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Wasting Time But Not the Crisis

March 7, 2009

You have to wonder whether President Obama is taking the economic crisis seriously. His so-called stimulus plan is the economic policy equivalent of his call for withdrawal from Iraq: he wanted to spend money on infrastructure, education and ‘green’ energy and to restructure social security and the health care system before the economic meltdown. He still wants to do so after the economic meltdown. The only thing that has changed is that the economy has taken centre stage and that his massive spending programmes are now sold as a cure for it. Sadly, they are not and you don’t have to be a skeptic of Keynesian policies to agree with that.

Infrastructure spending may have a positive short-term effect on the economy, as may some other parts of the so-called stimulus package. But increased spending on education will not even give a cosmetic improvement to the current crisis, nor will ‘investments’ into alternative energies. Those are long-term projects which might pay off in decades from now but until then are more likely to make things worse by increasing the deficit and national debt. The same is true about social security and health care. While they are in need of reform, solving these problems will neither soothe the symptoms nor fight the causes of the financial crisis.

Very much to the disappointment to the stock market and anyone whose living standards are affected by them (ie everyone) the Obama administration has not yet come up with a plan to detoxify the financial institutions from the bad assets that are at the root of all this trouble. There are many possibilities to get this done, one way more painful than the other, but none so painful as to not get it done and to continue throwing money at zombie banks instead. Since here lies the genuine ‘fierce urgency’ to ‘act swiftly and boldly’ and since this has been known even before his inauguration you might begin to wonder what takes Obama so long to get into action.

And then you remember that he has been busy campaigning for his enormous spending proposals that include every living and many dead Democrats’ favourite pet project and increase the size of government to a degree that makes it virtually indistinguishable from those of European social democracies. There is no reason to doubt that Obama does not subscribe to the rule never to ‘waste’ a crisis that his chief of staff has spelled out and Obama has been pretty straightforward with his plans to boost spending and to ‘remake America’, so the White House’s focus on changing the role of government doesn’t really come as a surprise.

What is shocking, though, is that the President implements his big plans for America in full knowledge that Americans pay the price of it. They do so not only with their taxes (and the taxes of generations to come) but also with their job/their retirement money/their college funds thanks to the “gyrations of the stock market” that Obama doesn’t worry about in order to get the “long-term strategy” right. Right. And that would be the long-term universal health care-carbon tax-green energy subsidies- college for all-soak the rich and spread the wealth-European-sized government strategy.

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