Religious Keynesianism and Obama's blind faith
America's economic woes aren't all Obama’s fault; most western countries face a painful process of deleveraging. But few are following his lead of merrily piling debt on top of debt in the hope that more debt will solve a debt crisis.
In the film ‘2010’ Milson tells the astronaut Heywood Floyd “Whenever a President is going to get us into serious trouble they always use Lincoln”.
During his much trailed speech on jobs in front of a joint session of Congress last week President Obama took no chances throwing in Kennedy along with Abe. But given the content of the speech he might have been better invoking Nixon; if two wrongs don’t make a right, try a third.
Obama’s proposed American Jobs Act contains nothing he hasn’t tried already. Since his election Obama has added nearly $5 trillion to the Federal debt, helped by his last stimulus package of $787 billion back in 2009. In that time unemployment has risen by two percent. Under the proposed Act Obama will spend another $447 billion, seemingly working on the belief that doing half of what didn’t work the first time will work the second time.
Paul Krugman, one of the leading Keynesian cheerleaders for the President’s failed policies, accuses opponents of having ‘drunk the Kool Aid’ of free market philosophy. This is a reference to the followers of cult leader Jim Jones who killed his gullible followers by making them drink poisoned Kool Aid.
But in arguing, as they do, that the reason we are in this mess is because the stimulus wasn’t big enough and that all we need to do is commit our economic souls more fully to Keynes, it is the Keynesians who remind one of those religious types who, after a disaster, see it as punishment for being insufficiently pure of faith. Joan Robinson once referred to ‘bastard Keynesianism’. This is religious Keynesianism.
Also, the particulars of the package are hideously badly designed. Obama promised to “offer ideas to reform a corporate tax code that stands as a monument to special interest influence in Washington” but he also proposed, as Peter Ferrara wrote in the American Spectator, a raft of new loopholes including “a new tax credit of $4,000 for hiring the long-term unemployed...a tax credit for hiring veterans who have been unemployed for more than six months, and another tax credit for hiring the unemployed with service connected disabilities”
With the failure of the last stimulus package and the dog eared nature of the new one the belief that Obama’s Jobs Act will do any good at all is a case of hope (and ‘Change’) triumphing over experience.
But beyond this the US can’t afford it. At one point during his speech Obama said “Building a world-class transportation system is part of what made us an economic superpower. And now we're going to sit back and watch China build newer airports and faster railroads?”
Well yes actually, you are. The Chinese are building those airports and railways because they can afford to, the United States can’t. In fact, watching Obama speak and make billion dollar spending commitment after billion dollar spending commitment you found yourself thinking ‘I hope the Chinese are happy to pay for all this’
And they may be reaching the end of their willingness to work, save, and lend those savings to Americans to spend on things that most Chinese can’t afford. This week a senior official of the Chinese central bank spoke of Beijing’s wish to “liquidate” its holdings of US Treasury bonds. As the biggest buyer of US debt the prospect of this market drying up presents the Treasury with the nightmare scenario for a heavily indebted economy like America’s of rocketing bond yields. Think Athens on the Hudson.
They are no more impressed with Obama’s plans in Buffalo than they are in Beijing. A Bloomberg poll this week found that while sixty-two percent of Americans disapprove of Obama’s handling of the economy just thirty-three percent approve. Bloomberg also found that “only thirty-six percent of respondents approve of his efforts to create jobs, thirty percent approve of how he’s tackled the budget deficit and thirty-nine percent approve of his handling of health care”. Americans doubt whether the Jobs Act will do anything for 9.1 percent unemployment by a margin of fifty-one percent to forty percent with fifty-six percent of independents sceptical. Overall, at 45 percent, Obama’s approval rating is the lowest of his presidency.
These weren’t the only bad figures for Obama to emerge this week. Inflation and jobless claims were up, manufacturing was down and poverty hit its highest rate for eighteen years.
This isn’t all Obama’s fault, most western countries face a painful process of deleveraging, but few are following his lead of merrily piling debt on top of debt in the hope that more debt will solve a debt crisis.
Obama has hit the road with his plan like some commission hungry vacuum salesman. He has, as ever, been met with adoring crowds, though these may be smaller than before, Bloomberg also found that those who supported him in 2008 have soured. As then the crowds have been chanting inanely but the fact that Obama’s message always seems to be capable of being summed up in between one and three words, be it ‘Hope’, ‘Change’, ‘Yes We Can’ or, now, ‘Pass This Bill’, suggests that it isn’t much of a message.
But it never was. On the campaign trail candidate Obama said “I’m not talking about a budget deficit. I’m not talking about a trade deficit…I’m talking about a moral deficit. I’m talking about an empathy deficit.” So of four deficits mentioned only two actually exist and he focused on the two that don’t.
It is an article of faith that Republican candidate Michele Bachmann is an idiot. She might be. But can you imagine how idiotic she would be considered if she went on Fox News and said “If you elect me I will spend $5 trillion dollars and increase unemployment by two percent”?
Yet that is exactly what President Obama has done. ‘Stupid is as stupid does’ as a wise man once said.
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