Somehow, I managed to stay awake for last night’s Presidential press conference. Say what you will about President Obama’s communication skills–and they are considerable–he is no macro economist.
Which is a shame, because he has access to two of the brightest macro-economists of our generation: Ben Bernanke and Larry Summers. He should listen to them; learn from them. They have much to teach him. My reaction to watching the President last night is that he is clueless as to how the economy really works, and his recent historical perspective is revisionist.
First, kudos to the media. As opposed to the first press conference, they asked him some hard, direct questions. Unfortunately, President Obama is incapable of answering these questions in a transparent, straightforward manner, but the questions were direct even if the answers weren’t.
Now to the revisionist Obamanomics. First, President Obama claims he inherited a $1.2 trillion budget deficit. According to the last figures I saw, the federal budget deficit for fiscal year 2008, ending September 30, was $456 billion. Now, if you include the $787 billion “economic stimulus” package and the $410 billion Omnibus spending bill both signed into law by President Obama, you get to $1.2 trillion pretty quickly, but you don’t get to blame your predecessor for that.
Second, the President claims that the economy will only grow if we spend more money on lowering health care costs, education and “green” energy. Serious economists like Milton Friedman, Gary Becker and Alan Greenspan will tell you that the economy grows two ways: increased lending by banks, and increased productivity by workers. Printing more money and subsequently artificially growing the economy will only increase inflation. (In fact, expect inflation to skyrocket in about two years. For proof, look to the Carter Administration.) The President claims that the Republicans have put forward no alternatives, but in fact they have advanced alternatives, he and his cohorts are just so busy shouting them down that they haven’t been able to hear them. And quite frankly, that’s what opposition parties do–they oppose. The Democrats did the same thing during the Bush Administration and it’s how a healthy democracy functions.
I have to admit, I’m still fuzzy on some of the President’s math. For example, how does one create a $1.2 trillion deficit and yet still balance the budget? Based on my knowledge of the law of large numbers, it’s mathematically impossible. If one raises taxes, it will further the recession spiral, and here’s why: economic activity in this country is derived by two-thirds consumer spending, one-third business and government spending. Raising taxes on consumers will choke any recovery and cannot be offset by government spending without further increasing the deficit.
The President would like to be able to control boom and bust cycles, which is what defines a capitalistic society. We’ve had boom and bust cycles for 250 years, and suddenly we think we’re so smart that we can control them? Joe Stalin, to a certain extent, was able to control the Soviet Union’s economic cycles. Is it the President’s plan to move our economy toward that type of environment?
Obama did make one statement last night that I agree with: “Debt is what got us in the mess”. This is true, but it is also true that the government coerced banks to make loans to less-than-creditworthy borrowers. Even last night, he encouraged banks to lend more money. Banks are lending more money, they just aren’t interested in taking the risks that they were obligated to take for the last 15 years. And creating more debt, albeit national debt, won’t get us out of it.
I don’t see how leveling the rates of tax deductability of charitable contributions is going to nominally impact charities. The President’s example of the bus driver making $50,000 is flawed. People who make $50,000 a year are the one’s that we’re told (by the Obama Administration) are struggling. Struggling people don’t make charitable contributions to the same extent that people with means do. A family making $250,000 will now have to make a choice, and while they’ll still choose to make charitable contributions, they’ll hold some money back to pay the increased tax liability. That’s going to hurt charities.
Finally, I get the sense with this guy that for the last 18 months or so, he’s been given a free pass. He’s never really been challenged by anyone at any time. He has an air about him of, “Trust me. I’m the President and I won’t lie to you”. But he’s also in a position of accountability and he needs specific facts and figures to support his arguments. I know this is unusual for him, but for the rest of us in the real world, we have to support our ideas with real data. Memo to the President: Stop trying to dazzle us with your “bovine feces”. We can’t trust you because your numbers don’t add up. That’s the transparency we’re looking for.
Here are a couple of links to support my arguments: