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The "Can-Do" Economy-Killer

The "Can-Do" Economy-Killer

By Robert Tracinski - February 25, 2009

I have been wondering whether Barack Obama will turn out to be another Jimmy Carter or another Franklin Roosevelt. The least bad option is Carter: a leader whose policies are disastrous for the economy and for US foreign policy, but who ends up being rejected by the American people and voted out of office after only one term--as opposed to a leader like FDR, whose policies are also disastrous, but who ends up being loved by the American people nonetheless and voted back into office.

After viewing Obama's speech last night, I am forced to conclude that he has the makings of another FDR.

There aren't many people alive today, of course, who can remember what FDR was like while he was in office. So it is difficult for us to project how an American leader could be permitted to preside over double digit unemployment and complete economic stagnation for more than one term, much less for an entire decade. But I've seen enough of the old news reels of Roosevelt to have a sense for how he did it. He always projected a buoyant confidence and a vigorous optimism that was just convincing enough to connect to the American sense of life--which he could then use as cover for policies that systematically destroyed wealth and prevented the economy from recovering.

For example, he would boast of "bold and persistent experimentation" in a way that would make the general public think of him as a vigorous, enterprising man with a "can-do" spirit. But what that would actually mean is an administration that lurched in panic from one statist scheme to another, creating so much fear and uncertainty in the markets that capital went on strike and withdrew its productive power from the economy.

That is precisely the kind of pattern we saw in Obama's address to Congress last night. There was a lot of soaring, all-we-have-to-fear-is-fear-itself kind of rhetoric about American greatness and resiliency and never quitting. But the actual content of the speech was one body blow after another to the private economy.

Here is an example of the rhetoric:

[T]hough we are living through difficult and uncertain times, tonight I want every American to know this: We will rebuild, we will recover, and the United States of America will emerge stronger than before.

The weight of this crisis will not determine the destiny of this nation. The answers to our problems don't lie beyond our reach. They exist in our laboratories and our universities, in our fields and our factories, in the imaginations of our entrepreneurs and the pride of the hardest-working people on Earth.

Those qualities that have made America the greatest force of progress and prosperity in human history we still possess in ample measure. What is required now is for this country to pull together, confront boldly the challenges we face, and take responsibility for our future once more.

But underneath the airy-fairy inspiration of Obama's words, here is the cold, factual reality of his policies.

• Taxes and regulations will increase. In the previous era, Obama tells us, "A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future. Regulations were gutted for the sake of a quick profit at the expense of a healthy market." So taxes will go back up on the most productive people in the economy, and they will find new government restrictions placed on their activity.

• The government will take over lending directly. "We are creating a new lending fund that represents the largest effort ever to help provide auto loans, college loans, and small-business loans to the consumers and entrepreneurs who keep this economy running." This implies lending provided directly under the control of government, financed with government money.

• The government will take over lending indirectly. "Our goal is to quicken the day when we restart lending to the American people and American business and end this crisis once and for all. And I intend to hold these banks fully accountable for the assistance they receive, and this time they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer." This means that federal regulators will be looking over the shoulders of the banks and dictating how much they should lend and to whom.

• The government will vilify and punish bankers. "This time, CEOs won't be able to use taxpayer money to pad their paychecks, or buy fancy drapes, or disappear on a private jet. Those days are over." Having foisted government money onto hundreds of banks across the country, the Treasury will now use that funding as an excuse to impose government controls on the banks--including populist caps on executive pay, which will only serve to drive talented and ambitious individuals to seek more profitable work elsewhere.

• No one can know when all of this intervention is going to end or how much bigger it's going to get. "This plan will require significant resources from the federal government and, yes, probably more than we've already set aside." What that means is that we should expect to see another TARP-style bailout plan, another pork-barrel "stimulus bill," another mortgage bailout. (Already there are plans for another $410 billion in spending increases.) There will be no way for the market to rationally project the value of any investment, because there will be no way to know what massive new intervention the Obama administration is going to launch next.

• Obama will subsidize inefficient and unprofitable "renewable energy" projects. "Thanks to our recovery plan, we will double this nation's supply of renewable energy in the next three years." This means solar panels and windmills, technologies that are only capable of producing electricity at a cost far greater than coal-fired or nuclear power plants.

• Obama will artificially increase the costs of all other forms of energy. "[T]o truly transform our economy, to protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy. So I ask this Congress to send me legislation that places a market-based cap on carbon pollution." The means by which Obama intends to make wind and solar "profitable" is not by making them less expensive; instead, he plans to make all other forms of energy more expensive by imposing government rationing, which is what the part about a "cap" actually means. As for the part about the program being "market-based," all that means, in effect, is that we will be able to buy and sell our government-issued ration cards.

• He will seek socialized medicine. "Let there be no doubt: health care reform cannot wait, it must not wait, and it will not wait another year." Obama doesn't mean "reform"; after all, health care has been "reformed" by government over and over again for 50 years, which is part of how we got where we are. What will finally happen this year, Obama is promising, is government-provided "universal" health care, i.e., socialized medicine. But don't worry, Obama says, because taking over a $1 trillion-plus industry will be "paid for in part by efficiencies in our system that are long overdue," which means new government restrictions on what kind of medical care doctors are allowed to provide.

• He'll soak the rich. After pushing for a trillion dollars in government bailouts and pork-barrel "stimulus," Obama has the nerve to claim that he's trying to reduce the federal government's budget deficit. How? Primarly by raising taxes on the wealthy. "In order to save our children from a future of debt, we will also end the tax breaks for the wealthiest 2 percent of Americans." The wealthiest 2% already pay by far the largest burden of income taxes--and Obama is now expecting them to close a trillion-dollar budget deficit, punishing them for the crime of being more productive.

In sum, Obama is offering the basic Roosevelt method or formula: buoyant American "can-do" optimism--in the service of the economy-killing agenda of a high-taxing, high-spending welfare and regulatory state. Get the people to love you for giving them a pep talk that lifts their spirits--even as you impose policies that dash their hopes.

If Obama is identical to FDR in his basic method, all we can hope that he does not achieve the same result: another ten years of economic collapse.

Robert Tracinski is editor of The Tracinski Letter and a contributor to RealClearMarkets.

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