Allan Meltzer of Carnegie Mellon and AEI makes the argument that the president’s economic policy has failed to generate the kind of recovery that its proponents had hoped for:
Two overarching reasons explain the failure of Obamanomics. First, administration economists and their outside supporters neglected the longer-term costs and consequences of their actions. Second, the administration and Congress have through their deeds and words heightened uncertainty about the economic future. High uncertainty is the enemy of investment and growth.
Most of the earlier spending was a very short-term response to long-term problems. One piece financed temporary tax cuts. This was a mistake, and ignores the role of expectations in the economy. Economic theory predicts that temporary tax cuts have little effect on spending. Unless tax cuts are expected to last, consumers save the proceeds and pay down debt. Experience with past temporary tax reductions, as in the Carter and first Bush presidencies, confirms this outcome.
Another large part of the stimulus went to relieve state and local governments of their budget deficits. Transferring a deficit from the state to the federal government changes very little. Some teachers and police got an additional year of employment, but their gain is temporary. Any benefits to them must be balanced against the negative effect of the increased public debt and the temporary nature of the transfer.
The Obama economic team ignored past history. The two most successful fiscal stimulus programs since World War II—under Kennedy-Johnson and Reagan—took the form of permanent reductions in corporate and marginal tax rates.
So much for the “multiplier effect,” about which not much has been heard, recently. Yet to be felt are the impacts of Obamacare and Cappin’ Trade.
Government is much better at redistributing wealth than it is at creating it.
When the crowd in power ignore the obvious lessons of history and persists in foisting failed economic policies mouthing platitudes that no one even pretends to actually believe you have to conclude that their intentions have little to do with their rhetoric.
I conclude they really want to control everything. That is a scary concept and dismissed as wing-nut rhetoric by those in power. The more they dismiss such talk the more I believe it. “…me thinks the lady doth protest too much.”
They aren’t stupid but are counting on the voters to be. So far they’ve been mostly right on that score but hope springs eternal for November.
During my quick lunch errand I heard Neal Boortz reference a 13.6% increase in 2009 of people dependent upon the Government. Details courtesy of Investors Business Daily http://bit.ly/bz8xw1.
One of Neal’s points was that when Democrats came back into power they would do everything they could to increase the dependence of people, for their everyday living, upon the Government. By that measure they have been successful.
Part of the Administration’s solution has been to give small businesses tax cuts. Tax cuts give companies more cash, but why would they spend it on employees or equipment that wont pay for itself? Any businessperson knows you don’t hire a worker or invest in a piece of equipment that won’t pay for itself.
The real problem is weak sales, so hiring or buying new productive capacity, if you can’t sell the results, will only produce lower profits because the cost will exceed the money you make.
Obama doesn’t understand basic business, so his administration comes up with stimulus programs that actually do just the opposite and waste of taxpayer money.
Well Tailspin, a lot of those small business “tax cuts” have actually been tax “credits”. For example, you can get a $5,000 tax credit IF you hire a new employee and (a) that new employee has been out of work six months (lots of those around) and (b) you pay the employee $100,000 or more for his first year of work (the $5,000 is on a scale, and if you pay the employee less than $100 K, you get less of a credit).
Now that’s just a heck of a deal–spend $100 K (and more if you keep the employee on) to get $5K. Only a government weasel could believe that.
There is a multiplier effect at work here with Obamanomics. The multiplier is “uncertainty”. Which way will this Pelosi-Obama whirligig spin next? How much destruction can they do to the economy?
All of that translates into an attitude of “let’s hunker down, take no risks, and take on no new employees”.
Professor Allan –” “Capitalism without failure is like religion without sin—it just doesn’t work.” – Meltzer has long been railing against the stimulus from the outset; now incredibly claiming, despite the facts that it has “failed.”
Most economists disagree. While not perfect, the economic stimulus has indeed been a success. Not only did it avert a depression, it has produced 1.8 million jobs, and ultimately 2.5 million jobs.
