By Phil Billington / Chronicle contributor
Near Bush’s sunset, Treasury Secretary Paulson and Fed chairman Bernanke terrified the nation with “the sky’s falling and America is doomed” unless the government steps in with new regulations, institutional takeovers and massive lending. Congress hastily approved. Guess what? It didn’t work; more banks and corporations failed and unemployment zoomed.
Even before inauguration Barack Obama begun fear mongering, “If we don’t act swiftly, the economic decline might be irreversible." Congress signed Obama’s unprecedented “stimulus” package without even reading it. Where did President Obama get the impression that history owes him $2 trillion to spend on whatever he wants, the right to live out his personal dream of being Franklin Roosevelt?
His irritating language reminds me of the arrogance of George Bush who similarly believed that history owed him a gargantuan war in the tradition of FDR. In farewell Bush said, “I had to push aside my free-market ideas in the face of this crisis.” Say what? Presiding over the destruction of American prosperity with the largest spending spree in history and he calls himself a free-market guy? And who can top the arrogance of “we won it, we’ll run it” speaker Pelosi?
America wanted change and got something else. Obama’s head is filled with myths and lies, not only about FDR and the New Deal but also about the government’s power to repair the existing economic problems. He needs to recognize that the New Deal was a calamity far worse than the market plunge that began it. It is utterly bizarre that the Obama gang with befuddled economic credentials crafted an economic plan based on a discredited economic doctrine – failures piled upon failures.
These Washington misfits have no idea how the American market economy works. They wrongly believe that output (production) generates employment (rather than vice versa) and that government spending is a measure of real output; that the central government must spend money in order to stimulate the economy. What a crock. Never mind that this Keynesian trick has never worked in all of human history.
Obama has reversed economic cause and effect. The truth is that production generates employment whereas production feeds on investments. Investments on the other hand are encouraged by cutting taxes and abolishing regulations that thwart entrepreneurial innovations. You cannot make the country rich by looting taxpayers and paying people to repair the peeling walls at public schools. This amounts to capital consumption, a drain on the wealth of society, not investments.
Obama is taking exactly the wrong path. Interest rates should be raised, not lowered. Government spending should be cut, not increased. Taxes should be reduced. Regulations should be cut, not expanded. On the current path, the bozos in Washington are going to wreak whatever hope for recovery there is.
He needs to clear his head of the Babel of silly ideas about the power of government and hostility for the free-market, i.e., his really stupid stimulus speech remark, “Government is the only entity that can solve this crisis.” He should understand that markets are far more powerful than even the bloated federal government and that markets always have a way of healing themselves, no matter what governments do or don't do to try and right them. It is clear that Obama’s top priority is not fixing the economy but a massive socialist expansion of government.
Obama tapped Timothy Geitner for Treasury Secretary to head his economic team, reportedly the only man on the planet that can solve the current crisis. During confirmation, he got the sharpest grilling from Senator Ensign (R-NV). The senator knew history well and asked the wannabe treasury secretary details about the New Deal. Geitner’s answer was incoherent. Imagine: Geitner plans to duplicate the disastrous New Deal for which he is completely ignorant.
Obama heaped praise on Geitner for his upcoming new bailout plan, “he will be just great.” But as soon as Geitner opened his mouth the market began to tumble and it fell nearly 400 points by time he finished. His long awaited plan was full of grandiose talk and fluff but extremely light on details: he announced a "plan to come up with a plan." So investors dumped their stocks.
The danger of the Obama stimulus, however, is that massive government spending will divert financial resources away from the private sector and instead of righting the economy will more likely drive it into a deep depression dragging on for a decade, the same as FDR did. What Obama has done in fact is to declare war on prosperity and freedom.
