Thursday, April 23, 2009

Robert Reich's Surprising Grade on Obamanomics

Robert Reich, the former Secretary of Labor under Bill Clinton, has not been at all shy in his support of President Barack Obama. In a recent article on the President's economic agenda, he made his bias well known by stating plainly that he "is a big fan of this administration." Since he so clearly "showed his cards" in terms of his view of Obama, you would think his report card would be nothing short of glowing. You might want to think again.

Reich graded the Obama administration in three areas: the budget, the stimulus package, and the bank bailouts.

The Budget: A. Reich could not begin his commentary with a more syrupy assessment, stating that "It's an extraordinary vision of what America can and should become, including universal health insurance and environmental protections against climate change. And the budget takes a little bit more from the rich and gives a little bit more back to the poor and lower middle class, which seems appropriate given that the income gap is wider than it's been since the 1920s. I'd give the budget an A plus except for its far-too-rosy economic projections." He fails to point out that more companies are moving from the US than at any time in US history and one of the main reasons why is the fact that we have the second highest tax rates on business among the 16 industrialized countries. Furthermore, the top 50 percent pays 96 percent of all the revenues of the government. This "class conflict" approach is going to lead to the worse form of taxation of all, which is the the loss of jobs. Furthermore, this budget goes where no budget was intended to go before. It provides huge reach by the federal government in the most dangerous ways. I give it a F.

The Stimulus Package: B. Reich takes the rhetoric down some in this area, noting that this package is "Good as far as it goes but doesn't go nearly far enough. $787 billion over two years sounds like a lot of stimulus. But the economy is operating at about a trillion and a half dollars below its capacity this year alone. And considering that the states are cutting services and increasing taxes to the tune of $350 billion over this year and next, the stimulus is even smaller." The reality is, this stimulus package is so enormous it can only be funded with "funny money." That is, the mass production of currency that will only be able to compete with Monopoly money in value. This administration pumped $1.2 trillion dollars of worthless currency into the economy on one day alone, which will make our currency (and our debt) worthless to other countries and only push us further down the road towards economic depression. I would give Obama an "F" again.

The Bank Bailouts: F. Finally Reich and I find an area of agreement. Reich states that "The bailouts are failing. So far American taxpayers have shoveled out almost $600 billion. Yet the banks are lending less money than they did five months ago. Bank executives are still taking home princely sums, their toxic assets and non-performing loans are growing, and the banks are still cooking their books. And now the Treasury is talking about converting taxpayer dollars into bank equity, which exposes taxpayers to even greater losses." It is surprising to see someone as well educated as Reich to simply not realize (or seem to care) how far reaching Obama's failure is in this area. Yes, we both give the administration an "F," but there is more, so much more. All that Reich said was correct, but why would the administration want to continue to spend in this area at such prolific levels and why it is prohibiting these banks from paying back their loans is not even addressed. It seems fairly clear to me that the issue is not helping the banks, but increasing government control of them. The more the administration denies that nationalization is its objective, the more it does to move towards that objective, no matter how little that does to spur economic growth.

In the end, Reich says Obama deserves a "C+" (which is slightly generous based on the grades he gave, but I will leave the math to others). That is a sad mark to come from someone who describes himself as a "fan" of this administration.
Kevin Price is Host of the Price of Business, the longest running show on CNN 650 (M-F at 11 am), AOL Radio, and CBS Radio. Eric Bolling of Fox News and Fox Business says that Price’s Blog “is very influential and moves the blogosphere.” Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

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