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Obama’s Economic Shift

Posted By Tait Trussell On January 14, 2011 @ 12:41 am In Daily Mailer,FrontPage | 11 Comments


President Obama’s New Year’s resolution was to “keep the economic recovery going.” [2] It appears he may do this with the appointments of William Daley as chief of staff and Gene Sterling as director of the national economic council. Neither man is ideologically as far left as Obama. They both understand the economy. But is the president trying to moderate to make peace with the business sector, as The Wall Street Journal reported [3] Jan. 7? Or is this a play to gain broader support only to be reelected in 2012?

Sperling held this same economic director position under Bill Clinton. On the ideological scale, Sperling falls between a centralist and liberal [4] Democrat. While the Sperling appointment Jan. 7 is important, Obama’s choice the day before of his new chief of staff could also have an impact on economic developments. The chief of staff, replacing fellow Chicagoan Rahm Emanuel, is William Daley, labeled as a Democratic moderate [5]. He was a senior executive at JP Morgan Chase, but earlier served as a pro-free trade secretary of commerce under Bill Clinton. Daley wrote in The Washington Post in 2009, “Either we plot a more moderate, centrist course or risk electoral disaster.” Whether Daley can help captivate the business community and independents, he can surely fund Obama’s re-election campaign with millions of dollars. Daley quickly got the approval [6] of the U.S. Chamber of Commerce, while the far-left had an expected spit-fit.

Gene Sperling is said to be especially proud of the work he did during the Clinton administration to expand the Earned Income Tax Credit (EITC) for the working poor, which Obama supports vigorously. The clearest statement of Sperling’s economic beliefs, said a New York Times blog Jan. 5, can be found in his book, “The Pro-Growth Progressive.” The book embodies the idea that all problems are solvable if we just set aside ideology and focus on what works. Sperling writes, for example, that resolving international trade issues requires “deep honest exploration that does not easily fit within any right-left, pro-globalization-anti-globalization perspective.” He also has written: “Neither progressives nor conservatives have articulated a vision for retirement security” that guarantees a reasonable nest egg while also helping workers invest in equities. Much of the book emphasizes this third-way theme. His book provides a reproach to progressives who hold that ideological purity requires rejection of market-friendly means. But Obama has shown himself through his political years to be a purist.

In a Bloomberg column, Sperling wrote in 2008 that “Democrats and Republicans are threatening to work together [7] to deal with a major economic issue–a stimulus package—just when you least expect it. To its credit, the Bush administration has played it pretty straight so far. In 2001 and 2003, the administration used the need for short-term stimulus as a ploy to justify long-term tax cuts for the well-off that would ignore all rules of fiscal discipline[.]” While writing the Bloomberg News column, Sperling also was an adviser to Goldman Sachs. For much of this period, he also worked for the Council on Foreign Relations. In 2006, Sperling was among a small group who gave Obama (then an Illinois senator) advice on early drafts of “The Audacity of Hope.” Sperling was a top adviser to Clinton in his presidential campaign in 1992 and was described as a “tireless advocate of fiscal discipline.” At one point, Sperling worked at the liberal, but respected, Brookings Institution. He was one of the principal negotiators with GOP leaders during last month’s agreement on the Bush-era tax cuts and unemployment insurance extension. Most recently, he has been senior counselor to Treasury Secretary Geithner. Surely, Sperling is no conservative.

In the past two years, the Left has been able to increase public dependence on government while decreasing self-reliance. This is a core difference between socialism and capitalism. For entrepreneurs, investors, and industrialists, their wealth is undeserved in the eyes of the socialist. Instead of providing incentives to the job–makers, they are verbally lashed for what they do. Austrian economist Ludwig von Mises said in the minds of progressives, “the wealth of the rich is the cause of the poverty of the poor.” This idea seems to steer Obama’s thinking.

The Keynesian wishful thinking about how an economy works will still be the guide for many Democrats in Congress in spite of the manifest failure of the American Recovery and Reinvestment Act (ARRA), known as the stimulus bill that wasn’t economically stimulating.

Data covering the year and three quarters of the Recovery Act show the despite the $862 billion approved, the effect has been negligible [8], as noted by John Cogan and John Taylor, senior fellows at the Hoover Institution in a Wall Street Journal op-ed piece. From the fist quarter of 2009 through the third quarter of 2010, “government purchases have increased by only 3 percent of the $862 billion ($24 billion).” Infrastructure spending increased by an even smaller amount: $4 billion. The notion that spending tax money can stimulate the economy is combined with another tenet of the Left—that only government can do it right. Although Obama went along reluctantly with the Bush tax cut extension agreement, he has never given up on stimulus through spending.

Keith Hennessey, national economic adviser to George W. Bush (Sperling’s counterpart), wrote in the Nov. 29 issue of National Review Online, “The goals of an ideal economic-growth agenda are simple and well known: a large and thriving private [9] sector and a small government; reduced government spending; lower taxes; smaller deficits; open trade and investment; regulations that don’t distort decisions, discourage capital formation or work; deep and flexible labor markets; a reformed financial sector that channels savings to where they can do the most good[.]”  This philosophy doesn’t sound like Obama guidelines to economic success. It would be foolish to expect this fiscally conservative route to be taken under Sperling’s watch. But it just may be a new economic day for Obama—forced on him by the November election reality. He needs to indicate he is shifting toward the political middle.

Meanwhile, our neighbor to the north cut corporate tax rates the fist of the year to 16.5 percent. This contrasts with the relatively punishing U.S. corporate tax rate of 35 percent. The corporate tax cut is part of Canada’s decade-long campaign to make the country a cost-effective place to do business.  “Canada’s government says the cuts and other business-attracting measures” said a Wall Street Journal Dec. 30 story “should bring more investment to the country.” Also, Finance Minister Jim Flaherty said, “We have our deficit and debt situations under control.” The Canadians seem to have gotten the message. Let’s hope the Obama economic team has as well.

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URLs in this post:

[1] Image: http://frontpagemag.com/wp-content/uploads/2011/01/0107-obama-gene-sperling_full_600.gif

[2] economic recovery going.”: http://www.reuters.com/article/idUSTRE7001DG20110101http:/www.reuters.com/article/idUSTRE7001DG20110101http:/www.reuters.com/article/idUSTRE7001DG20110101http:/www.reuters.com/article/idUSTRE7001DG20110101http:/www.reuters.com/article/idUSTRE7001DG201

[3] reported: http://online.wsj.com/article/SB10001424052748704415104576066100141395190.html

[4] centralist and liberal: http://economix.blogs.nytimes.com/2011/01/05/gene-sperling-101/

[5] moderate: http://online.wsj.com/article/SB10001424052748704415104576066094081529156.html?mod=googlenews_wsj

[6] approval: http://politicalticker.blogs.cnn.com/2011/01/06/chamber-of-commerce-applauds-daley-appointment/

[7] work together: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aBTR_QJB6WtM&refer=columnist_sperling

[8] has been negligible: http://has+been+negligible

[9] thriving private: http://www.nationalreview.com/articles/253392/thus-does-economy-grow-keith-hennessey?page=1http://www.nationalreview.com/articles/253392/thus-does-economy-grow-keith-hennessey?page=1http://www.nationalreview.com/articles/253392/thus-does-economy-grow-keit

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