BLOGS FROM SIDNEY

In the Mirror

Riley

Economic Recovery: The Insanity Of Political Control

Blog From
September 8th, 2010

Today, Obama is announcing yet another big government push to get the economy off the dime. Just in time to try to turn back a predicted tsunami of voter rejection come November. Of course, getting the recovery really going would be a great thing for all of us, not just Obama. And we’d like to root for him, except he can’t pull it off. Why not? Businesses and consumers, not politicians, restore a healthy economy. There are things the D.C. crowd can do, but they’re of the less-is-more variety, which the current bunch doesn’t seem to understand. So, they keep making the same large-scale mistakes expecting a different outcome. We know what that kind of repeat behavior means: insanity.

This time, if Congress cooperates, Obama will temporarily allow businesses to write off capital investment expenditures immediately rather than over a 3 – 20 year period. He also proposes to expand the business tax credit for research and development. These cost-saving measures are intended to lure businesses into spending money now in the hope that the cash spent will stimulate the economy. But, according to DNC Chair, Tim Kaine, the R & D tax incentive will be the ninth business tax credit since Obama took office. The first 8 didn’t work. Who thinks number 9 is the charm? And who’s willing to wait for more than a year to find out if either one has any effect at all?

Even if these moves don’t do any good, why not try? Because doing things that don’t work wastes time that could be spent on something productive instead. They also raise false expectations that the government action is beneficial. By the time taxpayers figure out what’s happening, politicians are firing off another solution, full of excuses about why the last one missed the mark.

The tax incentive solutions aren’t going to bag the recovery either. To begin with, small businesses employ over half of the private sector workers. When the Bush tax cuts end next year, the owners responsible for generating 48% of the net income will see a tax increase. So, they’ll have less money to grow their businesses in ways that make economic sense. To attempt to recoup some of it, they must spend their money as Obama dictates.

But, government is only good at piling up huge debts, not judicious management. So, forcing growth choices on the private sector by substituting government judgment for that of business owners is highly unlikely to spur a recovery. It would be one thing if we had a robust economy and the government wanted to influence some aspects of business spending. In a recession, it should ensure a level playing field and let business run with the ball, not micromanage the plays.

An even bigger problem is the uncertain economic climate. The uncertainty exists because of both overreaching and undefined administrative regulations in bills passed by Congress. And the constant political promises to do a lot more of the same. Not that there shouldn’t be regulations. But, the failings are generally not for lack of rules. They’re due to the lack of enforcement. A lean set of effective regulations beats hog-tying businesses with rules that do not permit them to function. We’re at the latter point right now.

The issue really comes down to whether government should control the private sector. The control ball started rolling during the Great Depression and it’s picked up speed ever since. During our current Great Recession government has grabbed more power over business, and the rest of us, than ever before. But, political dominance has never worked to our economic benefit.

Franklin Roosevelt spent ten years spinning his wheels trying to pull our economy out of the Great Depression ditch. He implemented lots of heavy-handed government works programs and erected the social spending piggy bank. None of it worked. According to Christina Romer, Obama’s recently departed Council of Economic Advisers Chair, the Depression ended because of currency devaluation and monetary expansion.

Thanks to the Fed, some monetary expansion is already in place. Congress’s part is no-strings tax cuts and fewer regulations. Then politicians can step aside and let our economic forces repair themselves. But, that will take a government with a different mindset than the one we have now. Which will you favor at the ballot box in November?

See you in the mirror.


 





Leave a Reply

You must be logged in to post a comment.