When attacked on the slow pace of economic recovery and asked about the prospects of big losses for the Democrats in this fall’s election, President Obama is fond of asking, “would you rather restore to power the same people and ideas that got us into this mess in the first place?” It’s a valid point, but I have to ask: What the hell is the difference?
As reported in the above-linked CNBC article, the president will announce this week a plan to give businesses tax credits for capital investments. He has also announced plans for tax credits for research and development investment. He’s also advocating putting a hold on the expiration of most of the Bush tax cuts. Republicans would counter that, no, they would extend all of the Bush tax breaks. Even the Economic Recovery Act (the “stimulus plan”) that was passed only weeks into Obama’s administration was very little different from the stimulus plan that Bush had proposed just before leaving office.
With Democrats we get a little more spending – ultimately doomed to failure when the political environment turns against rising budget deficits. With Republicans we get lax business regulation and enforcement and more tax breaks, but no more fiscal discipline than we would have under a Democratic administration. None of this is going to improve the economy. Anyone who suggests that we can boost the economy with more deficit spending, or with more tax breaks that can be paid for by cutting spending is either naive or is flat-out lying. There aren’t enough mythical $500 toilet seats in the military to make even the tiniest dent in the deficit. If our only approach to the deficit is to cut spending, it’s simply not possible without taking on social security, medicare and medicaid. Yes, the economy can be boosted by cutting taxes, putting more spending power in the hands of all Americans. But paying for those tax cuts with cuts to social security and medicare takes purchasing power back out of the economy just as fast. In the final analysis, we’re no better off.
All we’re doing is wiggling left and right on the road to economic ruin. As I pointed out in Five Short Blasts, shifting our aim slightly left or right isn’t going to make the least bit of difference if our aim is completely off-target. Our economic ills can’t be solved by taxing a little less or by cutting spending a little more. The problem with our economy is that we’ve carved out a huge sector, loaded it onto ships and sent it packing to China, Japan and Germany, tax free. In addition, we continue to import 120,000 additional laborers every month at the same time that employers are cutting jobs. Tinkering with tax rates isn’t going to fix any of this.
I’m extremely disappointed with President Obama but, looking around, I don’t see any real alternatives. If some Republican stepped foward with a real plan to address our trade imbalance and to restore sanity to our immigration policy, I’d be leading the parade with his/her banner. But all I hear is the same, lame, worn-out, been-there-and-done-that approaches that have gotten us to where we are today. It’s enough to make one ponder emigrating to Canada, eh?