LINK
It is job growth and a rising GDP that are most important to our economic recovery. And contrary to contrarian Meltzer, Obama has indeed turned around a dangerous and desperate situation, into one of distinct and measurable progress.
Review the Obama economic graphs and facts here. Meltzer should do the same.
First off you lose points for referencing the NY Times and Washington Post. Journalists are journalists because they can’t actually do anything else.
“Jobs created or saved” is a useless metric and anyone using it with a straight face should be shot for intellectual dishonesty. There’s absolutely no way we can know for certain if a job would have gone away, it’s an argument over a hypothetical.
Politicians love charts. They’re colorful, easy to read, give the impression of information density (worth a thousand words) and are trivially easy to massage to give the desired impression. All of your referenced charts end in January, before the home buyer tax credit that was artificially inflating house prices expired, before the Eurozone crisis brought uncertainty back into the market, before Obama’s idiotic moratorium threw thousands of Americans out of work. I think it’s a bit premature to conclude that this the the start of a true recovery vice some kind of “dead cat bounce”.
The more conspiracy-minded set has proposed that Obama and his team are implementing a Cloward-Piven strategy (http://en.wikipedia.org/wiki/Cloward%E2%80%93Piven_strategy). I thought that the idea was far-fetched until I asked myself if you wanted an ecomomic Cloward-Piven, what would you do different?
Craftsman – I think you should have stuck with your first impression: “Far-fetched.”
The Cloward-Piven strategy belongs to the far-fetched, conspiratorial theorists and fringe players who hate Obama… which are many. It has nothing to do with economics or reality for that matter, and everything to do with demagoguery and fear mongering. It is a red herring. It is designed and has gained traction to bring the tea party’s kettle closer to a boil.
While Meltzer dislikes Obama’s economic policies, he is at least a noted economist and not some rabble-rouser like Beck et. al. He and I would both agree I think, that Obama’s economic policy has absolutely nothing to do with Cloward-Piven, and a whole lot to do with real Keynesian economics.
Actually, Flit, Cloward-Piven must have a failed economy to work. The question is intention. Personally, Obama and Biden would screw up a one car funeral procession. I don’t think they know enough Economics to intentionally destroy the economy. So, I guess we agree in that way, but it’s like sneaking in the back door.
The “noted Economst” business really doesn’t mean much. Krugman is a “noted Economist”, but every time he opens his mouth he shows just how little he knows about Economics and human nature. Meltzer, OTOH is a different kettle of fish in that regard. Anyone that knows anything about Econ or human nature will stand squarely against the Obamtron’s Economic policy, such as it is.
There can be little doubt that Obama’s policies will suppress investment by businesses and individuals, will inhibit hiring and cause continued high unemployment, and will generally worsen and extend the recession.
Any positive impact of the so-called “stimulus” is miniscule in comparison to the damaging effects on millions of businesses and households.
The whole nonsense of “saving” a job is just that: Meaningless nonsense. I mean, for crying out loud! Al Gore must’ve saved a masseuse job, because he didn’t demand she be fired when she didn’t put out! I saved a job when I bought a small pack of cotter pins. But I can be accused of destroying a job because I bought that small pack of cotter pins; after all, I bought them so I could do the job myself. I’m so un-American, aren’t I, for refusing to “share the wealth?”
It is indeed meaningless. Almost as meaningless as hiring, then laying off, then re-hiring then rinsing, lathering and repeating three times, these part-time census workers. One worker went through four cycles of hiring/layoff, and it counts by the federal bureaucracy as four brand-spankin’ new jobs!
And the media just suck it up, not bothering to dig deep to find the real meta-narrative hidden behind the propaganda b.s. shoveled out by this administration (rather, regime?).
So please, Flit, let us not discuss jobs “saved.” It is a false presumption; the O can take credit for all jobs currently filled. He saved ‘em all! Hallelujah! Nope. Doesn’t work that way.
