How to Fix the Economy, Democrat Style


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President Obama says he has the solution to our nation’s economic ills.  It is, of course, in compromise.  Compromise, that is, of President Obama’s making, has never been formally articulated, and with which nobody agrees.  In other words, President Obama’s compromise looks a lot like unilateral speechifying.

But let’s take his proposal seriously nonetheless.  Here’s what he thinks will fix our fiscal woes: “let’s live within our means by making serious, historic cuts in government spending … let’s ask the wealthiest Americans and biggest corporations to give up some of their breaks in the tax code and special deductions.”

Sounds great, right?  You don’t own a corporate jet, so you won’t get hurt – and we’ll cut the spending we’ve been needing to cut.  Only one problem: Obama hasn’t put a concrete proposal on the table.  More than that, his theory itself is deeply flawed.  By raising taxes during a recession, Obama’s plan actually fosters a decline in tax revenue over the long haul, meaning that our deficit grows larger rather than smaller.  Only a consistent and flourishing Rolls Royce economy can generate the kind of tax dollars America needs to pay off her Boeing-sized debt.  If we shrink our economy to the size of a Toyota Tercel – which is precisely what raising taxes does – we can forget about fixing the debt crisis anytime soon.

Liberal solutions to the economy are almost always this wrongheaded.  They don’t take into account two basic concepts: fluidity of economic modeling, and opportunity costs.  Fluidity of economic modeling means that whatever we do will have an impact on the economy, for good or ill.  If we raise taxes, we aren’t just taking a larger slice of a static pie – we are taking a larger slice of a pie that shrinks because people don’t like giving up their pie.

Opportunity costs are costs imposed by forcing people into making silly choices.  For example, liberals want to force us to spend our cash on idiotic fluorescent light bulbs.  To that end, they regulate away incandescent light bulbs by explaining that doing so will help spur the economy.  What they fail to realize is that by forcing people to spend more on light bulbs – money they don’t want to spend on light bulbs – they are forcing them not to spend money on products that are more market-ready and don’t require regulation and subsidization in order to reach market.  Ten green light bulbs sold via governmental intervention equals a memory upgrade for somebody’s computer not sold.  A windmill forced on the American population means several transformers that we aren’t able to pay for.  The consumer is best situated to decide what their lifestyle requires, not the government.  Furthermore, the consumer-driven market makes products better and cheaper through competition; the government-driven market generally doesn’t.

For some odd reason, the left doesn’t think that either of these concepts apply in the real world.  So they call for raising taxes; so they call for redirecting money from one industry (e.g. the computer industry) to another (e.g. the health care industry or the car industry).

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  • StephenD

    Excellent post Ben.
    Tell us how much it cost per job created under the stimulus package and why merely giving the money back to the people directly would not have accomplished much more.
    They just don't get it.

  • megapotamus

    Given these well known facts I take a contrarian stand on much of the gloomism out there. Since fiscal collapse of some sort is as close to inevitable as an economic event can get, would it not be best to get to the terminal point as quickly as possible? On this stipulation the best outcome would be no deal whatsoever while Obama goes 14th or otherwise simply orders Treasury to keep issuing bonds. The one, crucial upside to this scenario is this: clarity.

  • Paul of Alexandria

    Let’s solve both problems in one fell swoop. The funny thing is that this is pretty much what China has been doing, in reverse. The "John Batchelor Show" (http://www.wmal.com/showdj.asp?DJID=9992) on WMAL examines China in detail a couple of times a week, and lately has described the large number of ghost cities which the Chinese have built. There is no demand for them, nobody actually lives there, but building them keeps the construction workers employed. http://www.dailymail.co.uk/news/article-1339536/G

  • tanstaafl

    Some folks believe that the government can do anything and that the instrumentality of the state can be used to compel citizens to comply with such a government "for their own good".

    I oppose such dictatorial notions.

  • Asher

    The Only action that will solve our debt crisis and Job solutions is to vote Obama out of Office… Good Bye El Creepo!