Obama on the Economy: Do more of exactly what got us into this crap.

Today, Barack Obama called for Congress to spend another whopping $50 billion in economic stimulus. I find these particular excerpts by him cited by the article to be particularly fascinating:

The presumptive Democratic presidential nominee cited the largest monthly increase in the unemployment rate in over 20 years, and record highs in oil prices, food prices and foreclosures.

"Such relief can't wait until the next president takes office. ... That's why I've called for another round of fiscal stimulus, an immediate $50 billion to help those who've been hit hardest by this economic downturn," Obama told a crowd in Raleigh, N.C.

He said that he supports the expansion and extension of unemployment benefits, as well as a second round of tax rebate checks.

So his answer to rising oil and food prices is more inflationary deficit spending? (And we're supposed to believe that he is some sort of fiscal conservative, as he tries to claim, who is concerned about deficits? Then again, I've already detailed how Senator Obama has a thing for big spending.) This, while Helicopter Ben has sent all of the choppers in the battalion into Red Alert mode this year?

And his answer to addressing the unemployment rate is further subsidizing unemployment?

His answer to easing job losses during this depression is to send out rebate checks that are most likely going to be spent on more imported goods? Is Wal-Mart really that large of a percentage of our GDP?

As the article states,

the jury is still out on how successful those rebates will be stimulating the economy.

The mess we are in right now is precisely due to deficit spending policies of this kind and due to the active manipulation by the government the economy through discretionary policy, be it on the fiscal side or the monetary side. The racking of $9.4 trillion in national debt, as my nifty clock to the right keeps track of by the money, is having some serious consequences, and will continue to have serious consequences. This, while we have $50-70 trillion in present value stacked in unfunded liabilities of our government, depending on the source. This, while the Federal Reserve's manipulation of market interest rates has caused massive instability in financial markets. Nearly every economic problem we are facing in this country- inflation, decline in the manufacturing base, malinvestment, declining savings, our massive current account deficit, destruction of the currency in foreign exchange markets, the current mortgage and credit crises- can be traced to the presence and wicked interaction of discretionary policies.

Preventing recession and generating growth are two fundamentally different concepts. Preventing recession also prevents the process by which causes of long-term decline, such as bad debt and perverse incentives, are cleaned out of the market. Broadly defining the economy as "in recession" in the first place is useless. Macro data is often horrendously unreliable given the complexity of the macroeconomy, and the fall of production overall in the economy does not necessarily entail that every industry is in recession and that the sky is falling because some in the economy (often a relatively small minority) have no jobs. On the other hand, economic growth policy entails having a policy framework that facilitates strength in the fundamentals of growth. There is broad consensus among growth theorists that long-term growth is sourced in the following:

* Vibrant entrepreneurship (thank you, Mr. Schumpeter)
* Innovation
* High personal saving rates
* Physical capital investment
* Human capital investment (i.e., education investment)
* Public infrastructure investment
* Protection of property rights and enforcement of contracts

Most growth theorists would agree that low and simple taxation and regulation, although not all do.

Further Obama proposals cited in the article:

Obama has pledged to keep the tax cuts in place for everyone except those making roughly $250,000 and up. He has also made proposals to cut taxes further for the middle class, some of which he reiterated in his speech: exempt seniors making less than $50,000 from having to pay income tax; give a tax credit worth up to $500 per working person ($1,000 per family) to offset the Social Security tax on the first $8,100 of earnings; and expand the earned income tax credit.

To boost retirement savings, he has also proposed a 50% federal match on the first $1,000 of savings for families that earn under $75,000.

1) What's with setting an arbitrary threshold for maintenance of tax cuts at $250,000? If Senator Obama is as big of a fan of small businesses as Democrats claim to be, he would realize that there are quite a few small businessmen making exactly that amount or perhaps a little higher. Does he really want to throw a huge new burden on small business owners who file individual income taxes? Furthermore, does he really think that someone making six-figures is part of the evil "money culture" oppressor class that he seems to hate so much? That's a pretty ridiculous assertion, if in fact that is what he is saying. And it's not as if the revenue from getting rid of the tax cuts for those with incomes greater than $250,000 is going to generate much more revenue, or even enough to fund all of his grand programs.

2) So the answer to easing the burden on low-middle income families is to add more complication and paperwork to their tax filing every year? I beg to differ.

3) How the hell is a federal match on the first 50% of $1,000 saving for families earning under $75,000 going to boost saving substantially? $1,500 a year over, say, 30 years or so (maybe not even that many years, for many families who will see upward income mobility) would build a nominal nest egg principal of $45,000, with the real figure being significantly less after inflation. A saver at this level would have to get some really kick-ass return in order to finance a decent standard of living in retirement, and people saving at this level probably aren't going to afford the instruments that generate this type of return. This proposal, with its arbitrary constrictions, is pure poppycock. But hey! Social Security and Medicare will be in tremendous financial shape at that time and will affordably be able to finance a nice middle class standard of living for retirees in the future with absolutely no crushing cost to the productive economy! Oh, wait.

And besides, tax-preferenced schemes to boost savings such as this have tricky effects, such as giving breaks to people already saving and, in cases like tax-preferenced IRAs, re-channeling saving into another financial insturment. The use of the tax code to engineer some type of economic outcome, which is really just a form of central planning, typically doesn't work very well, and often has effects just as negative as other lovely central planning instruments like price controls, direct subsidies, and regulation. (For a grand example of a royal screwup by tax-preferencing, observe the health care industry.)

However, it is at least encouraging that he's at least thinking about saving.

Further down in the article, there is mention of a new education program he is planning to unveil. I'm not one of those libertarians who opposes public education. An educated citizenry is a necessary precondition for the maintenance of a free soceity, and a quality public education system develops the quality human capital that produces economic growth and the functioning of a free market. (Of course, the education system must be funded justly.) However, federal involvement needs to end. Public education systems need to be the cornerstone of state economic development plans, rather than shelling out taxpayer-funded sweetheart deals to massive corporations as many states do. (And as we have a storied tradition of doing here in North Carolina.) NCLB has caused a serious chirade in public education systems around the country with its one-size-fits-all masturbatory emphasis on testing and the externalities of it, including the dreadful "teach the test" philosophy. Given Obama's previously stated support for NCLB, I'm pretty sure his new program is not going to go more in the direction of decreasing federal involvement.