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Opinion: Editorials

Examiner Editorial: Why Obamanomics doesn't work

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Photo - Among the expenditures under President Obama's $845 billion economic stimulus program in 2009 was $10 million to the ATF’s “Project Gunrunner” to increase staff by 37 persons, according to a November 2010 Department of Justice Inspector General report. (AP Photo)
Among the expenditures under President Obama's $845 billion economic stimulus program in 2009 was $10 million to the ATF’s “Project Gunrunner” to increase staff by 37 persons, according to a November 2010 Department of Justice Inspector General report. (AP Photo)
Editorial,President,Federal Budget,Debt Ceiling,Entitlement Reform,Analysis

President Obama's latest "pivot" to jobs and the economy has so far consisted of two speeches in which he extolled scant evidence of growth, condemned Republican opposition to his policies and proposed a "grand bargain." That grand bargain essentially consists of Obama's idea of tax reform, which means higher taxes on the rich, and Republicans agreeing to let Obama spend the resulting revenue on expanding government programs and regulations. The chief executive would likely feel grand if Republicans were dumb enough to go for such a misnamed deal, but there is clearly no bargain in it for American taxpayers.

The problem with Obama's gambit is that it is neither grand nor a bargain. It's not new, either. Obama took the country down this same road of using massive government spending to boost the economy back in 2009 with his $845 billion economic stimulus program. As Peter Ferrara explained last week in Forbes, five years later, it's clear that program failed, as the economy still hasn't regained all of the jobs lost during the previous recession and growth remains essentially stagnant: "Taxing or borrowing a trillion dollars out of the private sector to spend a trillion dollars in the public sector is not going to increase jobs or economic growth overall on net. At best, it will just shift jobs from where the market directs to where the government directs. More likely, it will be a net drag on the economy, because the market spends money more productively and efficiently than the government."

Therein lies the basic reason why private-sector investment almost always produces far more economic growth than government spending. A free-market economy is guided by consumer preferences, whereas government spending satisfies bureaucratic and political preferences. It's analogous to the difference between the wisdom of crowds in which billions of consumers dynamically express their preferences and the "wisdom" of government planners statically doing so every five years in the form of a new economic plan. It is also why free-market economies are inherently wiser and more just than government-directed alternatives because the former represent the needs and wishes of hundreds of millions of people, while the latter impose the wishes of an elite few on the subservient many. Just ask the economic commissars in the defunct Soviet Union.

As Ferrara further notes, it is precisely this lesson that Obama has either ignored or never learned: "He has increased government spending, deficits and debt, which only drains the private sector of the resources to create good middle class jobs, and economic growth and prosperity. And he has cheerled a weak dollar Fed monetary policy that only chases off investors who don't want to invest in dollars that the Fed is depreciating over time." Obama has occasionally responded to such criticism by insisting that he is "pro-free market." This reminds of former British Prime Minister Margaret Thatcher's observation that "power is like being a lady. If you have to tell people you are, you aren't."

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