Saturday, March 28

A Real Economic Defense of Obamanomics

Robert Reich's article on how Obama's economic policy will help America at least applies real economic principles to try and sugarcoat the fiasco. It is the best economic excuse for Obamanomics, and well worth a read and a response.

In 10 years, taxes are expected to fall to around 19% of GDP, a lower level than the late 1990s. Spending is expected to drop to around 22.5% of GDP, about where it was under Ronald Reagan -- including nondefense discretionary spending at about 3.6% of GDP, its lowest since data on this were first collected in 1962.

Reich's caveat that this might be "wildly optimistic" is probably closer to the truth than the dreamland of

[Caption]Obama plans. Even look at Bush, or almost any president. It is easy to promise hard decisions down the road to make your budget in the end look conservative. We should expect the same in two years not ten.

Those tax increases [2% on the rich] will fund more Pell grants allowing lower-income children to attend college, better pay for teachers that show they're worth it, broader access to health care, improved infrastructure, and more basic research. These and related expenditures are designed to help Americans become more productive. You might think of it as "trickle up" economics.

These expenditures might be designed to make American's more productive but there is no guarantee that they will. Unfortunately, this logic assumes that the government will do a more efficient job teaching, healing, researching and deciding who gets that money. Look at your city construction crews vs. your home business lawn and garden care and try telling me that government does a more efficient job. But I compliment Reich on asking "will this make America more productive?"

Finally, Reich ignores several crucial parts of Obama's plan. Bank bailouts. No indication on how those make us more productive. What about the energy tax of cap and trade. If Obama gets his way your electric prices could double as the country and economy suffers from over a $1 trillion dollar tax on energy. How will this help the economy?