The 2003 invasion of Iraq was sold to the public at the time as being justified in part by Iraqi dictator Saddam Hussein’s possession of weapons of mass destruction and his harboring of al Qaeda terrorists. In the wake of the Bush Administration’s 2003 invasion of Iraq, word leaked out that several prominent figures around Bush long had wanted to invade Iraq; for them, 9/11 was the perfect cover, and the WMD and al Qaeda arguments mere window dressing. By the time the world knew the justifications were false, Iraq had been conquered and Saddam had been removed.
President-elect Barack Obama now says that he is going to reverse the current course of the US economy. This contraction, largely the result of the popping of the Fed-induced housing bubble, would come to a natural end in a matter of months anyway. That’s how the market works: if there is a government-induced binge, the fever breaks and the patient can return to health.
But the average American has been brought up to believe that good economic times are the results of proper government policy, and that bad times result from its absence. Like some 18th-century physician with a bag full of leeches, knives, glasses, purgatives, and emetics to leach, bleed, burn, and blister a sick man before inducing diarrhea and making him vomit, government hovers over the American economy, eager to make him sick in the name of restoring his health.
We have seen the same scenario play out many times in American history. The finest medical care available in America killed poor George Washington in 1799, and the latest economic voodoo caused the recession of 1929 to last a decade and one-half.
When finally the government laid off the taxpayer and the business owner in 1945, the US economy boomed. What a remarkable example of statesmanship! The lesson historians drew was that not only was Franklin Roosevelt, the bleeder and blisterer who had stretched the previous recession to seven times the normal length of an American recession, a great statesman, but so was Harry Truman!
Barack Obama, it seems, wants to be judged in the same way. His soon-to-be-predecessor, George W. Bush, has emulated Herbert Hoover in responding to the current contraction with a spate of inapt federal measures: nearly $1,000,000,000,000 in handouts of newly-printed dollars to US banks and insurance companies have yielded no discernable result. In fact, federal "oversight" appears to have been totally absent, as the same inept colossi whose institutions tottered on the brink of insolvency before this great looting of the taxpayer now claim not to know where the money went.
What to make of this? Why, that more of it is "needed," of course. Thus, $17,000,000,000 was handed over by Bush and his minions to insolvent American automobile manufacturers. No moral, philosophical, or constitutional justification of handing, say, GM — with a current value of —$60B (that is, negative sixty billion dollars) — a few billion was even attempted. No one said how this "loan" would make the great Midwestern dinosaur solvent. Why not? My prognostication? Because it won’t.
All this "act of statesmanship" has done is keep GM in business so that GM can demand more money from the government in a few months. And more a few months after that. And more a few months after that.
The calculations here are almost entirely those of brute politics. GM is "too big to fail." That is, its unions control so many votes that they, like plains-state senators demanding agricultural subsidies, can twist this gift out of the taxpayer. Comes word now that the steel companies are lining up at the trough. Surely the paleoconservatives will muster the same arguments in their favor as served so well in the case of the Big Three: great countries manufacture their own steel; steel workers are highly paid; some of them were navy SEALs; my sister doesn’t want her husband to lose his job at the steel plant; and (the only one that really matters) if the Republicans don’t join the Democrats in this measure, highly organized and politically mobilized steel workers will vote Democratic forevermore.
I predicted that the Big Three would get our money. I predict that other decrepit industries will follow.
AIG spent part of its federal gift on lavish retreats for senior executives. Chrysler put some of its taxpayer "loan" into advertising to "thank" taxpayers. This obscenity was rather akin to Stalin "thanking" the kulaks for their land.
Barack Obama just announced that he plans to have the federal government resolve the economic problem in part by "modernizing" libraries and offering tax reductions to "workers." The library gambit is all about pork-barrel politics: every substantial community has a library, and so a measure like that will mean a federal expenditure in every congressman’s district. Since the early nineteenth-century days of Henry Clay (Pat Buchanan’s hero), greasing the skids that way has been part of the art of buying votes. No need to explain how expropriating money from its owner to purchase a new rug or computer for a library helps the economy.
Tax reductions to "workers," in classic Keynesian analysis, are a wonderful way to address economic contraction because "workers" (that is, unskilled employees) tend to spend a higher proportion of their income than the more affluent. Obama’s conclusion, then, is that America, with virtually the world’s lowest rate of savings, suffers at present from too much savings and too little spending. He wants to reduce the savings rate even further. This is what Keynesianism has given us: gigantic debt and ever-declining savings, despite the fact that everyone knows that societal investment (read: savings) is necessary to heighten the future standard of living.
The Clay platform was based chiefly on the idea of "internal improvements," meaning federal financing of roads and bridges throughout the country. Again, if roads were built throughout the country with money provided by the Federal Government, locals would see the wonderful benefit of supporting Henry Clay. Obama understands this perfectly well.
Like the Feiths and Abramses, the Cheneys and Wolfowitzes, and like George W. Bush himself wanting war with Iraq and seizing on the first excuse that came to hand, Obama has been handed a perfect cover for doing what he was disposed to do all along. An orgy of public spending outstripping even the super-profligate Bush’s was the desire of the leftward-most senator before the contraction, and he can justify it with economic bunk now.
As CNN.com reports, “Economists from across the political spectrum agree that if we don’t act swiftly and boldly, we could see a much deeper economic downturn,” Obama said. “That’s why we need an American Recovery and Reinvestment Plan that not only creates jobs in the short-term but spurs economic growth and competitiveness in the long-term.”
But "economists from across the political spectrum" do not "agree." Keynesians and Chicago School monetarists who slathered credit for the bubble on Allan Greenspan and failed to predict its popping, which they still find inexplicable, agree. Austrian School economists who castigated Greenspan during the bubble, forecast the current contraction, and see worse to come as a result of the government’s response, disagree. Vehemently.
But, as one of the Austrians recently said, "Being right is overrated." They are now in the position of the bystander who cannot reach the child in time to push him out of the way of the bus. Obama has adopted Bill Clinton’s tactic of referring to all government spending as "investment," but his taxing and borrowing to pay for wasteful government programs will only make matters worse.
The American economy is like big, healthy George Washington that fateful day in 1799. How much quackery will the government inflict?
Reduced saving means reduced future standard of living. Heightened government spending means reduced saving. Taking money from the politically weak to give it to the strong is King John’s model of government. And George Bush’s. And Barack Obama’s.
In recent days, some paleoconservatives have labeled observations such as these "ideological," people who object to the Big Three Rip-off "ideologues." Was Robin Hood an "ideologue"? Was King John a "statesman"?
There is still time for Obama to decide that unlike the second Bush, he is not going to follow King John in taking money from everyone else for the benefit of the well connected. He can still refuse to follow Bush in exploiting others’ misery for his own ideological ends. The signs are not promising.