I just wanted to make sure you saw this op-ed piece by Harvard Professor and Reagan Council of Economic Advisers Chairman Martin Feldstein. It’s the most succinct and powerful indictment of Obamanomics that I’ve seen.
Feldstein reveals that the economy is actually floating away down far more dire straits than you realize.
The drop in GDP growth to just 1.8% in the first quarter of 2011, from 3.1% in the final quarter of last year, understates the extent of the decline. Two-thirds of that 1.8% went into business inventories rather than sales to consumers or other final buyers. This means that final sales growth was at an annual rate of just 0.6% and the actual quarterly increase was just 0.15%—dangerously close to no rise at all.
Estimates of monthly GDP indicate that the only growth in the first quarter of 2011 was from February to March.
He says the Obama response to the downturn has included feel good fiscal policies that achieved only ephemeral effects.
Cash-for-clunkers gave a temporary boost to motor-vehicle production but had no lasting impact on the economy. The home-buyer credit stimulated the demand for homes only temporarily.
The most obvious way to achieve (real stimulus) in 2009 was to repair and replace the military equipment used in Iraq and Afghanistan that would otherwise have to be done in the future . . . Instead, President Obama allowed the Democratic leadership in Congress to design a hodgepodge package of transfers to state and local governments, increased transfers to individuals, temporary tax cuts for lower-income taxpayers, etc. So we got a bigger deficit without economic growth.
And the concern among those with a bit of money that THEY ARE GOING TO GET SOAKED is causing a drag on the recovery.
(Obama’s) budget this year repeated his call for higher tax rates on upper-income individuals and multinational corporations. With that higher-tax cloud hanging over them, it is not surprising that individuals and businesses do not make the entrepreneurial investments and business expansions that would cause a solid recovery.
And of course, the failure to be really serious about dramatically scaling back the deficit – “Investments! My
new spending investments in the future must survive!” – is killing the real investors.
This creates uncertainty about future tax increases and interest rates that impedes spending by households and investment by businesses.
As Andrew Malcolm notes today in Top of the Ticket, Obama’s chief opponent in the next election is not the Republicans, it’s the economy.
If Obama didn’t read Feldstein’s article, the economy may be on track to beat him.