“High uncertainty is the enemy of investment and growth”
George Eliot wrote something in 1866 which should be contemplated by all managers/leaders in business, government, and the military:
“Fancy what a game of chess would be if all the chessman had passions and intellects, more or less small and cunning; if you were not only uncertain about your adversary’s men, but a little uncertain also about your own . . . You would be especially likely to be beaten if you depneded arrogantly on your mathematical imagination, and regarded your passionate pieces with contempt. Yet this imaginary chess is easy compared with a game man has to play against his fellow-men with other fellow-men for instruments.”
Some journalist was asserting that Obama’s brilliant mind thinks in terms of 3-dimensional chess. I haven’t seen any particular evidence that he’s even good at 2-dimensional chess…but the kind of “chess” that really matters in real leadership positions is much more like the game Eliot described than like standard chess, of whatever number of dimensions.
The government, as envisioned by the “Thems that Knows” liberal/marxist/so-called progressives, is a self-licking ice cream cone. That is until the economy has been flogged by it to the point where it cannot produce ice anymore.
When I took my require courses in Economics in College I noted the “multiplier effect” that my profs were so enamored of (all of them were Keynesians).
The “multiplier effect” is a Keynesian fantasy. The only way Government can spend the money is to take from someone else first. Government has no money of its own. Government is a parasite that can be symbiotic, or destructive. Flit’s side in this is destructive, as progressivism has always been.
“The only way Government can spend the money is to take from someone else first. “ Not true.
President Bush did not seem to have a problem with “spend[ing] the money” without ever taking it “from someone else first.” Indeed he cut tax revenues while simultaneously increasing spending by printing money. He totally erased a large surplus, then went on to the other extreme, and helped create the current mess we are in.
Not only did Bush take less in tax revenue because of his celebrated but ineffective tax cuts, he exacerbated the problem by spending even more, foolishly producing deficit spending every year!
Moreover, there also remains the “off-the-books” supplementary spending for our two long and never-ending wars. Thanks to the Chinese funding, we spent a trillion $ on these two wars. But eventually these chinese chickens will come home to roost, causing unforeseeable but certainly painful economic woes in the future. The Chinese have us by the short hairs. They know it, and can use it to their advantage.
Good government, as is civilization, is essential to humanity. To deem government a “parasite” is to advocate anarchy, isn’t it? And then what?
Cost of war
Flit. That’s one of the most ignorant statements you’ve made here. It is one massive non-sequiter as your statement does not follow even in opposition to mine.
Government gets its money solely through taking it from people. It may tax it, or it may print it (i.e. inflate, which is a very dishonest tax), or borrow it (which must be paid back one way or another), but it comes out of the hide of the citizens the Government is trying mightily to convert to Serfs. Your raving changes none of those facts, Flit.
Government is an economic parasite because it feeds off the society. Look at what the Founders had to say about government, my young friend. They certainly didn’t like government and saw it as a necessary eveil, yet they also knew that “men are not angels, therefore we have government.” Government was also instituted by God to deal with those who would do evil (read what the Apostle Paul had to say about it). To see governemnt as a parasite is not to advocate anarchy, it is to look the facts square in the eye and acknowledge them.
Yeah, those Chinese Chickens will come home to roost. The Chickens liberals/leftists of both parties have hatched and raised to what they are now. I’m all for getting the government back in its constitutional cage, which would mean FedGov does nothing more than Defense and foreign relations. About 98% of what FedGov does is unconstitutional.
Flit, you rail against the run away spending of the Bush administration. Yet the Obama administration has tripled down on the same policies and you defend them. This partisan driven disconnect does not strengthen your position. Many here including myself did not support Bushes overspending in fact I often clashed with Liberals and Democrats when I would suggest that Bush was not really conservative in any way other than national defense, of which he was forced into by 9-11.
You pratice what many liberals do, making the strawman that in the past we did fully demonize the president we cannot have an opinion on the new president and his actions. Well we are a year and a half into the current term and at some point Obama must accept that the things he has done are having a much greater effect today than things done years ago.
