Nothing could have encapsulated better the vast divergence between economic reality and the Obama administration’s agenda than the events of Thursday. On the one hand, the Dow dropped another 280 points to close below 6600, a 4% loss. On the other, President Obama was conducting a dog-and-pony health care show at the White House. This raises a fundamental question: is he mad? Really, the economy is smoldering in ruins and the president is rushing to find more matches?
The Republicans reacted in horror to the prospect of further taxes and government expansion, especially now. Minority Leader John Boehner declared:
We all know that health care costs are putting a tremendous strain on American families’ budgets. Republicans believe that every American should have access to affordable, quality health care. However, we have serious concerns about the plan outlined in the president’s budget. Taxpayers cannot afford to subsidize a bureaucratic takeover of health care with a massive tax hike on all Americans, particularly in these troubled economic times. In addition, we believe families and their physicians should make decisions about what treatments are “appropriate,” not government bureaucrats. We welcome the dialogue and look forward to working with the president to come up with a plan that will work for all Americans.
And even Democrats like Sen. Max Baucus are slightly nervous, reminding the president that America is not Canada.
But the more fundamental question than the contours of his health nationalization plan is whether the president has his priorities straight. Even those sympathetic to his long-term policy goals are criticizing his lack of focus on — if not downright hostility to — wealth creation. Jim Cramer, defending himself against another media attack from the White House press office, explained:
I actually embrace every part of Obama’s agenda, right down to the increase on personal taxes and the mortgage deduction. I am a fierce environmentalist who has donated multiple acres to the state of New Jersey to keep forever wild. I believe in cap and trade. I favor playing hardball with drug companies that hold up the U.S. government with me-too products.
But these are issues that we have no time for now, on the verge of a second Great Depression. This is an agenda that must be held back for better times. It is an agenda that at this moment is radical vs. what is called for. I am proud to have voted for the Obama who I thought understood the need to get us on the right path, and create jobs and wealth before taxing it and making moves that hurt job creation — certainly ones that will outweigh the meager number of jobs he’s creating.
In short, it has become apparent that the president would rather spend his time reinventing America than reviving the American economy. It might be smart politics to ram home as much of his far left agenda as possible before the next congressional election, but it raises two significant problems.
First, at this rate there might not be much of an economy remaining to pay for his grandiose plans. While the president views the Dow as nothing more than a “poll,” it is a gauge of real wealth in the real lives of millions and millions of businesses, investors, retirees, and ordinary voters. Ryan Ellis of Americans for Tax Reform explains that in a “very rough rule of thumb, every 100 points of swing in the Dow is worth $200 billion in shareholder wealth.” So that 280 point drop yesterday means Americans are about $560 billion poorer. (And recall that on Election Day the Dow was 3000 points higher.) And now both the Fed chairman and private economists are predicting a long recession and climbing unemployment into 2010. As a practical matter, then, a morbid economy is not going to generate wealth, even as silly as the Obama accounting methods may be, to pay for a fraction of his elaborate plans.
Second, the president runs the risk of appearing out of touch. His back-of-the-hand dismissal of the stock market already raised eyebrows. But voters and pundits alike might begin to wonder why he isn’t spending his time and energy putting together a comprehensive and credible bank rescue plan or a private sector job-generation plan. If he is supposedly concerned with job creation, why is his vice president talking to Big Labor behind closed doors about card check legislation, which is a job killer ? While his stimulus contained plenty of junk spending by dozens of government agencies, there is not much in there for immediate private sector job development. And the president has taken off the table any tax rate cuts that might encourage productive, economic activity.
In sum, the Obama administration’s temptation to “get it all done” is running headlong into the reality that business bashing, tax increases, uber-regulation, and nationalization of major industries make for a poor formula for economic success. And if Obama learned anything from his campaign, it is that regardless of the circumstances, voters eventually hold the party in power responsible for the economy.
Unless and until the president gets off his New Deal II lark, it is unlikely that he’ll contribute much to the recovery that is necessary for the Democrats to retain power. And if the first month of his administration is any guide, his current agenda is likely to make things a whole lot worse.