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Friday, February 6, 2009

President Obama and "the Same Failed Policies"

When faced with growing Republican opposition to his stimulus plan (a plan that Republicans feel is filled too much with spending and not enough tax cuts), President Obama has grown to saying
something like this.

But what I have also said is — don’t come to the table with the same tired arguments and worn ideas that helped to create this crisis. (Applause.) You know, all of us here — imperfect. And everything we do andeverything I do is subject to improvement. Michelle reminds me every dayhow imperfect I am. (Laughter.) So I welcome this debate. But come on, we’re not — we are not going to get relief by turning back to the very same policies that for the last eight years doubled the national debt and threw our economy into a tailspin. (Applause.)

We can’t embrace the losing formula that says only tax cuts will work for every problem we face; that ignores critical challenges like our addiction to foreign oil, or the soaring cost of health care, or fallingschools and crumbling bridges and roads and levees. I don’t care whether you’re driving a hybrid or an SUV — if you’re headed for a cliff, you’ve got to change direction. (Applause.) That’s what the American people called for in November, and that’s what we intend to deliver. (Applause.)

It is both ironic and troubling that President Obama thinks that it is tax cuts that are the same tired old policies that have failed. That's because President Obama seems to think that massive government spending and borrowing is somehow new and visionary.

In fact, it was those like then Senator Barack Obama that criticized out of control spending by then President George Bush. President Bush, in fact, engaged in much of the very same spending that President Obama now claims is the only savior of the economy. In 2005, a mostly bi partisan vote approved a $300 billion highway bill. President Bush nearly doubled the budget of the Education department after passing No Child Left Behind. The Prescription drug benefit President Bush passed also ran several hundred billion Dollars.

This sort of spending was the hallmark of the Bush administration. It lead to unprecedented deficits and endless criticism from the Democrats. Now, President Obama seems to be saying that unprecedented spending and deficits is somehow new and revolutionary. It isn't. In fact, it was this reckless spending much more than any tax cuts that were far more responsible for the situation we are in now.

If President Obama really wants to try something revolutionary, he may want to try some real across the board tax cuts along with limiting government spending. Now, that would be a revolutionary idea.


Anonymous said...

Obama's economic view is there are fundamental structural deficiencies in the American economy that need to be addressed before a new era of growth can begin. This is a similar vision to FDR.

These, among others, include; education reform, green technology, health care reform, and infrastructure.
The idea is they lay the platform for future growth.

This necessitates massive govt spending because it is not necessarily profitable so wont be done by private interests. The thesis being, once the structure is improved, this provides a foundation for better growth for the long term.

Obama looks at the widening income inequality, increasingly expensive health care, education problems, and shrinking middle class as structural problems.

Giving tax cuts may help, but it will not address these issues. The evidence of the Bush years is the wealth has not been "trickling down", despite his tax cuts.

The Republicans are understandably opposed to some of the more liberal and unimportant spending ideas in the bill. But they are also a party struggling to redefine themselves and gain traction. Thus, there is also a huge amount of politicking going on from their side which, I note, you fail to acknowledge.

Harold said...

In regard to the Republican assertion that tax cuts are a better way to revive the economy.

We needn't rely on logic and common sense to know that welfare spending is stimulative; economists study these things. One such economist is Mark Zandi of Moody's, who served as an adviser to John McCain's presidential campaign. Zandi has produced a handy chart

showing how much a variety of spending increases and tax cuts would stimulate the economy. According to Zandi, a dollar spent on increasing unemployment benefits yields $1.64 in increased gross domestic product, and a dollar spent on food stamps yields $1.73 in GDP.

As for tax cuts, Zandi says the most effective form is a payroll tax holiday. A one dollar reduction in federal revenues as a result of such a tax holiday would produce a $1.29 increase in GDP -- far less than the benefit realized from extending unemployment benefits, increasing food stamps, providing general aid to state governments, or spending on infrastructure.

Most people who receive a tax cut don't spend all of it. They use part of it to pay down their debts or they save it. Most of us did one or the other last spring with that tax rebate. From the standpoint of any particular individual, paying down debts or saving may be smart behavior -- even commendable. But what's intelligent for an individual does not necessarily translate into what's good for the economy as a whole. The only way to get businesses to create or preserve jobs is through additional spending. And unlike tax cuts used to pay down personal debt or add to savings, every dollar of government spending flows directly into the economy and adds to overall demand.

Second, even that portion of a tax cut we might actually spend doesn't necessarily go into the American economy. It goes all over the world. I have nothing against creating or preserving the jobs of Asians who assemble those flat-panel TVs you see at the mall, for example, but right now we're trying to create or preserve jobs here in America. Sure, the retail workers at the mall who sell the flat-panel TV's might benefit, but remember we're talking about how to get the biggest bang for every dollar. When government spends to repair a highway or build a school or help pay for medical services, the money and the jobs stay here in America.

Finally, those who say cutting taxes on businesses is the best way to create or preserve jobs forget about the demand side. Even with a tax cut, businesses won't hire workers unless there are customers to buy what those workers produce. A government stimulus that creates jobs is a necessary precondition.

This isn't a matter of more or less government, however much Republicans and conservatives would like to wedge it in that old ideological box. The issue is how to revive the economy. When consumers and businesses can't or won't spend enough to keep the economy going, government has to be the spender of last resort. Period.

As for the argument they are worried about the deficit. Cutting taxes also increases the deficit because of lower tax revenues.

mike volpe said...

Both of you are bringing up a trojan horse.

First, there are thousands of economist so who cares what Zandi says. I can find hundreds of economists that say this is garbage so why is Zandi so important.

There may be structural deficiencies in our infrastructure but apparently those weren't addressed the last time we spent money on infrastructure.

We spent about $350 billion on our highways not but four years ago. Yet, President Obama now thinks we need to spend even more.

Second, our nation's infrastructure is something different from economic stimulus. President Obama shouldn't try and solve our infrastructure in a "stimulus bill". If the point is to put people to work, that's what he should do. He should worry about infrastructure in another bill.

Mike said...
This comment has been removed by the author.