Wednesday, January 26, 2011

Status Quo

Obama gathered his economic team in the West Wing's Roosevelt Room to review themes for his State of the Union address. ... The ideas presented to him...seemed familiar and uninspired. “You know, guys,” he said, according to someone in the room, "I've told you before, I want you to come to me with ideas that excite me.” Nothing he was hearing excited him.

[Obama wanted] “solutions on the cheap” . . . a way of promoting growth without deficit spending. [emphasis added]

--Peter Baker, New York Times Magazine, 1.19.11

Of course, Baker of the New York Times’ story has a happy ending. Obama, as we heard in his State of the Union address yesterday, has offered us “a vision for rebuilding by improving American competitiveness in a global economy, calling it ‘our generation’s Sputnik moment.’”

But did Obama truly capture “the state of the union”? Or are he and his advisors simply unable to fix the economy by helping business grow and government shrink, because they so deeply believe business is the problem and government the solution?

A “Sputnik moment” is about Big Government fixing everything for us innocents. Calling the president and his team “wrong” about “this [Sputnik] moment,” the National Review’s Yuval Levin writes:
We have an opportunity in the next few years to avoid a truly disastrous entitlement and debt crisis and foster the conditions for vibrant growth again. We still have a chance to implement reforms that could do this without crushing austerity or terrible disruptions for seniors and other vulnerable Americans. That chance won’t last long, however, and it is profoundly irresponsible to just pretend we needn’t worry about it.
Levin is one of many who think Obama has missed real problems and real solutions.

Such as reining in debt:
in his first two years Mr. Obama has overseen . . . increased federal spending to as much as 25% of the economy from a modern average between 20% and 21%. In terms of allocating resources, this means that 4% of annual economic output was suddenly taken out of private hands and put under government control.

--Wall Street Journal editorial, 1.26.11

Under President Obama, the U.S. has one of the worst budget deficits in the developed world. Our federal debt is exponentially increasing by $54,373 every second. At this dangerous rate, our debt will be $18.6 trillion at the end of the president's term — an unimaginable explosion of 75% above and beyond the debt accumulated by all of his 43 predecessors combined.

--Rep. Kevin Brady (R-TX), 1.24.11
and fixing unemployment and housing:
The unemployment rate was 8.2% in February 2009, when Obama first addressed Congress. It hit double digits by that October and was 9.4% at last report. . . there are 2.8 million fewer jobs now than when Obama took office. Housing is a particular sore spot. Foreclosures hit a record 1 million in 2010, and this year's figures are likely to be worse.

--Nancy Benac, AP, 1.23.11
and truly (not falsely) cutting government regulations:
The Small Business Administration estimates that government regulations cost our economy $1.7 trillion every year. According to the IRS's own figures, it cost taxpayers $338 billion to comply with the tax code just last year.

--Sen. Ron Johnson (R-WI), 1.26.11

the president's enacted health care and financial laws, by themselves, rigorously increase regulation over 25% [to] 30% of the entire economy. [Obama] announced that he had issued an executive order to review all government regulations. . . although [he] makes it explicit that the cost-benefit analysis must take account of -- as benefits -- intangible factors such as "equity, human dignity, fairness, and distributive impacts." Plenty of leeway there for career regulators and liberal political appointees to justify almost any oppressive regulation they may stumble over.

--Tony Blankley, 1.26.11
in sum, giving business the confidence to invest and hire:
The basic issue [with Obama] is uncertainty — uncertainty on what health care is actually going to cost, uncertainty on hundreds of rule-makings in the Dodd-Frank [financial reform] bill, uncertainty about what’s going to come out of the E.P.A. putting through what they couldn’t get legislatively, uncertainty about taxes.

-- Thomas Donohue, chamber of commerce president, December 2010
The president is stuck defending the status quo because government is under attack, and he’s playing defense the best way he can. Last November’s election means he can’t make government bigger. He doesn’t want it smaller. So he’s hoping what he’s done so far will work.

Again, the New York Times’ Peter Baker:
The president. . . recently asked advisers to present arguments about whether the slow recovery is part of an economic cycle that will ultimately turn around or something different, a “new normal” signaling stagnation as in Japan in the 1990s. . . In the end, Obama concluded that the economic moment is part of a cycle.
Kenneth Rogoff, author with Carmen Reinhart of This Time Is Different, a book about financial crises, told Baker that after two years, the president has essentially done everything he can and must wait to see if it works. “What’s going to happen with unemployment and the economy is largely set at this point. He’s taken his decisions, and now it will unfold and things will begin to improve.”

Noam Scheiber, writing in the New Republic, put a little blunter spin on Obama’s hope:
The dirty little secret of macroeconomic policy is that most of the decisions that will influence job growth over the next two years have already been made. The beauty of [Obama’s] rapprochement with business is that it creates the appearance of a president rolling up his sleeves to solve the problem. And the best part is that it seems to come at little substantive cost.
Too bad “appearance” won’t work. The status quo is unacceptable. We need the reality of job and housing growth.

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