give businesses some illusion – albeit temporary – of stability and confidence.

Under pressure from sundry Congressional hearings and witch hunts, Bernanke repeatedly insists that that his role, and that of the central banks, was to keep the economy from crumbling, and lend a degree of stabilization to the nation’s faltering economy.

The problem is, this illusion of stability doesn’t solve the already unsustainable problem of debt, and the cycle of nationalizing of credit and money via government policies that are already firmly entrenched in the system. And more dangerous, it does nothing to reverse popularly held opinions that central banks and governments know best, and therefore need to exercise maximum control over all things financial.

To put this more simply, instead of returning to the more tried and true free market “regulators” of profit and loss, the common mentality of Obama and Keynesian types is that government meddling and “too big to fail” is actually desirable.

Our choices for the next POTUS leave us in a precarious position. We know that Obama will market the state managed fiat money system as the solution. Any effective opponent cannot be a softer version of the same, and must make a more radical fiscal correction in order to halt the self-destructive “feedback loop.” This will require educating voters to the folly of the state managed fiat money system itself. Are any one of the candidates up for that challenge?

Who let the dogs… er, unicorns out?

Riding the unicorn to victory
Ah yes… what is a political season without the unicorns? Let’s hear it for Harry Reid, going toe to toe with Joe Biden for the latest and greatest dumb faux pas. At the beginning of the month, ol’ Harry dismissed those selfish and evil “millionaire” employers as nonexistent, calling such a critter a mythical “unicorn”. From Forbe’s writer, Paul Roderick Gregory, quoting Reid:

“Millionaire job creators are like unicorns. They’re impossible to find, and they don’t exist… Only a tiny fraction of people making more than a million dollars, probably less than 1 percent, are small business owners. And only a tiny fraction of that tiny fraction are traditional job creators…

Most of these businesses are hedge fund managers or wealthy lawyers. They don’t do much hiring and they don’t need tax breaks.”

Naturally, only too willing to lend a hand pulling Harry’s foot out of his mouth, that non-partisan [/sarc], taxpayer paid radio station, NPR, launched a massive effort [more /sarc] to find even a single, solitary millionaire employer. They insist they contacted GOPers to find this elusive critter – only to triumphantly declare that Reid was right… they don’t exist.

As Mr. Gregory rightly points out, it’s bogus to assert such nonsense as fact when we have the Library of Congress and the Congressional Budget Office, as well as other institutions that harbor data designed to analyze such serious matters as tax policy. If NPR and Harry aren’t finding those mythical creatures, they obviously are looking in all the wrong places.

Mr. Gregory didn’t mind doing some cyber legwork and fact checking, using something a bit more scientific… like the IRS’s Table 1.4 “Sources of income, adjustments, and tax size of adjusted gross income, 2009”.

According to the IRS, there were 236,883 tax filers with incomes of a million dollars or more that year. Using Harry’s “less than one percent” would mean only 2,361 are business owners, and – again according to Harry – only a “tiny fraction” of them are job creators.

Hey, let’s give ol’ Harry the benefit of the doubt, and assume that all one percent are actually job creators. This means the IRS must have tax returns for 235,522 “millionaire hedge fund manager or wealthy lawyers” on their records…. None of who create jobs, employ anyone, or need tax breaks.

Hummm… what was that about unicorns?

It seems that Mr. Gregory’s attempts to find this huge number of lawyers and hedge fund managers – i.e. the real unicorns – came up to something more like 16,000 or so. That’s a far piece from the 235,000 plus needed.

Gregory’s summary of his findings?

Millionaire tax filers earn almost a quarter trillion dollars from their businesses. They must hire hundreds of thousands of employees to do so.

There are a trivial number of millionaire hedge-fund managers and wealthy lawyers (who, according to Harry, do not hire anyone and don’t need tax breaks). The millionaire tax surcharge is not aimed at them, but at the tens of thousands of millionaire business owners.

A 1.9 percent surcharge on millionaires would raise at most eleven billion dollars. By today’s standards, this is chump change, within the federal budget’s rounding error.

The millionaire’s tax is not about balancing the budget. It is about gaining political advantage through the use of envy and greed (two of the seven deadly sins).

