Dan

Calabrese

Read Dan's bio and previous columns here

March 26, 2009

President Obama Does Not Understand Economics

President Obama does not understand economics. All you have to do is watch his press conference of this past Tuesday to understand that.

He doesn’t understand how wealth is created. He doesn’t understand how and why people earn and receive rewards. He doesn’t understand how and why employment agreements are made and kept.

Of course, this is no surprise to many of us. It was clear during the presidential campaign that Obama did not understand economics. As he talked about the need to “reward work instead of rewarding wealth,” he demonstrated his cluelessness about the relationship between labor and capital – and the crucial need each has for the other.

And it didn’t take a Nobel Prize-winning economist to sniff this out. Heck, a plumber sniffed it out. Obama’s claim that raising taxes on a small businessman would somehow benefit the businessman because the money would somehow be given to the man’s prospective customers was one of the most mind-bogglingly ignorant statements ever uttered. The only reason you don’t remember it is that the mainstream media chose to focus instead on the fact that the man who asked the question wasn’t properly licensed as a plumber, or something, which was clearly much more important than the qualifications of the man answering the question to do the job he was seeking.

But as obvious as it is, and has been for some time, that Obama does not understand economics, some of his statements during the press conference are nonetheless mind-blowing. Consider:

Obama declared that we cannot build a prosperous economy on the basis of “maxed-out credit cards,” which is true, but he also said this:

The third part of our strategy is to restart the flow of credit to families and businesses. To that end, we've launched a program designed to support the markets for more affordable auto loans, student loans and small-business loans, a program that's already securitized more of this lending in the last week than in the last four months combined.

Yesterday, Secretary Geithner announced a new plan that will partner government resources with private investment to buy up the assets that are preventing our banks from lending money.

And we will continue to do whatever is necessary in the weeks ahead to ensure the banks Americans depend on have the money they need to lend, even if the economy gets worse.

So let me see if I have this straight. We can’t build a prosperous economy on debt, but a key element of the prosperity strategy is to kick-start lending, which increases debt?

If this leaves you shaking your head, at least you should know that the president is consistent. He applies the same twisted logic to federal budgeting policy.

When asked how he can justify running record-shattering deficits throughout his entire presidency, Obama claimed he will “cut the deficit in half” by the end of his first term, which completely ignores the facts that a) it is only “half” after he himself balloons it to four times the deficit we had as recently as 2007; b) his own growth assumptions, on which his deficit projections are based, are optimistic according to the Congressional Budget Office; and c) the CBO also projects the budget ballooning again after that one brief reduction, even if it happens.

Of course, Obama’s first response to the question about ballooning deficits was to attack his Republican critics for failing to deal with deficits themselves – and of that they are certainly guilty, but Obama’s projected deficits makes theirs look like chump change by comparison.

So we can’t build an economy based on credit, but the key is to get people borrowing more from banks. And we have economic problems in part because of structural deficits, but the solution is to have even bigger structural deficits.

Obama’s ridiculous claims that soaring federal spending will somehow get health care and energy costs under control – as if rational market policies would not achieve that on their own – could fill a column all its own, and soon will.

But it should be clear to anyone paying attention that, on economic matters, Obama doesn’t have the slightest idea what he’s doing.

© 2009 North Star Writers Group. May not be republished without permission.

This is Column # DC266. Request permission to publish here.