Friday, January 09, 2009

Obama Lack of Leadership Shines Through

Obama defended his trillion dollar plan as the nirvana to get us out of this terrible economic funk. The easy road is to spend and create massive deficits, the likes of which we have never witnessed int the history of the nation or any other industrialized nation.

The road less traveled is to do the right thing and cut government spending. entitlements, cut income and capital gains taxes on productive assets such as labor and capital, and use the bully pulpit to encourage Americans to save more, be more frugal, cut waste, be more efficient etc.

His economic team, that does not have a credible track record, seems to look to the past to come up with same old solutions: spend, spend, spend. The WSJ states:

'Still, with the U.S. economy facing 1930s-style threats, the Obama administration is looking back to that period for guidance. President Franklin Roosevelt's Works Progress Administration provided jobs to millions of Americans during the Great Depression, though it had critics who said the program wasted money on unnecessary projects.

..limits of Keynes-inspired growth were reached in the following decades. Many countries mistimed their spending, pouring money into their economies just as they were riding out a downturn and leading to economic overheating. Latin America regularly succumbed to hyperinflation, while in the U.S. the "misery index" -- the combination of inflation and joblessness -- climbed to 20.8% in 1980, from 10.8% a decade earlier.

Many nations also wasted their money on unnecessary projects: Japan became notorious for investing in little-used airports and bridges leading into sparsely populated islands. Indonesia started a national car project that lost money and was riddled with corruption.

With the rise of Ronald Reagan and Britain's Margaret Thatcher, critics of stimulus policy came to the fore. The goal became to shrink government.

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