There was question in the media about exactly how
president-elect Obama planned to deal with the economic crisis.
Some have speculated that he would move right with moderate
economic policies that would foster growth the old-fashioned way –
by creating wealth through the methodical process of wise capital
formation and deployment. And several of his appointments including
Reagan-era Fed chairman Paul Volcker, Christina Romer, a tax cutter
from UC Berkeley, and Tim Geithner at Treasury indicate that he may
be prudent in this area.
But for those who are skeptical about a candidate who said he
wanted to “spread the wealth around,” Obama’s Saturday
November 22 radio address offered some troubling language. Here are
excerpts from the address followed by observations:
Excerpt: The news this week has only reinforced the
fact that we are facing an economic crisis of historic proportions.
Financial markets faced more turmoil. New home purchases in October
were the lowest in half a century. Five-hundred-forty-thousand more
jobless claims were filed last week, the highest in 18 years. And
we now risk falling into a deflationary spiral that could increase
our massive debt even further.
Observation: This is Obama talking down the economy. We
would never get this from an optimist or a conservative. Ronald
Reagan would have said something like: “We have challenges that we
will meet with American optimism”. When Obama aides said that the
current economic crisis offers an historic opportunity to reshape
the economy, they were really talking about reinstating
Roosevelt-type New Deal policies which utterly failed to improve
the economy of the 1930s. Let’s hope Obama resists temptation.
Volcker is a good sign he might. But you never know.
Excerpt: While I'm pleased that Congress passed a
long-overdue extension of unemployment benefits this week, we must
do more to put people back to work and get our economy moving
again. We have now lost 1.2 million jobs this year, and if we don't
act swiftly and boldly, most experts now believe that we could lose
millions of jobs next year.
There are no quick or easy fixes to this crisis, which has been
many years in the making, and it's likely to get worse before it
gets better. But January 20th is our chance to begin anew - with a
new direction, new ideas, and new reforms that will create jobs and
fuel long-term economic growth.
Observation: Obama here is setting the table for big
government intervention in the economy in addition to the $1+
trillion in bailouts already in effect. “A new direction, new
ideas, and new reforms” is nothing more than the same old stuff:
Use the government to try and fix the economy. It will not work. He
has talked about $500 billion more in economic stimulus. This is
just throwing money at a problem that requires patience. Perhaps
his appointees will talk him out of it.
And indeed the crisis has been years in the making, but it has
evolved out of Obama’s ideology – decades of massive government
waste, corruption at Fannie Mae, and laws like the Community
Reinvestment Act that forced private banks into the role of social
engineers.
Excerpt: I have already directed my economic team to
come up with an Economic Recovery Plan that will mean 2.5 million
more jobs by January of 2011 - a plan big enough to meet the
challenges we face that I intend to sign soon after taking office.
…We'll put people back to work rebuilding our crumbling roads and
bridges, modernizing schools that are failing our children, and
building wind farms and solar panels…
Observation: Obama plans to create these 2.5 million
jobs using the government as an employer, creating huge new
deficits. He can easily create 5 million or 10 million jobs in this
way if he is willing to take on enough debt. But it will not
improve the economy in the long term. Only private growth will do
that.
The whole idea of “rebuilding our crumbling roads and bridges”
is classic socialism and is exactly the route that FDR took between
1933 and 1938 with make-work government jobs building roads and
bridges and other public projects. It did not work. The
unemployment rate was higher in 1938 than it was in January 1933
when Roosevelt took office.
“Modernizing our schools” is just another term for throwing more
billions into the pot for the public school bureaucracy and the
teacher unions, which then will contribute it back to the Democrat
party. The public schools have been failing for decades now. Why
give them more money?
Meanwhile Obama’s plan to finance “wind farms and solar panels”
with government cash is nonsense. Think ethanol. The whole
pie-in-the-sky ethanol program, touted for years by
environmentalists, has turned out to be hugely inefficient, has
pushed up food prices by diverting large amounts of the corn crop
to fuel, requires tens of billions in government subsidies, and
never even has been shown to produce more energy that it consumes.
In other words, ethanol production is voraciously consuming three
critical things – food, energy and capital, while its government
subsidies hide its real effects. Wind farms and solar panels will
be no different.
Excerpt: These aren't just steps to pull ourselves out
of this immediate crisis; these are the long-term investments in
our economic future that have been ignored for far too long. And
they represent an early down payment on the type of reform my
administration will bring to Washington - a government that spends
wisely, focuses on what works, and puts the public interest ahead
of the same special interests that have come to dominate our
politics.
Observation: Obama talks about “investments”, but most
government spending is not “investment” because it relies on
taxation, which is the nationalization of private investment
capital. Private capital in private hands is true “investment”.
To learn more about “investment”, just go to the states where
the economies were collapsing long before the financial crisis hit
and you will find Democrats in control with their big government
spending programs and high tax levels. New York State, Vermont,
Rhode Island, Massachusetts and Michigan all voted overwhelmingly
for Obama and have had the worst economies in America for years
now. Obama’s own Democrat-dominated state of Illinois is 45th in
job creation of the 50 United States.
In Obama’s big economic rollout on Monday, November 24, he
called for more government spending including a tax cut for the
“vast majority” of Americans in the middle class paid for by the
nation’s “wealthiest”. Let’s hope Volcker and Romer talk some sense
into Obama.
Here is an excerpt from the article 'Irrationalizing Employment
Growth' in the National Review of September 14, 2004, by
contributing editor Tom Nugent restating a well-established fact
that increasing taxes on upper-income citizens harms the
economy:
In particular, Democrats continue to press the idea that the
first four Bush years have turned in the worst rate of job growth
since the Hoover administration. The president’s detractors,
however, should be made aware that Hoover raised taxes on the
wealthy (just as Kerry proposes) and encouraged the Smoot Hawley
tariff to protect farmers from foreign competition (just as Kerry
wants to protect U.S. workers from outsourcing). These policies are
given the blame for the Great Depression, which hit during Hoover’s
one term as president back in the 1930s.
So not only has Obama talked about “taxing the rich” but he is
protectionist as well, which will hurt our economy just as Smoot
Hawley did. He campaigned on renegotiating free-trade agreements
with South Korea, Mexico, Canada, Colombia and the Central American
region. Pray that Volcker and Romer can get to him to leave these
pacts alone and to encourage free trade.
Regarding Obama’s plan to genuinely cut taxes for the middle
class: The Democrat party has relentlessly taxed the middle class
over the last 50 years. Real tax reform would permanently encode
significantly lower tax rates for the entire middle class. Obama
won’t do this. He already has plans to increase the Social Security
tax and increase taxes in many other ways.
Obama has sent so many mixed signals that even normally
level-headed Fox News headlined its story about Obama’s November 25
press conference like this: 'Obama Promotes Fiscal Restraint, Big
Spending'
Huh?
What we do know is that the Fox headline is half right. Obama
probably is going to do one thing to restrain spending and that
will be to cut the military substantially as Bill Clinton did.
Clinton went farther however, gutting out intel agencies too, which
led to 9/11. In the wake of the Mumbai, India terrorist attacks of
November 26, we must realize that vigilance it crucial. Whether
Obama plans to remain vigilant economically or militarily is
another story. Time will tell.
Please visit my website at www.nikitas3.com for more.