Monday, March 16, 2009

This is the core of the problem today

Most people seem to be saying that the financial crisis must be solved in order for the economy to recovery. I think the financial crisis could solve itself if the threat of damaging government policies recedes. What is lacking today is confidence in the future, but so far what has come out of the Obama White House inspires only fear.

I have no problem saying that Bush & Co. messed up big time, by allowing government spending to rise and by creating new government programs that will surely grow like topsy in the future. But Obama & Co. are doing their best to win the prize for outrageous abuse of the public purse. I think the market today is terrified of the prospect of a significant increase in the size of government and an attendant rise in tax burdens. "Cap and trade" promises to severely impact not only all energy-intensive industries, but our international competitiveness as well. Trade wars, such as the one just ignited today by Mexico's announcement of higher tariffs on 90 U.S. products in retaliation for U.S. restrictions on Mexican trucks, promise to escalate under cap and trade, since U.S. exports will suffer if carbon-based fuel costs rise here but not in other countries.

Brian Riedl of the Heritage Foundation has written an excellent summary of the details and consequences of Obama's budget proposals. Here are the main points, with a HT to Andrew Roth at the Club for Growth. Do read the whole thing.

During his presidential campaign, President Barack Obama promised the American people a "net spending cut." Instead, he signed a "stimulus" bill that spends $800 billion, and he has proposed a budget that would:

• Increase spending by $1 trillion over the next decade;
• Include an additional $250 billion placeholder for another financial bailout;
• Likely lead to a 12 percent increase in discretion ary spending;
• Permanently expand the federal government by nearly 3 percent of gross domestic product (GDP) over pre-recession levels;
• Raise taxes on all Americans by $1.4 trillion over the next decade;
• Raise taxes for 3.2 million taxpayers by an average of $300,000 over the next decade;
• Call for a pay-as-you-go (PAYGO) law despite offering a budget that would violate it by $3.4 trillion;
• Assume a rosy economic scenario that few economists anticipate;
• Leave permanent deficits averaging $600 billion even after the economy recovers; and
• Double the publicly held national debt to over $15 trillion ($12.5 trillion after inflation).
• A new cap-and-trade energy tax that could devastate the manufacturing sector
These are the things that are depressing the market; this is the current source of the apparent crisis in the financial markets. If Congress can cut back on even just a few of these anti-growth, anti-free market and anti-capital measures, I think we would see a much faster resolution to our financial crisis.

For more on how, in his own words, Obama is anti-free market, see this article.


Ryan Grannis said...

Why did you remove the article you posted last night about where the stimulus money is going?

WilliamSSmith said...

I've always understood why members of the boomer generation (my own) would vote for a liberal democrat at this stage of their lives. What confuses me is why young people would vote for him. They will be saddled with the staggering debt and loss of opportunity that this administration seems to be creating. Perhaps, to paraphrase an earlier President, "when one is young and stupid, one is young and stupid."

Scott Grannis said...

I think Obama did a bit of "bait and switch." He sounded like we was going to reverse all the bad things of the Bush era (among which was a lack of spending control and a proliferation of earmarks), but instead he has set new records for fiscal profligacy. I don't think young people have had a chance to realize how deceitful politicians can be, and they certainly have no appreciation of the problems that come with bigger government. Obama acts like a young idealist when he rhapsodizes about all the good things that can happen when money is distributed to local governments and government agencies. He still thinks he's a community organizer in a Chicago neighborhood.

Jon S. said...

The answer, William S, is that it's not just financial markets that have melted down; it's the mainstream media and our educational system from K-college that have disappeared from the landscape in any decent, recognizable form.

Scott is right about the bait and switch, but plenty of people -- I'm sure Scott was one of them -- saw through this transparent dishonesty. If we still had a media to question and grill our pols, perhaps enough voters would have realized the depths of Obama's accomplished lying, but when the MSM becomes the media wing of just one party, then it's not surprising that poor McCain got swamped. In this light it's amazing that Bush eked out a win in 2004.

The thuggery of this new administration seemingly knows no bounds. For the first time in my adult life, I'm concerned about the nation's future. Like Scott, though, I'm an optimist, so I still think that enough concerned citizens will vote the bums out before it's too late (not that Republicans have shown themselves to be shining beacons of courage either, but in comparison ...).

Somehow the people have to be made to see that responsible governing -- that fosters economic growth and freedom -- is more important than irresponsibly power-grabbing, warring with political opponents who are private citizens, and imposing ruinous tax hikes while pretending they're tax cuts. Again, if we had a real media....

Unknown said...

Scott and Ryan,

My question, too. There was a link on the stimulus article page that I wanted to check out but when I went back to the post, the posting was gone. Thanks.

Scott Grannis said...

Here's the link to Stimulus Watch. I removed the post because I mistakenly thought that it listed actually projects being funded.