Obamanomics, the economic program of the Obama administration, will fail to help the U.S. economy. Instead it will undermine the economy. It will fail to help the American people as a whole, although it will benefit some. It will succeed in augmenting the government...
Whenever the government failure becomes prominent, the government blames the private economy for having failed. It always blames someone else, never its own policies. It blames industry. It blames businessmen. It blames greed. It blames speculation. It blames the consumer. It blames foreigners. It blames Nature. It never blames itself...
Obama and his economists are facing a worse situation than existed three months ago. The government actions up to now have made matters worse. The Obama $825 billion spending program will not turn the economy around. It is a Christmas tree going to various interest groups: $142 billion to state education, $111 billion to health care, $102 billion to relief, $90 billion to infrastructure, and $58 billion to energy subsidies. A lot of this is pyramid-building or pyramid-maintenance. $275 billion is payroll tax cuts is also slated. What should be done is to cut government spending by a trillion dollars and simultaneously lower tax rates on capital. Ending the estate tax, cutting marginal rates, and cutting tax rates on dividends and capital gains will all stimulate smaller businesses to form and add employment. They are a major source of new employment in the economy. Ending subsidies to various industries, cutting tariffs, and ending various quotas will also benefit the economy. These should all be done while at the same time cutting the budget...
Obama is an economic illiterate. He would maintain high capital gains taxes even if by reducing them, they would bring more revenue to the government. It doesn’t get much more irrational than maintaining a tax at a high level out of a concern for fairness when the overall pie will go up by reducing that tax. Obama and his team will be back asking Congress for another trillion quite soon and probably another trillion after that. They will not know what to do when more big banks fail and when many regional banks start to fail. I predict that they will do as was done with the S & Ls in the 1980s. There will be a policy of "forbearance" when regulatory guidelines are violated. They will not want to have to appropriate money for the FDIC. If they form a Resolution Trust kind of entity to receive and sell off bad bank loans, this again subverts the bankruptcy option. It socks the taxpayers with the losses...
The overall result of continuing along the lines laid down by Bush and the prior Congress will likely be stagnation of the American economy and a longer-lasting depression of business activity and economic growth. It could last 4–7 years or longer. The attempts to revive the economy will produce inflation during the depression.
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