The fundamentals of the recovery are sound....

That seems to be the message from the administration going into the midterm elections.

In an op-ed piece today, featuring the dreadfully tone-deaf title, "Welcome to the Recovery", Treasury Secretary Tim Geithner presents the good news....The public is unlikely to be fooled.... Americans are all too well aware of the extent of joblessness, and forecasts put a return to full employment around mid-decade. Banks and businesses have repaired their balance sheets—and  are too concerned about the state of recovery to do much new investment. 

I find this to be nearly as tone deaf as John McCain's claim in September 2008 that the "fundamentals of the economy are sound." McCain was rightly and widely criticized for this claim (although the fact that the fundamentals of the economy were indeed not sound is probably what led to the Republican defeat). It was so utterly tone-deaf that he spent considerable time trying to walk it back (remember his subsequent clarification that the fundamental of the economy is the American worker. You wanna talk smack on the American worker?). If the decision to go this route, the lie-to-the-American-citizen's-face path, is the best electoral strategy they've got, then they're in big trouble. If this, however, reflects the genuine belief of the administration, then it's us who are in trouble. This brings us to Brad DeLong's frequently asked question: "Why aren't there irresistible political demands for more government action to steer us toward a better economic recovery --or at least to hedge against a double-dip in what seems likely to be called not a “recession” but a “depression” when historians get around to writing about it?"


His theories are: 

1. "widening wealth inequality and an upgrading of the class position of reporters and pundits, who are no longer ink-stained wretches immersed in mainstream America;
2. the collapse of union power, which ensures that nobody who sees real workers on a daily basis sits at the table when the deals are made;
3. increasing job security for the powerful in Washington, aided by the growth of the lobbying apparatus that envelops the mixed-economy government;
4. the collapse of professional integrity among the Washington press corps, which no longer dares to call balls and strikes as it sees them, preferring to say only that the Democrats say it was a strike and the Republicans say it was a ball, and that opinions on the shape of the earth differ."

If you asked me a year or two ago, I would have probably said that the 2nd--the decline of the unions--was most important, followed by the 3rd. Increasingly, however, I believe that the first is an incredibly important factor, although I would not limit this to reporters and pundits but rather broaden it to include much of the professional Washington establishment class. For many, especially those with significant investments (other than real estate), the recovery is already well under-way.