The point is what have the actions and policies of the CURRENT administration done to improve the nations lot or not.
Wanted to end with that last sentence but could not let your logical fallacy stand “Good government, as is civilization, is essential to humanity. To deem government a “parasite” is to advocate anarchy, isn’t it? And then what?”. Again a common strawman used by liberals, if a conservative advocates for less goverment they must be advocating for NO goverment. There is a point where goverment begins to harm the nation rather than help, that is the conservative arguement, only anarcist advocate no goverment and I never see them on the conservative side of things.
DINGDINGDINGDINGDINGDINGDINGDING.
Um, WRONG. If you go back and check, revenues actually increased after the tax cuts.
I will give you this: Bush increased spending over and above the increased revenue stream. I just you’ll admit that the Democrats were 200% behind every nanny-state-empowerment program, including No Child Left Behind, and the MEDICARE prescription increases.
I also agree that “off book” supplemental bills for the Southwest Asian wars is silly. And how many Democrats insisted on strict financial responsibility here? Zero? Still, $1 trillion over eight years is chicken feed. Our annual GDP is around $12 trillion, and in the past few years of (Democratic Party-controlled) Congress we’ve seen $2 trillion budgets. Per year. And you’re pissing about $1 trillion over eight years?
Flit’s entire argument here is a massive tu quoque directed against the Bush administration. In other words, he’s following the pattern of other Obama-ite fellow travelers that everything is Bush’s fault.
Ignoring the final Flit quote as a typical red herring appeal to emotion…
Kudos to dave for further evisceration of the Flit propaganda.
Argh. Preview is our friend. “I just hope you’ll admit that…”
You’re kidding, right? “Much better”? Like government creates any wealth at all? You meant to say “Government does not create wealth, only redistributes it, and in doing so destroys a good portion of it, which is why government was designed to not have anything to do with wealth in America”, right?
The only things which create wealth are mining, manufacturing, and agriculture. Agriculture is sustainable, as long as the Sun shines. Mining works until we use up the easily-dug-up stuff. Manufacturing depends on energy, from agriculture or mining.
Most sunshine is wasted into empty space. If we could catch some of that and beam it down here, we could have cheap energy again, which is good for everybody.
Our current rulers seem to be thinking in terms of hydraulic empire, in which control of the irrigation canals is not for the purpose of providing water to everyone, but for the purpose of shutting off the water to rebellious provinces.
jtg…”Our current rulers seem to be thinking in terms of hydraulic empire, in which control of the irrigation canals is not for the purpose of providing water to everyone, but for the purpose of shutting off the water to rebellious provinces”
Very nicely put. I would add only that our current rulers are analogous to very late rulers of the hydraulic empire, who did not build the irrigation canals but inherited them from earlier and more virile generations.
The entire country was inherited from more verile generations. Waelth allows a rise of the soft heads. The modern left is just the current manifestation of that. Our ancestors accomplished a lot. The present lot does little more than complain about the injustice of it all and try to take from the productive to give to the unproductive able-bodied to relieve those “injustices.”
I’m not a retired Army Avaiator, so I guess life really is unjust. Doncha think
Quartermaster:
I am not a retired Army Aviator, and never wanted to be an Army anything. I am a comfortably retired mariner, and life is good.
See, there is some justice. If you join the Navy.
Besides, sailors have more fun.
Ah, Grampa. I did join the Navy. The reason for the QM handle (that’s what I was on Courtney and Sylvania). It inspired me to join the Army for flight school.
Actually, I wanted to go to sea because my father wanted me to join the Air Force (I actually just wanted to go to sea). The original plan was to go to college then the AF to fly, but didn’t know about Warrant Officer Flight and signed up as soon as I found out about it during my freshman year in Engineering School. The Major who was president of my board, and the aviator part, was a bit puzzled that I wanted to go to flight school when I was doing well in Engineering School. I could always go to Engineering School, but flight school was for the young and mostly insane. The Major thought that was funny and I got the highest recommendation they could give.