Listening to Barack Obama’s speech Thursday gave little indication that he has any idea what the nations economic problems are or any plan that would keep us from a long, slow and painful recovery.
First of all, the president-elect failed to mention that the largest part of our problem was due to too much money and credit and forcing banks to make too many bad loans to people who are not creditworthy. These are problems caused by government action for which both parties can take blame.
The Republicans can take the blame for the excess money and credit while the Democrats can take the blame for the bad loans. Any plan to revive the economy should start with recognizing and then rectifying these two problems.
Obama said that hard work and responsibility are to be rewarded. While we didn’t hear any specific threats against people who work hard and take responsibility, we also didn’t hear any specific measures that could ever reward them.
What was heard was a call for immediate action to solve the problems with massive new spending. These are measures that have caused the problems in the first place. Massive government spending programs have never helped stimulate an economy in the past and never will.
To make matters worse it appears that the massive spending will quickly deteriorate into massive vote buying boondoggles with the bulk of the funds spent on projects that are of no use to anyone.
Finally, Obama announced a tax rebate to everyone. He did not go into detail but we know from repeated experiments that this type of action does absolutely nothing for the economy. No matter how happy it may make some people when they get their checks there is no lasting benefit for the economy.
The only possible role for government spending would be to shore up shaky Banks and prevent a collapse of the banking industry from a run on all the banks. This move should be done sparingly and with loans rather than gifts.
What gets the economy moving is setting up conditions under which the markets will step up their activity. Obama’s speech made no mention of free markets or individual initiative. All he talked about was the need for massive government action to correct the problems caused by previous government action.
When Obama starts to talk of permanent tax rate cuts for everyone, sound money, less regulation , freer foreign trade, and legal protection of property rights, then economic conservatives like myself will become optimistic.
In the meantime, the nation's business leaders are looking for a place to hide.