- The Washington Times - Monday, December 29, 2008

Danger ahead

“Individuals, companies or cities with heavy debt and shrinking revenues instinctively know that they must reduce spending, tighten their belts, pay down debt and live within their means,” Peter Schiff writes in the Wall Street Journal.

“But it is axiomatic in Keynesianism that national governments can create and sustain economic activity by injecting printed money into the financial system. In their view, absent the stimuli of the New Deal and World War II, the Depression would never have ended.

“On a gut level, we have a hard time with this concept. There is a vague sense of smoke and mirrors, of something being magically created out of nothing. But economics, we are told, is complicated. It would be irresponsible in the extreme for an individual to forestall a personal recession by taking out newer, bigger loans when the old loans can’t be repaid. However, this is precisely what we are planning on a national level,” Mr. Schiff said.

“I believe these ideas hold sway largely because they promise happy, pain-free solutions. They are the economic equivalent of miracle weight-loss programs that require no dieting or exercise. The theories permit economists to claim mystic wisdom, governments to pretend that they have the power to dispel hardship with the whir of a printing press, and voters to believe that they can have recovery without sacrifice.

“As a follower of the Austrian School of economics I believe that market forces apply equally to people and nations. The problems we face collectively are no different from those we face individually. Belt tightening is required by all, including government.

“Governments cannot create, but merely redirect. When the government spends, the money has to come from somewhere. If the government doesn’t have a surplus, then it must come from taxes. If taxes don’t go up, then it must come from increased borrowing. If lenders won’t lend, then it must come from the printing press, which is where all these bailouts are headed.”


Barack Obama is an awfully good politician but not much of an economist,” Fred Barnes writes in the Weekly Standard.

“His model for lifting America out of its economic slump is President Franklin Roosevelt’s New Deal. The trouble with FDR’s policy, however, is that it didn’t come close to reviving the economy and restoring it to pre-Depression vigor. But FDR did use the New Deal quite successfully in another regard: to build a coalition that kept Democrats in the majority for a half-century. …

“The contrast here — and not only in language — is with President Reagan’s economic stimulus in 1981. To generate investment, Reagan relied on a 25 percent, across-the-board tax cut on individual income — including the income of the rich — and accelerated depreciation for business. It worked, aided by monetary easing by the Federal Reserve. By early 1983, both the economy and employment were growing rapidly. …

“That Obama has no interest in the Reagan recovery model is hardly a surprise. He has some unusual ideas about the economy. ‘The American economy has worked in large part,’ he said last week, ‘because we’ve guided the market’s invisible hand with a higher principle: that America prospers when all Americans can prosper.’ That’s not exactly the way Adam Smith described the invisible hand of free markets.

“When he announced his picks for top energy and environmental posts, Obama praised California for adopting the most stringent emission standards in the country. ‘And rather than it being an impediment to economic growth, it has helped to become an engine of economic growth,’ he observed.

“At best, it hasn’t helped much and more likely has hurt the California economy, which is currently cratering.”

Managing hope

“The conventional wisdom is that Obama’s first chores are to prepare for national-security challenges and to deal with the economy,” David Shribman writes in the Pittsburgh Post-Gazette.

“Indeed, with the 111th Congress scheduled to be sworn in more than two weeks before the 44th president is to be sworn in, there is every reason to believe that a stimulus bill could be sitting in the President’s Room in the Capitol, awaiting Obama’s signature a few moments after he completes his inaugural address. …

“But the truth is that Obama’s first chore is not to manage diplomacy or the economy. His first chore is to manage hope,” Mr. Shribman said.

“It’s not as easy as it sounds. When Time named Obama its Person of the Year, it borrowed the Shepard Fairey ‘hope’ image of a thousand campaign posters. … Obama, who hardly has a biography at all even though he has written two autobiographies, is indelibly associated with the title of one of those autobiographical volumes, ‘The Audacity of Hope.’ …

“But now that we have put aside ‘A Christmas Carol’ for another year and while we move from Bleak House to Great Expectations, Obama is facing the question of how to satisfy all those expectations, great and small.”

Green times

“I’m very puzzled by the nexus between the current downturn and concern about global warming,” Victor Davis Hanson writes in “The Corner” blog at National Review Online (www.nationalreview.com).

“Given that we were told we had to immediately cut back on carbon emissions (even before sustainable alternative energies are in place), largely by curbing our lavish energy-dependent lifestyles, why then all the concern about stimuli and global depression? Surely, the world right now is sort of what the radical Gorists wanted to see, since the current cutback in gasoline usage, and general economic slowdown are radically restricting the burning of fossil fuels in a manner that even the most optimistic green utopian could hardly have envisioned just a few years ago,” Mr. Hanson said.

“In other words, in the booming 2004-06 years, radical suggested scale-backs would have probably led to something akin to what we are experiencing now. So why the gloom instead of headlines blaring — ‘The Planet Continues to Green — as Archaic Consumption Practices Erode Further!’”

Greg Pierce can be reached at 202/636-3285 or [email protected]

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