Obama’s Fear Mongering

Barack Obama wants to frighten us into giving the federal government dramatically more power over the economy. However, not even his own advisers agree with his economic predictions. Obama said, “If nothing is done, this recession could linger for years. The unemployment rate could reach double digits.”

Of course it’s easy to claim that something “could” happen. But Obama wrongly suggests a causal relationship. It is also true that “if something is done, this recession could linger for years” with double-digit unemployment. And everything about Obama’s economic plans promises to undermine the economy, from trade restrictions to welfare expansion to new controls on energy and medicine.

But here let us look only at the job picture. Interestingly, Obama’s advisers released a paper the day after Obama’s speech in which they claim unemployment will reach 9 percent “Without Recovery Plan” and only 8 percent with it. Well, they can claim whatever they want. The fact is that increased central planning threatens the economy. At least they admit:

It should be understood that all of the estimates presented in this memo are subject to significant margins of error. There is the obvious uncertainty that comes from modeling a hypothetical package rather than the final legislation passed by the Congress. But, there is the more fundamental uncertainty that comes with any estimate of the effects of a program. Our estimates of economic relationships and rules of thumb are derived from historical experience and so will not apply exactly in any given episode. Furthermore, the uncertainty is surely higher than normal now because the current recession is unusual both in its fundamental causes and its severity.

In other words, it’s hard to predict the future. A lot of things “could” happen. The economy could recover relatively well despite Obama’s grand schemes. But Obama’s advisors fail to look at one source of error: the flaws generated by their own pragmatist/Keynesian pretensions.