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February 13, 2009
Exclusive: Obama Should Use Hindsight to Gain Foresight
Change and hope has turned into "same old" and "fear." Obama has continued down the same path as Bush on Iraq by keeping Secretary of Defense Gates and not changing any status of forces agreements with the Iraqis. And while he's promised to close Guantanamo Bay, there is no plan as to where the prisoners will go. Miami? No, they'll most likely end up in Kabul, Kandahar, or some other backwater place under the same conditions they are now if not worse.
Secondly, Obama talked about "optimism" during his inaugural address, but since that day he has stoked the fears of Americans by promising catastrophe and devastation if the "stimulus" (and I use that term very loosely) is not passed. The problem is that the "stimulus" does very little stimulating for the economy, but a great deal for the government. This provides an enormous amount of evidence to those, like myself, who labelled Obama a socialist.
The credit crunch has been caused by ineffective regulation (although not over-regulation, quite the opposite), bloated government bureaucracy and incompetence, and irresponsibility on the part of Wall Street brokers who lent money too easily and average Americans who borrowed too eagerly. The central problem is bad debt and too much of it, but Obama's solution is for the U.S. government to take on more. Not only will the government be taking on more debt under Obama’s plan, but it will be printing money as though there are no consequences or repercussions. The probability of dangerous inflation levels and a market that doesn't react to his economic plan could present a perfect storm that will exaggerate the severity of the recession.
If Obama is serious about stimulating the economy and being bipartisan about it, he should follow the examples of a Democrat and a Republican of the past who implemented well targeted financial policies to stimulate economic growth: John F. Kennedy and Ronald Reagan.
Kennedy and Reagan both faced economic problems and implemented tax cuts across all income levels to stimulate investment, savings, and consumption. A serious problem that has plagued America is massive levels of debt. Don’t get me wrong, some debt is good but some is very bad. Credit card debt is bad because it allows consumers to purchase what they normally couldn’t afford without saving up first. Mortgage debt, on a first home, is good as it allows people to build equity, credit, and assets (i.e., wealth). As Reagan said, “You and I, as individuals, can, by borrowing, live beyond our means, but for only a limited period of time. Why, then, should we think that collectively, as a nation, we are not bound by that same limitation?” Indeed, we are.
The deficit and national debt have been ignored for far too long. Reagan, and others before him, warned of the dangers of prolonged debt that ignored the reality that at some point in the future someone will have to repay it: “For decades, we have piled deficit upon deficit, mortgaging our future and our children's future for the temporary convenience of the present. To continue this long trend is to guarantee tremendous social, cultural, political, and economic upheavals.”
Jobs have been leaving America in various sectors for decades. Sometimes that is a healthy development in the process of “creative destruction,” but other times it is because America is not competing well or at all. Capital will flee from areas where it is restrained and burdened to go to areas where it can thrive and grow. The examples of Ireland, Singapore, and Hong Kong are proof of how an economy unrestrained by taxes and government regulation can prosper.
Kennedy stated, “It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now ... Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus."
If President Obama really wants to stimulate the economy, he needs to bring down corporate and individual taxes dramatically. His belief that government is the only solution to the present recession is nothing short of an admission that socialism is necessary to revive capitalism, but unlike Kennedy’s statement, Obama’s paradox is false. Kennedy’s statement was not just a flash in the pan, but represented his deeply held convictions on stimulating economic growth: “Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government."
A tax cut would essentially give every tax payer a raise, and few choose not to spend more or increase their lifestyle after getting a raise. Indeed, America needs to save more as well. Smarter, but not more, regulation for credit card companies and predatory lenders may be appropriate to move the country away from the perpetually mortgaged/indebted culture that pervades America.
Obama is setting himself up for failure and the country up for, at best, a Carter-esque malaise if not, at worst, tremendous hardship. Spending more money to get out of a problem rooted in debt will not work. What is needed is fiscal discipline, smaller government that allows capital to grow and thrive, and incentive for businesses and individuals to invest. It is just as likely that doing nothing would be every bit as effective as passing this stimulus package loaded with pork, expanded government bureaucracy, and immense increases in entitlement program spending. President Obama is fond of quoting Lincoln, so I will end with his words: “You cannot escape the responsibility of tomorrow by evading it today.”
FamilySecurityMatters.org Contributing Editor Jonathan D. Strong graduated from the Michigan State University College of Law. He is a member of the Florida bar and currently resides in a suburb of Toronto, Ontario. E-mail: strongconservative@gmail.com.
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