Why would Harry Reid tell such whoppers, which are so easily disproved?

But I’m quite sure that Obama won’t let a few pesky facts won’t get in the way of a good fairy tale about unicorns. We can expect to hear this little ditty on the campaign trail again. The more important question is, will a GOP opponent let him ride the unicorns to the finish line, unimpeded by facts?

Speaking of unicorns, there’s another creature of mythological scale that will be a regular player in Obama’s road show… the “middle class”. What the heck is middle class and how is it defined? The CRS tackled this same enigma back in 2008, since this same creature was a leading character in the 2008 campaigns as well.

Seems that unicorn isn’t so visible either…

Much of the legislation considered by Congress is in the name of the so called “middle class.” But there is no consensus definition of middle class. Neither is there an official government definition, and it is not the aim of this report to establish one.

What constitutes the middle class is relative, subjective, and not easily defined. Most people likely have decided views as to whether they are middle class. At the same time, those who refer to the middle class have a rough idea whom they have in mind. How closely these two definitions correspond is another matter.

After establishing it was hard to establish, they concluded that, for the purposes of economic views, it was likely the second, middle and fourth quintiles of the five income tiers… i.e. not the bottom, and not the top. That would be 46.9% of all American households in 2007. But of course, they were also quick to point out that these Census facts did not include all forms of income (like welfare checks, food stamps, SS income, private pensions or capital gains).

If attempting to put a number on the income bracket, the broadest range for “middle class” was incomes between $20,291 and $177,000, or 75.4% of all households. A more narrow view was incomes between $39,100 and $62,000. Then, considering that almost half of the nation’s workers are also invested in the market with 401Ks, pension plans and personal investments, you can honestly say we haven’t got a real clue to the real income, or wealth, of “middle class” working families.

The CRS conclusion? Since the income definitions were difficult, if not impossible to establish… especially since you don’t have all income factors to consider (i.e. 401Ks, pension plans/pymts, investments, etc)… “middle class” was more often a subjective state of mind, relative to the next guy. You know, the ol’ keep-up-with-the-jone’s-and-stay-ahead-of-the-smith’s mentality.

No attempt to identify the middle class in the income distribution can be expected to yield a precise answer. But the term is used so often that it is worth the effort to attach some numbers to it. If the middle class is taken to be those who have more than enough to afford basic necessities, it can be presumed to exclude those at or near the poverty thresholds. Surveys indicate many people felt an income near $40,000 was the minimum to be considered middle class. On the other end, surveys suggested that those with income approaching $200,000 might still be considered middle class.

Whatever else they may have in common, those who constitute the middle class may have, more or less, similar sentiments regarding their position in the income distribution. Being well above the bottom is a source of satisfaction. But, when those at the upper end of the distribution fare better than they do, it is a source of consternation.

Well now, ain’t that a perfect unicorn for an Alinsky trained muckraker… working that “consternation” factor of envy or jealousy to his advantage. And playing to an undefined audience of those who think themselves part of the chosen “class”, merely based on how they look compared to the next guy.

But the point remains, just who are they talking about when they insist that the “middle class” – which is a moving target in definitions – is going to be extinct? I mean, wouldn’t any “middle class” be considered all of those who are not at the top, and not at the bottom? Are they suggesting that those who are making middle class wages today are all going to be below poverty level in the future?

Woof… need some Alice in Wonderland magic mushrooms to buy that one.

It’s unlikely you’ll be able to “save” the middle class – which I assume means add more numbers to what’s considered “middle class” – by elevating the lowest quintile, adding to the size of that vague group of citizenry. This means Obama’s only other choice is to *subtract* the nation’s earners from the top quintile’s top 5% (21.2% who make more than $177K), and tax them sufficiently to forcibly reduce them to the “middle class” status.

The benefits of “saving” the middle class by reducing others to increase and fit into that niche/class becomes all a’muddle since it then becomes a vicious cycle… made even more apparent by Reid’s unicorn millionaires who don’t create jobs. If he doesn’t believe those earners have employees and create jobs, just how many employers (and thereby employees) will we be losing when they raid the top quintile merely to bulk up the “middle class” numbers? And without employers, a “middle class” cannot exist.

