Wednesday, February 25, 2009

Obama's economic agenda is fallacious

President Obama delivered his first speech to a joint session of Congress yesterday. By employing a lot of platitudes and unwittingly painting a dreadfully wrong picture of what his plans will achieve, he tried to win the hearts of the nation once again. Let's have a closer look at his visions:

Obama said it's time to act boldly not just to revive the economy, but "to build a new foundation for lasting prosperity."
The only sustainable foundation for lasting prosperity is capital accumulation. Saving. Deferred consumption. Obama's stimulus plan entails quite the opposite, deficit spending and inflation. That may be the foundation for a new economic bubble, but it's far from being a foundation for prosperity.

"While the cost of action will be great, I can assure you that the cost of inaction will be far greater," he said.
This view implies that only government can take (and therefore must take) action or an already bad situation is bound to get even worse. Obama apparently doesn't believe in the power of emergence and grassroots operations, but rather trusts his own wits instead of letting the combined abilities and ideas of millions of individuals work out a solution. Such a stance requires quite a lot of self-confidence - Hayek coined it "presumption of knowledge".

Obama said his administration already has identified $2 trillion in government spending cuts that can be made over the next decade.
A surprisingly positive remark. Let's hope that "can" is not just a euphemism for "should be, but won't".

Obama predicted that because of the recovery plan, the United States will double its supply of renewable energy in the next three years. [...] Obama also pledged a "historic commitment" to health care and said the recovery plan could lead to a cure for cancer. He also promised the "largest investment ever" in preventive care. [...]
I don't even know how to call this. His first claim about a doubling output at least sticks to classic central planners' rhetoric, but holding out the prospect of a "cure to cancer" is one step beyond that. How can you promise a scientific breakthrough as a politician? Does he really think that throwing money after a project is all it takes? Amazing.

"Slowly, but surely, confidence will return, and our economy will recover," he said, asking Congress to join him in "doing whatever proves necessary because we cannot consign our nation to an open-ended recession."
The unfortunate aspect is that he's trying to imitate or even surpass Roosevelt in his "stimulus spending", thereby dramatically increasing the likelihood of an "open-ended recession". As I said above, dreadfully wrong expectations.

Obama promised to reform the regulatory system to "ensure that a crisis of this magnitude never happens again."
By ignoring the origins of the crisis, the existence of a central banking system, two state-backed mortgage corporations and a number of laws prohibiting banks from discriminating against customers with a low degree of creditworthiness, and instead opting for the popular, but misguided view of an "out-of-control market system", Obama is bound to aggravate the crisis and to sow the seeds for a new economic bust.

"A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future," Obama said.
This quote scares me. Obama seems to hold the view that giving money to the wealthy does not lead to any kind of investment. While it was certainly bad-mannered to grant tax cuts to the rich, but not to the poor, any new private sector money creates more prosperity and opportunity than wasteful and misdirected government spending. Is a tax cut some sort of "gift" to Obama? Do we need to stop giving gifts when times get tough and instead "save" money by giving it to government? The idea makes me shudder.

Even more disturbing is the response of his alleged political "opponents":
Louisiana Gov. Bobby Jindal, who delivered the Republican response to Obama, blasted the Democrats' stimulus plan, saying, "while some of the projects in the bill make sense, their legislation is larded with wasteful spending."
No principled opposition to stimulus packages. No defense of free markets or individual decision-making. No, just an admonishment for being "too wasteful". Another reminder that working within the two-party-system might be a giant waste of time if your goal is to promote liberty, though Governor Jindal found stronger words to express his support for a bottom-up grassroots society in his YouTube response. So we shouldn't judge too soon.

In conclusion, Obama's attitude resembles the confidence of a central planner when it comes to controlling the lives of millions of individuals. His distaste for private investment and his obsession with politically correct spending are frightening. The lack of a principled opposition should be clarion call for action to all friends of liberty.

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