Obama's Formula For Disaster
President Obama got a heaping serving of good news in Monday’s Washington Post poll. He remains strongly personally popular, and the public’s heavy mood of pessimism has lifted somewhat: 42 percent now say the country is on “the right track,” nearly triple the number who thought so before the election—and the best number in five years.
It seems unlikely that this jump represents a reasoned response to the president’s actual policies, which have had little time to effect voters directly. Indeed, the poll only asked about one specific policy issue, the budget deficit. There, respondents gave Obama an approval rating 14 points lower than his overall score.
No, it’s not the policies the public is applauding. It is the energy, the perception of activity, a feeling (understandable enough) that something is finally being done! Once again, the American people are confirming the astute observation of Franklin Roosevelt that voters will forgive the errors of activist government more than “the constant omissions of a government frozen in the ice of its own indifference.”
And so they will. At least until the full costs of the errors of activist government come home.
Polls tell us that Republicans are much more skeptical about the Obama plans than Democrats. I am, too. But let’s be very clear about what we mean when we say we doubt these plans.
Keynesian economics is the greatest pick-me-up tonic in the history of the world. Start with a recessionary economy, jolt it with massive government borrowing and spending, and stand back. Criticizing Ronald Reagan’s (comparatively puny!) deficits 20 years ago, Bill Clinton said, “You let me write $200 billion of hot checks every year, and I could give you the illusion of prosperity too.” Well President Obama will write upwards of a trillion dollars worth of hot checks in 2009. That should buy plenty of illusions.
The critique of Keynesianism is that while demand-management economics can deliver vivid results in the short term, those results come attended with significant side effects in the medium- and long-term. Keynes himself dismissed these effects with one of his famous quips: “In the long run, we are all dead.”
And after all, he had a point. If today’s problems are serious, then it’s best just to solve them—and leave it to tomorrow’s leaders to solve tomorrow’s.
The trouble is that President Obama’s program does not leave tomorrow’s problems to tomorrow. Unnecessarily and gratuitously, he is intent on restructuring vast areas of the American economy and doing so in ways guaranteed to aggravate tomorrow’s problems.
Obama inherited a genuine financial crisis that has forced unprecedented federal intrusion into finance at unimaginable cost. You might think he had enough to do managing this debacle. Instead, he seems determined to use the loosened spending environment to advance an array of programs that will insert government into microeconomic decision-making in ways Americans haven’t seen since the world wars.
The president wants an energy program that would, in effect, make the government the nation’s energy technology investment banker, directing massive capital to some technologies and away from others—and then subsidizing and even compelling utilities to buy the favored technologies.
This will be a formula for disaster—like the synfuels boondoggles of the 1970s times 100. Money will flow where lobbyists are most powerful—and be spent in ways almost indecipherable to the citizen.
On healthcare, Obama proposes to balance immediate, certain and huge increases in government spending against future, speculative and unknown cost-savings. What Obama refuses to learn from the experience of other countries is that government healthcare programs end up spending more not just on healthcare but on everything—hospital laundry, cafeterias, pay for janitors and service technicians. Just as school employees have captured government schools to run them in their own interest, multiplying the number of administrative jobs, spending more and more per student for worse and worse results, so will healthcare employees capture and run government healthcare.
In addition, Obama’s stimulus program transfers enormous sums of money to big-spending states, especially California. As a temporary cushion against layoffs and service cutbacks, there is something to be said for this approach. It threatens, however, to become permanent.
What Democratic president will claw back that money from the huge California congressional delegation? And with the federal government cleaning up California’s mess, any prospect of reforming the spending patterns of California and other over-governed states will be deferred for years, maybe decades.
In these and so many other ways, President Obama is building an economy for the 21st century of accreting waste and inefficiency, massive bureaucracy, slower productivity growth, and lagging prosperity.
I don’t blame him for borrowing the money to blast the U.S. and world economies out of their current rut. I blame him for accompanying his borrowing with a slew of long- discredited statist interventions. These will hugely burden those future Americans who inherit the job of paying off his debt.
Originally published in The Week.