But hey, if chasing rainbows, moonbeams and hunting unicorns is your bag, you can also read the Tax Foundation’s attempt to analyze this critter, or get a grin at MSN’s Money Central, grappling with the same unicorn.

The Houdini disappearing fact act…

Magic and chains that bind...
There is no doubt that Obama will seek to be a gifted magician on the campaign stage, backed again by the expensive and impressive props such as live bands, fireworks and Greek columns for visual effects. He’s been busy practicing his disappearing act for years now … the latest one being the improvement in the unemployment figures by literally making 405,000 American workers disappear from the labor force. Since Warren Beatty did a great reader’s post on this just yesterday, I won’t go into much detail parsing data and numbers.

Another disappearing act has been that much touted promise that the insurance plan you have, you can keep post the enactment of O’healthcare. We’ve not even hit the mandated date, and already corporations that provide health benefits to their employees are busy making arrangements to pay the penalties instead of continuing the benefit for bottom line fiscal reasons.

Then of course all those savings on healthcare that was supposed to be “more affordable” with lowered premiums after O’healthcare passed is another Houdini disappearing act. Since the legislation did not nothing to effect the cost of administering health care by the providers, premiums continue to rise to meet the costs, or they limit coverage. Surprise, surprise…. not.

Another sleight of hand trick are the jobs supposedly “saved or created” thru the ARRA stimulus. Not only was the reporting sketchy and inaccurate, the amount of money per supposed “job created” was so outrageous that had a private business tried the same, they’d be shortly bankrupt due to inefficiency. Perhaps a more accurate description would be state and local government workers whose layoffs were delayed until the taxpayer stopped paying their payroll.

Then there’s the magic of the the incredible shrinking GDP, which consistently gets revised downward when the rose colored glasses finally come off. This, of course, dominoes into the disappearing savings on deficit/debt reduction since those figures were dependent upon GDP growth that simply isn’t happening.

Another particularly poignant Houdini act was the disappearance of bankruptcy laws…. the reduction and dissolution of the holdings of primary shareholders in GM and Chrysler, when Obama decided to put the unions in first place power/money positions during the government takeover of auto manufacturing of two of the big three.

Naturally the Houdini tricks aren’t limited just to Obama’s lack of fiscal leadership. There’s the disappearing Middle East allies, the disappearing weapons from Fast & Furious, and the rapidly disappearing “transparency” over both this WH and their Congressional leadership, just to name a few.

But many citizens are mesmerized with magicians. Magic is just gimmicks, and presentation is everything. Any GOP opponent will know, in advance, the secret of all Obama’s tricks. The real question is, can he effectively expose them to the voting public without them being enraged at the loss of the entertainment? Or better yet, make the exposé even more entertaining than the trick itself?

Obama has now added a new twist to his magic act… that of shape shifting into “a conservative”, in the bold attempt to redress the Democrats as the true fiscally conservative party with tax cuts. Leaving aside the GOPs inability to see the payroll tax cuts, and it’s stolen funds from the general revenues, as nothing more than Keynesian fiscal policies, Obama is now being repositioned as the caretaker of a moderately redistributive and regulatory government after the fashion of Reagan and Bush by leftist pundits.

I had to laugh at Peter Wehner’s observations on that twist… that apparently the concept of “liberal” has fallen so far from grace that they need to seize the previously much maligned title of “conservatism” for a winning strategy.

Stolen political platform valor? Perhaps in name only. Most of us see that the GOP has not been a responsible caretaker of that concept either. Reclaiming that title… even from those who are light-years away from being conservative in policies and leadership, will become tougher for any GOP opponent since their own spending record will, of course, be thrown right back in their face.


There are many that insist campaigning on the not-so-pretty economic facts deters recovery by shaking the confidence of consumers. That running a negative campaign based on ugly economic truths is not a winning strategy. I think it’s the opposite. American’s are tired of being fooled. We don’t need glossy covers, feel good misconceptions, and promises it will be all right if we just keep doing the same thing, and give it more time.

