President Obama, his advisers, his base, his opponents, the media and the markets know the administration is in trouble. We’re coming perilously close to a double-dip recession after two and a half years of failed Keynesian boondoggles. But the left implores him to “go big,” which is another way of doubling down on economically unwise and politically unpopular policies.
My colleague E.J. Dionne perfectly channels this sentiment:
The federal government needs to come to the aid of state and local governments again; the budget cuts they are being forced to make are precisely what the economy does not need now. We must find ways of boosting spending as quickly as possible on roads, bridges, transit and other building projects, including a new program to rehabilitate the nation’s dilapidated schools. And the administration needs to do far more to resolve the mortgage mess, which is holding back consumers.
If this seems familiar, it is. This is what Obama has tried since he was elected. It’s not clear why it would suddenly work now. In fact, it seems improbable that credit-rating agencies and investors would look kindly on another orgy of borrowing and spending.
And if that is not enough to freak investors and employers, Dionne urges: “Obama should not be shy about urging eventual tax increases, particularly on the wealthy. And let’s be clear: These would not be immediate tax hikes; they’d kick in a year or two from now.” But of course, who is going to hire and expand if you’re awaiting another round of taxes? (This obviously is why gold is all the rage — value without risk is the name of the game in uncertain times.)
None of this would get through Congress, and I’d predict many Senate Democrats would recoil in horror as well. Tax hikes and spending binges are not the way to woo independent voters.
Now while Warren Buffett apparently has money to burn and is anxious to funnel more money to the federal coffers, other business leaders disagree. Writing in the Wall Street Journal, Harvey Golub, the former chairman and CEO of American Express, chides Buffet: “Others could pay higher taxes if they choose. They could voluntarily write a check or they could advocate that their gifts to foundations should be made with after-tax dollars and not be deductible. They could also pay higher taxes if they were not allowed to set up foundations to avoid capital gains and estate taxes.” More fundamentally he urges tax and spending reform:
[T]he extraordinarily complex tax code is replete with favors to various interest groups and industries, favors granted by politicians seeking to retain power. Mortgage interest deductions support the private housing industry at the expense of renters. Generous fringe benefits are not taxed at all, in order to support union and government workers at the expense of people who buy their own insurance with after-tax dollars. Gifts to charities are deductible but gifts to grandchildren are not. That’s just a short list, and all of it is unfair.
Governments have an obligation to spend our tax money on programs that work. They fail at this fundamental task. Do we really need dozens of retraining programs with no measure of performance or results? Do we really need to spend money on solar panels, windmills and battery-operated cars when we have ample energy supplies in this country? Do we really need all the regulations that put an estimated $2 trillion burden on our economy by raising the price of things we buy? Do we really need subsidies for domestic sugar farmers and ethanol producers?
Why do we require that public projects pay above-market labor costs? Why do we spend billions on trains that no one will ride? Why do we keep post offices open in places no one lives? Why do we subsidize small airports in communities close to larger ones? Why do we pay government workers above-market rates and outlandish benefits? Do we really need an energy department or an education department at all?
And of course, why do Golub and Buffett, and other affluent Americans, get Social Security and Medicare?
Republicans certainly hope Obama equates “go big” with ”more cowbell.” Should he continue down the same borrow-spend-and-tax road, we can expect voters will begin to wonder whether the president has learned anything at all in the past two and a half years.