This has been an astonishing presidential year. President Obama bounded into office with a quiver full of soft-pointed arrows for every policy area. A whole year has been wasted buying, senator by senator and influential congressmen one at a time, a health-care bill that is almost certain to be hideously expensive and to lower the level of health care for millions of people. The key was to unite the payer to the consumer, so there was some incentive for reducing costs without rationing access, and reducing the attached legal costs, and the administration failed both tests. Organized labor was protected in its medical-benefit sinecures and, for good measure, the UAW was rewarded for decades of greed and shoddy work habits by being handed most of the detritus of the U.S. auto industry.
The stimulus bill was $787 billion of straight political payoffs to prominent Democrats close to the next election and will be more a retardant than a stimulus; it has already failed every prediction of job creation its sponsors made for it. Workfare employs people; stimulus removes as much stimulation in borrowed money as it generates.
Cap-and-trade was an insane concept from the start, and after being greased through the House in a way that assured heavy costs to American homeowners, it emerged as not likely to reduce carbon emissions, nor to raise government revenues. It has died an unhonored death before arrival at the Senate and been banished to an unmarked grave.
The administration is boldly facing the cold winds like Washington (the general) crossing the Rappahannock, as it leads America to an economic miracle of Biblical proportions: increased taxes, faster economic growth, 50 to 100 percent annual increases in money supply without inflation for a decade, a decade of trillion-dollar annual budget deficits without seriously raising interest rates or devaluing the dollar. Obviously this is a fable, especially as the president solemnly announces, as he did last week, that he will reduce spending.
Since all numerate people know that the economic plan in its present form will destroy the dollar and revive the recession, I suspect that Ben Bernanke will walk on eggshells through his confirmation and, after a brief interlude, announce that the Federal Reserve will no longer buy the federal government’s Treasury notes to finance these scandalous deficits; that we have doubled the money supply in the last year; that the dollar will be devalued by about 15 percent, whatever the Chinese think of it; that interest rates will rise to about 6 percent; and that Congress and the administration have to cut the annual deficit by an initial 50 percent and show a plausible road-map to, or at least toward, fiscal responsibility.
The president and Treasury secretary will scream of betrayal, but eventually some bipartisan procedure will be arrived at for increasing sales and transaction taxes and addressing the gathering crises in some of the entitlement programs; this will convince serious observers that the mindless profligacy is being addressed. Unfortunately, a value-added tax seems to be in the country’s future. It is a fraud, as little that it applies to has any value added, but it can be largely hidden and is essentially a sales tax on goods and services. It is a better solution than increased taxes on incomes. A carefully conceived and managed program of these and other elements (including serious pursuit of alternate domestic energy sources, which means more drilling and not pouring billions into the mirage of clean energy) would stabilize the economy. It would permit market forces to reduce the size of the legal and imported-luxury-goods components of the economy, increase the number of savers and manufacturers, and clean up the ramshackle conditions that have gradually grown, festered, and metastasized for 15 years.
Bringing in such a plan without tumbling back into recession will require more dexterity than anyone in this administration has demonstrated, and the president, to sell it, will have to stop straining credulity by constantly revolving between all four directions on most issues in saturation appearances before the 24/7 media. He is rolling the dice, but he seems to be lucky, and it could work.
With few exceptions, the administration’s foreign policy has been a fiasco. The simultaneous pursuit of nuclear disarmament, drastic reduction of carbon emissions, engagement with Iran, appeasement of Chávez, pandering to the Arab radicals, and imagining that the U.S. has any ability to influence the world while undergoing total debt immersion and with almost all of its ground-forces military capability mired in the Near East, is as mistakenly ambitious as the domestic effort to revolutionize the country with no mandate or plausible game plan to do so.
The spectacle of Obama entreating the Chinese premier unsuccessfully for a meeting, and claiming to promise a huge fund to deluge the world’s most odious and corrupt regimes with huge dollops of money to promote clean energy, was painful, tempered only by its absurdity. The commitment of the Copenhagen meeting was to limit the rise of the world’s temperature to two centigrade degrees by 2050. Given that it has risen only one degree in the last 35 years, and none at all in the last ten, this should be achievable. But there is no convincing evidence that carbon emissions, or human activities generally, have anything to do with climate change.