This is a nation that has always risen to the occasion. We’re a “just the facts” type of society that, when faced with adversity, simply put our noses down the grindstone and get thru it as a country. To suggest that anyone has been buying into the “improvements” tossed out by this admin and the media is to ignore the Gallup dissatisfaction levels, or today’s consumer index of 64. Need a visual of what we’re supposed to be getting tingles up our legs about?

Here’s the chart of Consumer Confidence Index from 1968 to 2011

Need a closer look at just the past 10 years?

Such a low number would normally be the fifth worst on record… except in a post 2008 world mentality. Instead, this is a new “norm” we’re being told is to be celebrated.

This may be the last election where the voting public buys a bill of goods from politicians seeking what is… or perhaps was… the most powerful position in the world. We already know about Obama’s campaign of crystal balls, unicorns and Houdini disappearing acts. We know how it will be packaged… to delight the senses and play on the emotions with opulent visual presentations. Those Greek columns costs money, you know.

I believe Americans are looking for a straight shooter who’s willing to lay it out on the line, and point out that the wrong path most believe we are on needs a 180 direction change. If a GOP opponent merely tacks slightly left or right of Obama, the ultimate losers will be our nation and it’s fiscal health.

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Great job, Mata!
I know Obama has tried to insist this election campaign not be personal.
And, with this 99% VS 1% rallying cry, who can blame him?
Imagine all of the Marie Antoinette and haughty Obama imagery ripe for 15 and 30 second ads.
If any family epitomizes life as a 1%er it is the Obamas.
These ads will make themselves!

Your essay also brought to mind the tactic of push-polls that Obama used to CREATE public opinion while appearing to report public opinion.
It should be a regular feature here to go behind every poll.
It might be useful to compare apparently similar polls for differences, shifts in how the questions are framed.
Obama cannot win on the facts.
Obama must create an illusion of a groundswell that others can ride.
He has enough compliant media to assist him.
The internet is the best and fastest fact-checker in this election season.

Mata, as usual, thoroughly researched, brilliantly written. Thank you!

Great article Mata. Another tactic that the eventual GOP nominee can use is Obama’s schedule posted daily on the WH website. Mark Levin reports on Obama’s daily schedule on his radio show all the time. This President never gets his first security briefing until well into mid morning.

Inga Barks took it one step further when she sat in for Mark while he is off the air for the holidays. She compared that day’s schedule for Obama to the same day in the last year of Reagan’s presidency. It was like night and day. Reagan accomplished more in three hours than Obama manages to get done in a whole day – not counting golf, of course.

Rhetorically, Obama will pay lip service to the political expediencies de jour. But in terms of actual policy, the President never strays too far from his actual convictions. All of his major foreign and domestic initiatives have thus far conformed to his left-wing world-view.

Mark my words, this emerging “conflict-management” paradigm of Obama’s – if it exists at all – will last only to November 2012. If he’s re-elected, he will push anew with vigor and conviction to divest Israel of its territorial depth….so that he can bask in the glory of “peace-maker” and re-enforce his bonafides in the Muslim world. And if Israel doesn’t play ball, he will preside over a dramatic rupture in the US-Israeli ‘special relationship’ that will usher in the Jewish state’s near-total international isolation.

In other words, Obama’s defeat in Nov 2012 is imperative for more than just domestic considerations.

Mata, our computer is glitchy enough without cookies.
Hubby won’t allow any more of them than sneak in.
No ”on purpose” cookies.

So, no reader posts for me.

I have no idea how to do any of that.
Hubby does it only reluctantly.

Scan down to Q. #901.
No wonder Obama SEEMS to be rising in this poll.
Those proportions of Dems to Reps hardly lines up with the reality on the ground….
as seen in the right-hand columns here:

@ MataHarley:
Great article Mata!

On the matter of cookies, (since it’s an OT concern..) there is a better way. I hate having to log back into sites, so I keep the cookies I like. Cookies are not always a bad thing. They help in browser navigation quite a bit. Downloading one of these cache (or cookie) viewers will allow you to keep the ones you want.
Nan, cookies do not make your computer glitchy. There may be some temp internet files that slow things down, but it is probably something else. The single best site on the internet for finding computer help (and it’s free) is Bleeping Computer.
Good luck.