What Barack Obama Is Thinking

WedNEWSday - May 26th, 2010

Students of history will recognize the method to President Obama’s madness.  The parallels in both policy and politics to the Roosevelt Administration are too striking not to be deliberate. President Obama is consciously modeling his Administration on the Roosevelt Administration. But just as the liberals of the 1930s graduated to the New Left of the 1960s, President Obama’s policies and politics transcend the liberalism of the 1930s. He is building what Newt Gingrich rightly calls a secular socialist machine in his new book To Save America.

Unreconstructed Keynesian Economics

Roosevelt’s Keynesian economics was left for dead in the 1980s with President Reagan’s supply-side revolution miraculously ending the stagflation of the 1970s with a 25-year economic boom. But President Obama came into office talking as if that never happened, casting it down the memory hole. While Reagan’s early 1981 budget cuts slashed the federal budget by about 5%, Obama rammed through an almost $1 trillion stimulus package of nearly all Keynesian economics from the 1930s, laughing at his astounded critics with the question, “What do you think a stimulus is?”

Economically, it didn’t work, just as it didn’t in the 1930s or the 1970s. Now 29 months after the recession officially started in December, 2007, unemployment is 10% and rising, and the stock market is again stumbling, with the Dow still 4000 points off its last highs. The recovery was overdue a year ago, and even now economic growth is not half what it should be.

But note how the stimulus spending was structured so that more is spent this year than last. Was the goal to reduce unemployment as quickly as possible, or to use the guise of Keynesian stimulus spending for a political slush fund to buy as many votes as possible in this political year? Note also that about half of the direct “stimulus” spending went to state and local governments to prop up the employment of public employees, the most reliable supporters of liberal Democrat candidates. The only thing President Obama’s stimulus is stimulating is a left-wing Democrat political machine.

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Attack on Wall Street

Another early central theme of the Roosevelt Administration was a searing attack on Wall Street. The famed Pecora hearings, led by the Chief Counsel to the Senate Banking Committee Ferdinand Pecora, crucified top Wall Street bankers and brokers as the cause of the Depression. Despite the hallowed political propaganda long taught to American schoolchildren, Wall Street misdeeds played only a minor bit role in the Great Depression. The real causes were Fed mismanagement enabling a drastic collapse of the money supply, causing ruinous deflation, followed by brutal tax rate increases, and the soaring protectionist tariffs of the Smoot-Hawley Act. Roosevelt’s massive overregulation and Keynesian economics draining private sector investment were additional factors extending the Depression for a decade, putting the “Great” into the “Great Depression” as Amity Shlaes put it in her eye-opening book, The Forgotten Man.

But the Pecora hearings and Roosevelt’s class warfare rhetoric excoriating “the malefactors of great wealth” successfully shifted the blame politically from the government to the private sector. The result was passage of the Securities Act of 1933 and the Securities Exchange Act of 1934, imposing extensive new regulation on Wall Street, as if that would resolve the causes of the Depression. The measures did not produce economic recovery, but rather mostly just decades of voluminous securities filings filled with meaningless boilerplate that nobody ever read.

Today we see President Obama trying to pull off the exact same thing. The Democrats managed to inspire union-generated civil unrest with their incendiary rhetoric regarding contractually specified Wall Street “bonuses.” The statesman Obama then poured oil on the fire, explaining, 

The people on Wall Street still don’t get it. They’re still puzzled why is it that people are mad at the banks? Well, let’s see. You know, you guys are drawing down 10-, 20-million-dollar bonuses after America went through the worst economic year that it’s gone through in decades, and you guys caused the problem. And we got 10% unemployment.

But actually, no, Washington, it was “you guys” who caused the problem…

by Peter Ferrara

Read more at The American Spectator - May 26th, 2010

http://spectator.org/archives/2010/05/26/what-barack-obama-is-thinking

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