14 Dec Meet the Economic Disaster Architects
Meet the Press is a guilty little pleasure of mine, especially since I got my first TIVO nearly ten years ago. And yesterday’s episode promised a lengthy interview with Obama’s chief economic spokesperson (Dr. Christina Romer), as well as a panel discussion with Alan Greenspan (my arch nemesis), Jim Cramer (the clown of CNBC), and Mitt Romney (the only Republican to actually implement government health care who now has to go rail against it). This is the stuff television was made for (but remember, I am a pretty odd person).
I truly think that Dr. Christina Romer needs to remove herself from the media roadshow. Her big goofy smile and silly demeanor is unbecoming of a leading economist and a chief policymaker. Of course, “goofy” and “silly” are good words to describe the economic policies of the administration she works for, so maybe there is a method to the madness. But seriously, she is a lightweight. It is painfully awkward to watch her grin through the fantasy-land drivel she has to spew on the news show circuit (and to show that I still have a spirit of charity about me, I hear she is a very nice person, so I really am not putting her humanity on trial; I am just exhausted by the fluff her bosses are making her circulate the airwaves with). But my irritation with her style is not the point. The content is frightening. Incessantly describing the stimulus package as “bold” and “big”, defending it in the face of skyrocketing deficits and failed attempts to lower unemployment, is delusional, but worse, it is their honest perspective. They truly believe that the massive indebtedness the stimulus spending has created is to be ignored as long as some rhetoric becomes available regarding “getting help to those who need it”, and “hitting the recession head on with big, bold initiatives.” These people feel good about themselves for feeling bad about the economy. Romer said thirteen times yesterday morning in a thirteen-minute interview that “they inherited this economic mess”. I am dumbfounded at how politically naïve the Obama administration is if they believe that after a “big and bold” stimulus package that cost $1 trillion, and nearly an entire year chasing an insidious government takeover of health care, that the American people are going to buy the continued line that “it is Bush’s fault.” She was asked four times in a row if they were going to raise taxes to pay for this mess and all she could come up with in her non-answers was that “we are taking important actions”, and “we are certainly going to be doing … um, no one is talking about, um … the good news about the TARP.” When he pressed the fifth time, she made the catastrophic blunder of saying that “everyone knows you do not raise taxes in the middle of a recession”, and that “Obama is committed to putting forth a plan to lower the deficit”. I love it. My plan to lower the deficit is to put forth a plan to lower the deficit. The applications of this political sophistication are deep and wide.
I have a plan to lower the deficit that goes beyond having a plan. Quit spending money like a college kid with their first credit card. Cut taxes on capital and economic growth (at the margin). Done. Jobs higher, deficits lower.
Put differently, the vast majority of economics is a matter of understanding incentives. The government’s incentive to create jobs is entirely political; therefore, they are gleefully willing to implore methods that are counter-productive to the overall economy. And they are certainly willing to implore methods that are damaging to the future economy. But when an economy is allowed to flourish on its own, the myth that aggregate demand-dampening is the root of all trouble gets turned on its head. Bad economic times are almost always caused by bad government, and bad economic times are always, always made worse by the efforts of big government. The plans and needs of an economy can not be manipulated by a central government without creating major distortions. Romer knows this, because she has said so herself. And she has certainly said that when businesses are allowed to retain a higher portion of their own profits, manufacturing growth and job growth will always follow (quickly). Profits are the only stimulus that exist. There is absolutely no such thing as stimulus other than profits. By lowering the tax rate on these profits, we grow the profits. And by growing the profits, we stimulate the economy. So rather than an economic team that panders to the class-warfare sentiments of the far left, perhaps Obama ought to find a few advisors willing to speak some economic sense.