Dangerous and Deceptive Economic Policy

Thousand-Dollar Candy Bars: Obama's Dangerous and Deceptive Economic Policy For those of us pondering whether President Barack Obama is -- in his heart of hearts -- driven mainly by extreme ambition, like most highly successful politicians, or instead by a deep devotion to extreme liberalism, we have received a surprisingly quick and definitive an swer. He is driven by both.

The $787 billion "stimulus" package rammed through Congress with Obama's energetic support is not just the most expensive single piece of legislation in human history, it is also the most deceptive and will likely be the most disastrous. Most unsettling is the likelihood that it will stimulate -- or at least appear to -- for a little while before it converts the whole American economy into a government-sponsored entity. Fannie and Freddie demonstrated how well that works.

Obama, who campaigned as a man determined to bring transparency to Washington, has just presided over the passage of a law that will provide an endless supply of steroids to the federal government. In just a few weeks, Obama has managed to undermine the foundations that contributed to a quarter-century of rising prosperity and freedom -- in this country and around the world. And he managed to accomplish it with almost no serious debate.

The left-wing blitzkrieg was helped by the national media's new business model, in which news gathering has been replaced by public relations work for the Democratic Party and its infallible leader. Cheerleading and economic illiteracy are indeed protected by the First Amendment.

As during the campaign, Obama has proved to be a skilled and calculating politician. He has yet to display a shred of statesmanship -- and he shrugged off several opportunities to rise above the frenetic scheming of Nancy Pelosi and Harry Reid.

Obama has worked overtime persuading his fellow citizens that the U.S. economy is in the worst shape since the Great Depression. It isn't. But Republicans remember John McCain's suicidal "The fundamentals are strong" comments, so are unwilling to challenge Obama's narrative of catastrophe. And the media simply serve as a megaphone for Obama's most dire pronouncements.

There's no doubt that the country is in the middle of a sharp recession. Credit markets and bank balance sheets are dangerously damaged. Unemployment is rising rapidly. Housing remains moribund and many families are deeply in debt. The risks are real, tenacious, and serious.

But the worst-since-the-1930s claim is insincere and inaccurate. The misery index -- a simple but useful measure of economic health that adds the unemployment rate to the consumer inflation rate -- stands at 7.7. In 1980, the index reached 22. The inflation rate stayed above 10 percent for nearly three years during that stretch, while unemployment remained above 9 percent for 19 months in 1982-83.

The economy may deteriorate below the depths of the late 1970s and early 1980s. But so far, it has not. So why should a leader paint a gloomier picture than the facts will support? To lower the expectations of the people, of course, so that any minor improvement -- or even stabilization -- can be proclaimed a triumph. Reagan and FDR chose more noble paths.

To use the presidential bully pulpit for such naked political posturing is hardly unprecedented, but it disappoints, especially coming from a man who preached a new brand of leadership.

Yet Obama's comments are far less distressing than his highly partisan support for the so-called stimulus package. He is grossly exaggerating the current economic weakness, but Obama is correct in warning that the financial system and overall economy face significant peril.

So why -- instead of supporting a bill that revives a toxic stew of long-neglected left-wing causes -- did he not insist upon streamlined legislation designed to assist the economy as quickly and effectively as possible? Could it be that Obama believes his campaign rhetoric -- beloved by reporters but utterly detached from economic history or logic -- that blamed George W. Bush's tax cuts for many of today's economic ills? He must, because the "stimulus" package contains -- as best as anyone can tell -- not a single word that encourages private capital's return to the marketplace, even though the crux of the current crisis lies in the private sector's refusal to invest.

Any successful effort to revive growth must lure private investors out of their bunkers. The Obama plan seems determined to do just the opposite.

The minor, temporary tax cuts he signed into law are even less potent than the failed rebate checks that Bush supported in 2001 and 2008. The rest of the Obama-Pelosi bill focuses on undermining Bill Clinton's welfare reforms, vastly expanding government's role in the health care system, subsidizing government-favored approaches to energy, handing out goodies to unions, and rescuing states from their own irresponsible spending habits.

The package is, as White House Chief of Staff Rahm Emanuel prophesied, all about using a crisis to jumpstart a massive shift to the left without the annoyance and inconvenience of an informed public debate. Congressmen and senators were forced to vote on a bill they didn't even have time to skim.

It would not have been difficult for Obama to craft a smaller and more effective bill that focused on targeted public spending -- such as roads, bridges, and health-record modernization -- combined with temporary enhancements to the social safety net and tax cuts that actually stimulate, including lower rates on capital, middle-class income, and businesses.

That approach would have attracted Republican support. More important, it would have given a stronger jolt to the economy, with less debt to pay back.

The short-term political brilliance of Obama's approach is that the stimulus bill could help spur a short-lived rebound that arrives sooner and is sharper than anyone expects -- and easily exceeds the low expectations set by Obama himself. Gigantic federal spending, no matter how inefficiently deployed, could bring temporary relief, especially when it follows the tidal wave of money rolling in thanks to the Fed and the Treasury Department bailouts. The spending spree might briefly enhance the market's natural healing tendencies, which are quietly at work throughout the economy -- including the housing sector.

Think of it as buying a starving man a Snickers bar -- for, say, $1,000.

The pain in the belly will subside for a little while -- the media exult! But hunger soon returns and you're out a big chunk of change.

Obama's moment of truth -- and his chance for redemption -- will arrive as he is being hailed as the hero of our financial revival. His instinct will be to raise taxes and spending, to push government deeper into the people's economy. He will in fact need to encourage and support the Federal Reserve as it begins to mop up the easy money it has been busy creating. It will be painful. Obama will have to emulate Ronald Reagan in 1981 and 1982. He should ask his friend Paul Volcker about that.

If he does not -- if he cannot -- the hyperinflation, collapsing dollar, and double-digit interest rates that follow will make his dire economic pronouncements today seem overly optimistic.

Contact Bob Rayner at (804) 649-6073 or .