Obama flunks Economics 101

Boehmer and Obama

Obama flunks Economics 101

Well, we have watched many governments make the wrong decisions about their economies and now, 2 1/2 years later, we are facing another global economic crisis, perhaps worse than the 2008 one. Increasingly dire economic problems prevail. America is far from unique in its problems, but what the US does is particularly crucial to the global economy both as a driver and as an example. And we need to recognize that things would be better if different steps were being taken. It is hard not to feel that leaders have been blinded by ideology.

In America the situation is that a shift to the right some trace back to the Seventies peaked after the Obama administration took a midterm hit and the House got a "Tea Party"-driven republican majority. Since then the Tea Party extremist tail has wagged the republican party dog, making it difficult for the only relatively moderate House Majority Leader John Boehner to make deals with the administration on the economy. Advocacy of a rapacious, dog-eat-dog capitalism reigns. America is like a business, the advocates say, and should be run like one. But what they advocate wouldn't work for a business. You don't make profits by cutting back; you just survive a little while before shutting down. Actually the Tea Party republicans want to shrink and cripple government. They want everything privatized. Survival of the fittest. And fittest means richest.

The absurd debt ceiling flap is an objective correlative of how blindly ideology-driven and ultimately clueless Tea Party republicans are about economics. A basic Keynesian principle, which the right rejects out of hand, and not just in the US but internationally, is that when a national economy is failing, the government's first duty is to stimulate it through spending. After it recovers, then debt can be dealt with. Making austerity the watchword from the get-go guarantees continuing and worsening economic woes. And for everybody, though of course different factions differ radically on priorities, and the very rich always have resources to survive until a better day. The middle class does not, and is faltering and vanishing as real income continues to drop and unemployment increases.

There are widespread international mistakes at work here. But the American twists are in the way the Congress works now. The right is increasingly intransigent, willing to gamble away the whole game in order to win the hand. This is what they have done with the invented issue of the debt ceiling. The right uses the bad economy as an excuse to unravel the social safety net, including Social Security and Medicare. Talk about the debt is really an excuse to shrink the federal government. How this can work when state and local governments are out of funds is unexplained. The future involves cutting education, parks, highway repair, all the public works whose stimulus would create jobs -- which the "job-creator" rich (as the republicans call them) are not doing, because they're sitting on their money. And the job stimulus would increase spending, so that industries would sell more products and corporations would use some of the money they're hoarding to hire more employees. And the economy would recover. Instead, nothing of the kind is happening. In Congress, the talk is of the debt ceiling and the deficit, which in Keynesian terms are non-issues at this stage in the crisis.

In other words, they are doing exactly the opposite of what they should do. And most of the public thinks this. Polls show that Americans think creating jobs should be the first priority. They worry about the deficit, but they don't understand how it figures now.

In some ways the financial sector agrees with the Tea Party program. Bankers don't much mind having the rules and recent economic history ignored. The right rails about the debt and says the government's "out-of-control spending" created the current crisis, which isn't true. The crisis was created by the housing bubble and unscrupulous and unsafe banking practices. The banking sector wants to continue with those practices, so it doesn't want them to be seen as the cause of the great recession of 2008, though they were. The Tea Party republicans have their own separate agenda. They are using spending cuts and the debt as excuses to continue to pamper the ultra-rich and shrink government, thus putting all the burden on the poor and the middle class. And they are generally succeeding in this aim.

Liberals greeted the election of President Obama ecstatically because they saw him as a nice guy who was also clearheaded and smart, but he has not proved to be a good poker player. He's not tough enough. An awareness of this aspect of his character has increasingly dawned on his former supporters as a result of the recent struggle with Congress. Obviously Obama is not responsible for all the woes we now face. They were seeded in the late Seventies and early Eighties, and some of the US's worst current debt-makers, like the tax cuts for the rich and the Iraq and Afghanistan wars, are the responsibility of the previous administration. But Obama has missed many opportunities to play a strong hand. Evoking the Fourteenth Amendment to override the debt ceiling issue is one example.

Guest NYTimes op-ed writer Kurt Anderson, clearly no conservative, heaps praise on Nixon, to Obama's detriment, in a recent column. Nixon, Anderson writes, "governed further to the left than any president who followed him." Under Nixon, spending on social services doubled and defense spending decreased. He oversaw the establishment of various agencies protective of consumers. He signed the Equal Rights Amendment. The budget for the National Endowment for the Arts expanded six-fold. And these are just a few of the things Anderson lists. Anderson cites Nixon's "Madman Theory," used to scare the Southeast Asian communists with the idea that he was unhinged and dangerous. He suggests the right in Congress plays the Madman card every day now, only with them it's not a pose. They're actually mad. We need to understand that the country has shifted to the right, Obama is not a liberal, and republican vs. democrat is a distinction that's ceasing to matter, given that many of today's democrats are to the right of Nixonian republicans.

All this can't be blamed on Obama, but despite the good things he has done, some of them countering steps taken by Bush, he is a leader who is looking every day more and more like a follower. And it is no longer clear that in economic matters he knows what he is talking about. The troubling thing about Obama is not so much that he has lied to us repeatedly about what's good for the economy, but that he may believe these lies. Anyway, he is mouthing ideas that the right agrees with. And he seems not to understand that to do so gets him nowhere, because whatever he proposes, the republicans will reject, because it comes from a democrat. That is how they operate now. We can't say in Obama's case that he's blinded by ideology. He seems merely to be weakened by his lack of one. He is taking a highly dangerous real-life class in Economics 101. The classroom is full of crazies yelling nonsense, and he keeps listening to them. He's going to flunk the class.