Obama's New Economy May Be a House of Cards

There was nothing new in the President's speech yesterday. The first half blamed the Bush administration for our current economic woes and the second half consisted of general highlights of his broad economic agenda.

The President intends to set the nation on a firm foundation for long term growth and prosperity by implementing an agenda that he’s outlined ad nauseum every week since his inauguration, but now summarized succinctly with five points:

1. Regulate Wall Street;
2. Improve education;
3. Champion the use of alternative renewable energy;
4. Reform our health care system; and
5. Reign-in and ultimately reduce the exploding Government deficit.

Everyone knows that cultivating renewable energy and health care reform are in our nation's long term best interest, but everyone also knows that these profound changes will not come cheap or without some sacrifices. And that's the problem. We still don't know any more about the specifics of his plan than we did when Mr. Obama was a candidate for President. We do know that the last two points are at odds with one another and that points one and three could severely stymie our economic recovery. Expanding Government's role in our health care system while trying to reduce the Government deficit would be as futile as putting one's finger in a dam to hold back a raging flood.

It's not obvious that more Government regulation of our financial system would be beneficial either, considering the Government's demonstrated incompetence in managing Citigroup and AIG and other financial institutions during the past couple of years. Imagine the damage it could do with permanent authority to micro-manage our entire financial system. Also, a carbon tax on oil is expected as part of the President's plan to encourage the use of alternative renewable energy sources. That will effectively increase taxes significantly for everyone and stall our economic recovery.

The President's convenient use of "straw men" to undermine and downplay substantive and serious criticism also reduces confidence in his agenda. In his speech, for example, he said his critics want to reduce Government spending, when in fact they advised against his proposed dramatic increases. The President also said he inherited a large Government deficit, which is true, but does that justify proposing to double and triple that deficit during the next five and ten years, respectively?

The President's credibility is also called into question when he shades or tells half-truths. He says that greed and lack of regulation on Wall Street got us into this financial firestorm, but conveniently overlooks the fact that the Clinton administration ignited the fire, when in the late 1990s it created the boom in subprime lending and risky mortgage-backed securities in order to push its agenda to enable more Americans to buy homes. Also, the President's claim that Government spending must increase to spur economic recovery is not supported by empirical evidence. Most economists, including his own advisors, know that fiscal stimulus, especially government spending, has never been particularly effective in shortening recessions or precipitating economic recovery.

Mr. President, it's time to put all your cards on the table and tell us in detail what you really have in mind. You should also tell us the inconvenient truths along with the benefits of your plan. We don't need to be "sold," we need to be persuaded by facts and reason.