More than an empty suit?
By Dennis T. Avery
We elected a President we hardly knew. Barack Obama's campaign team—and the mainstream press—told us only that we should feel "hopeful."
Now we seem to be relying on this man to rebuild the U.S. economy almost from scratch. That's highly unlikely. My former boss, Gary Seevers, was on Nixon's Council of Economic Advisors, and before that a top official in Nixon's wage-and-price-control effort. He told me that "neither the CEA nor government price-fixing ever had a chance to succeed. The economic data was too late and too weak, and the tools too flimsy." Seevers ultimately put his faith in good incentives.
Obama himself was blind-sided by the sub-prime mortgage collapse, and his response was that he'd save the economy with a replay of Franklin Roosevelt's New Deal public works projects. That meant he had no real rescue ideas. After all, U.S. unemployment was nearly 25 percent when Roosevelt was elected, and was still at 19 percent in 1938, after six years of Roosevelt's "pump-priming." Many of the public works weren't badly needed, and they all took a long time to plan and pay out. Not until World War II did America finally rise out of the Depression.
Fannie Mae and Freddie Mac are still guaranteeing high-risk mortgages for poorly-qualified buyers, applauded by Barney Frank and the hard-left Democrats. Investment does not mean buying a house the buyer can't afford. Investment means putting capital into your trucking firm or computer service company and then buying the big house after the business starts to earn income for you. Investment first, rewards second.
Most of Obama's cabinet appointments have turned out to be retreads from the Clinton years, which also doesn't say much about investing for growth. The Clintons' investment-friendly tax cuts were forced by the Republicans—along with the welfare reform that stimulated so many low-income families to start working their way out of poverty, rather than staying on welfare. Those set the stage for real economic growth.
But then Greenspan and the Federal Reserve decided the key to growth was simply lowering interest rates. The recovery from the dot.com bubble-burst became the euphoria of free money. Even Freddie and Fannie looked like they were earning profits—until the $200 billion bailout that is still ongoing.
Obama's own experience as a community organizer in a rusting steel-mill neighborhood is a handicap itself. Dealing with the aftermath of massive union-enhanced failure has made Obama too hopeless about markets. The unions helped a few of the country's workers, at the expense of the rest. America still has a competitive auto industry, thanks to Asian investments in U.S. car factories and non-union workers.
Not even the U.S. government has enough money to bail out its whole economy. Fortunately, the Obama "stimulus package" has morphed partly away from handouts to mayors and governors, and somewhat more into short-term tax cuts. That's progress. But the real key to long-term investment will be permanently lower taxes, and tighter federal spending. Social Security and Medicare must be reined in, along with Freddie and Fannie. The promised campaign against man-made global warming will also be massively expensive—and comes at a time of declining global temperatures.
Obama's Presidential campaign was the mirror image of Deval Patrick's run for governor of Massachusetts. This is not surprising as they shared the same campaign manager, David Axelrod. Both men presented themselves as blank slates, offering "hope." Since his election, Patrick has been able to do little except wrangle over turf with the "old pol" Democrats in the Massachusetts statehouse. Will Obama become more than an empty suit at the national podium?
Dennis T. Avery is a senior fellow for the Hudson Institute in Washington, DC and is the Director for the Center for Global Food Issues. He was formerly a senior analyst for the Department of State. He is co-author, with S. Fred Singer, of Unstoppable Global Warming Every 1500 Hundred Years, Readers may write him at PO Box 202, Churchville, VA 2442 or email to email@example.com.
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