Phil Gramm is sent into political exile, some say, for stumbling into the truth by saying we have a "mental recession" and America has become a nation of whiners:
Campaign Econ says the American economy is a certain way because Americans think it is. Campaign Econ competes with real economics and often wins -- with damage that extends way beyond, say, the political career of either Phil Gramm or John McCain.
[. . .]
That Campaign Econ is also calibrating Barack Obama's economic team goes without saying. The view among the nation's political advisers, from far left to far right, is that the economy is in a Katrina. Anyone who disagrees has no role in the 2008 presidential contest.
She's right about several things, I think. The economy hasn't been as bad as many have been saying, and by thinking it is, we probably bring on the worse economy sooner than it would have gotten here. But saying it's all the effect of Campaign Econ instead of "real" economics glosses over a little bit how much of a consumer economy we have. If the consumer is discouraged, the consumer will engage in less buying. The self-fulfilling prophecy is an inherent component of a consumber-based economy.
And there is more reason to be pessimistic this time around than in prevous "perceived downturns." We are feeling the economic pinch largely at the gas pump and the supermarket. Those are two places where we buy the same things in the same amounts over and over. It's hard to miss the steady increases. Usually I haven't noticed a change in my buying power when talk has turned to gloomy economics. This time I have.
