It’s often been remarked that President Obama’s speeches are much less interesting in print than when spoken. For all his reputation as a master communicator, Obama’s words fall flat when not borne aloft by his excellent oratory. As an example, his singularly unimpressive op-ed in yesterday’s Washington Post is vague where it should be specific, and where specific, wrong. As a guide to Obama’s economic thinking, it is worrisome.
Obama’s errors begin at the beginning: “By now,” Obama opens, “it’s clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression.” This is untrue. The early-1980s recession was worse than where we presently stand. Unemployment was nearly 11 percent; it’s about 7.5 percent now. Inflation was running at 13.5 percent in the earlier recession but is not at present much of a problem, though it may be if we push a mountain of new spending through Congress. GDP fell more sharply in the 1980s than it has in the current recession. Obama is exaggerating the problem for dramatic effect.
“What Americans expect from Washington,” the president continues, “is action that matches the urgency they feel in their daily lives—action that’s swift, bold and wise enough for us to climb out of this crisis.” Obama’s plan, which amounts to channeling a trillion dollars into pet Democratic causes ranging from digital-TV coupons to art programs, and calling the resulting assemblage “stimulus,” is neither particularly swift nor particularly bold. The Congressional Budget Office reports that most of the discretionary spending won’t happen until 2011—so much for “swift.” If jacking up the burn rate for familiar federal handouts is “bold,” boldness should be made of sterner stuff. As for “wise”—our economy faces many challenges, but an excessively thrifty federal government is not one of them.
Obama writes: “Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.” This is unsupportable. The unbinding effects of federal spending, if they come at all, come gradually. The cost of waiting a week or two, in order that our priorities might be examined and debated, is well worth the lost time when balanced against the behemoth—the president might call it an “enormity”—that is the stimulus package. As for the claim that joblessness “will approach” double digits, this is studied vagueness. There is no way to know how high the unemployment rate will go, and government action probably will not be the main determinant of that in any case. Most preposterous is Obama’s claim that failure to enact his program risks a crisis “we may not be able to reverse.” That is pure opera, intended only to panic voters and preempt debate.
Once the shadow of fear has been cast upon the land, the crafty rhetorician lays down the questionable figures for the readers of Washington Post: saving or creating 3 million jobs, providing tax cuts to 95 percent of American workers, and the rest. Even if we accept Obama’s claim that Washington is able to “create jobs,” and even if we pretend not to notice that his job-creation figure changes from day to day, a trillion-dollar stimulus bill that creates 3 million jobs pays $333,333 per job, roughly what Michelle Obama earned in her last sinecure. That’s not a very good deal under any circumstances, but many of those jobs will be in government, making them a net loss for the economy. And when the crisis has passed and is long forgotten, those bureaucrats will still be collecting their pensions, and we’ll still be paying for them.
Obama’s way with numbers is slippery. His “tax cut for 95 percent of workers” is a classic piece of rhetorical misdirection—emphasizing the “95 percent” and directing attention away from the president’s odd definition of “tax cut.” Tax rates will not be reduced. A refundable tax credit of $500 will be offered against the payroll tax, including to those who do not pay $500, or $1, in payroll taxes—extending the principle of the Earned Income Tax Credit. The net effect is precisely the same as if the government were simply to send out another round of stimulus checks. But Democrats, having criticized the Bush stimulus checks, feel obliged to disguise their own similar payouts as “tax cuts.” In reality, there will be no cut in tax rates, so when those $500 credits are expired taxpayers will be in the same position they were in before the “tax cut.” Which is to say, Obama’s is a tax cut that doesn’t cut tax rates for taxpayers but does give tax dollars to non-taxpayers and calls that a tax cut.
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