Obamanomics Threatens Economic Recovery

The following article originally was published January 20 in Grand Junction’s Free Press.

Obamanomics threatens economic recovery

by Linn and Ari Armstrong

Barack Obama wants to “stimulate” the economy with barrels of other people’s money. Crack cocaine and crystal meth provide a “stimulus” too, and Obama’s proposal is about as healthy. Obama would have us believe that the answer to bad debt is more bad debt. Like a drug addict, Obama is looking for a short-term fix that endangers long-term health.

In his January 8 speech on the economy, Obama warned, “If nothing is done, this recession could linger for years.” But if Obama proceeds with his plan, he could make the recession worse and undermine long-term economic prosperity.

A recession occurs when an economic shock compels people to readjust their plans. In this case, the shock was largely caused by federal policies that encouraged and even mandated risky home loans. A recession is the period of changing strategies and rethinking behavior that sets the stage for renewed economic prosperity. A sick economy, like a sick person, needs recovery, not artificial stimulation.

The basis for long-term economic prosperity is the enforcement of just and stable laws. The government plays a legitimate role in preserving a free market by protecting property rights and freedom of contract, stopping violence, rooting out fraud, and providing the legal framework for resolving disputes.

Such stability is precisely what Obama threatens to undermine. It is ironic that Obama delivered his address at George Mason University. Russ Roberts, an economist at George Mason, recently wrote, “By acting without rhyme or reason, politicians have destroyed the rules of the game. There is no reason to invest, no reason to take risk, no reason to be prudent, no reason to look for buyers if your firm is failing. Everything is up in the air… The frenetic efforts of FDR had the same impact: Net investment was negative through much of the 1930s.”

In his Virginia Declaration of Rights, Mason himself wrote “That no free government, or the blessings of liberty, can be preserved to any people but by a firm adherence to justice, moderation, temperance, frugality, and virtue…” Obama’s plan is the opposite of temperance and frugality.

Obama said he wants to spend tax and deficit dollars to “invest in priorities like energy and education; health care and a new infrastructure.” Isn’t it interesting that this is the same corporate and personal welfare Obama also supported before the recession?

Obama wants more federal control over the economy, and he is using the recession as a pretext to achieve it. Does anyone doubt that these “investments” will be politicized? Obama has long supported government-funded health care. He has long demonized traditional energy producers and called for politically-correct — and frighteningly expensive — “green” energy.

The result of Obama’s “investments” will be to put medicine, energy, and other industries more under the capricious control of federal politicians and bureaucrats, thereby contributing to the insecurity that Roberts warns about.

Obama would also siphon resources away from free-market investment. The government can “invest” only by taking wealth out of the free economy through taxation, deficit spending, or inflation. Politicians now talk of adding a trillion dollars to the deficit. This too threatens long-term prosperity.

Yaron Brook of the Ayn Rand Institute argues that the federal government should reduce spending — not increase it — so that “as much real capital as possible will remain in private hands, and be put to productive use by entrepreneurs to create valuable goods and services to sell at home and abroad.”

In his speech, Obama invoked the spirit of Franklin Delano Roosevelt and his New Deal. Is Obama the next FDR? Those who read our December 8 column may hope not. Through his first two terms in office, unemployment never dipped below 9 percent (or 14 percent depending on the estimate), and it climbed again by 1938, due largely to FDR’s stiffer wage controls.

Amity Shlaes reviews the transition from Coolidge to Hoover to Roosevelt in her book The Forgotten Man. As Vice President under Harding, “Cool Cal” witnessed a recession in the early 1920s, but thanks to a hands-off policy, by 1923 “it was hard to find an unemployed man.”

But in the early 20th Century central planning became the rage in parts of Europe and, to a lesser degree, in the United States. Shlaes reviews that two economists popularized the term “beneficent hand” to substitute the hand of politicians for the Invisible Hand of Adam Smith’s market. In their book The Road to Plenty, they promoted spending as primary.

But one astute observer of the time wrote about this book, “Too good to be true — You can’t get something for nothing.” This observer was FDR himself, just a few years before his own “beneficent hand” stimulated the economy into the ground.

FDR forgot the lesson that Obama seems never to have learned. A stimulated orgy of federal spending is no substitute for a sound economy.

Linn is a local political activist and firearms instructor with the Grand Valley Training Club. His son Ari edits FreeColorado.com from the Denver area.