OBAMANOMICS: DEBT YOU CAN BELIEVE IN

By D. E. Lovett

After eight years of incessant carping by the Democrats about the “Bush deficits,” we finally find out what was bad about them: they were nowhere near massive enough! It took Bush and the Republicans three years to add one trillion dollars to the public debt; Obama and the Democrats did it in only three weeks!

In January 1996, then-President Clinton famously proclaimed “the end of the era of big government.” This absurd claim was based on his reducing the total Federal employment by stripping the military, while at the same time actually increasing the size and cost of government. Since then, Presidents and Congresses of both parties have worked overtime to further bloat the Federal government, and highlight one of the biggest (but hardly the only) of Clinton’s lies. The Republicans, practicing “Democrat light,” saddled the already bankrupt Medicare program with the infamous “doughnut-hole” prescription drug benefit. This transparent attempt to “buy” the senior vote was a miserable failure, condemned by conservatives as too expensive, and by liberals as too cheap. It also failed to swing many, if any, senior voters, used to dependence on the Federal government, who rightly perceived the Democrats, in the long term, would bring them the greatest largesse.

Fast forward to the current recession (or depression, if you like.) Its primary cause was government meddling in the mortgage industry. Rep. Barney Frank (D-Mass.) and Sen. Christopher Dodd (D-Conn.) were so committed to “affordable housing” that they required (with the active cooperation of Congresses and administrations of both stripes) Fannie Mae and Freddie Mac to lend money to the poorest of credit risks. In 2006, they managed to frustrate Republican efforts to rein in the patently unsustainable practices of the mortgage industry with assurances that all was well, and the bubble would continue to grow to everyone’s benefit. When the bubble inevitably burst, only a year later, the first (and completely foreseeable) reaction of Frank and Dodd was to blame the Republicans for inadequate regulation, and the second was to blame “unscrupulous lenders” for doing exactly what the government had required them to do!

Then comes the inevitable: the Government, having engineered the crisis, determines it is the best agent to “fix” it. Now Congress has the political cover to do what it does best, perhaps the only thing it does well: throw money at the problem, with little or no regard to whether or how this solution will help or hurt. Legislators, having been empowered to legislate, feel bound to do just that, in supreme confidence they will never be called to account (are Frank and Dodd in any real danger of losing their seats?)

Questioned about the massive deficits and their effect, President Obama manages to talk out of three sides of his mouth at the same time. First, he emphasizes he inherited the current huge deficit from his predecessor. Am I mistaken, or didn’t the Democrat controlled Congress pass the last two massive deficit budgets, and the current even more massive one? Second, he claims he will reduce the deficit by half in four years. After quadrupling the deficit in one year, to a staggering $1.7 trillion, reducing it to a mere $800 billion does not sound all that good. Third, he will reduce the deficit while maintaining current levels of spending, and granting tax relief to everyone but the “rich,” especially including those who don’t pay any income tax at all! Populist pandering, anyone?

The economic stimulus bill recently passed is advertised by the President as “timely, targeted, and temporary.” It is none of these. Most of the expenditures will be in 2010 and beyond; the beneficiaries are the ideological favorites of liberals; and no one realistically expects that the programs started by the “stimulus” will magically disappear within our lifetimes. While the impact of the “stimulus” on employment is impossible to predict, its impact on the public debt is all too easy to figure. Obama claims the bill will “create or save” 3.5 million jobs, with the “or save” caveat providing plenty of political cover. Let’s see: if one trillion dollars creates 3.5 million jobs, each job is worth about $285, 314. Where do I sign up for one of them? But of course, then I would be among Obama’s “rich,” and subject to large tax penalties!

There is a prophesy, sometimes attributed to George Santayana, that those who fail to learn the lessons of history are condemned to repeat it. It is beyond dispute that the tax rate cuts by Kennedy, Reagan and “W.” increased government revenue and spurred the economy, and tax rate increases by “H.W.” and Clinton cost the government and slowed the economy. We are about to see a repeat of history.

On balance, the current government tax, borrow and spend program will eviscerate the private economy, drastically curtail free enterprise, and empower the Federal government in ways that would make Franklin Roosevelt blush. And this doesn’t even begin to touch the upcoming Obama energy tax. Stay tuned, but don’t be very hopeful that “change” will be any better, just more expensive, and everyone will pay.