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Source link: http://archive.mises.org/9987/can-president-obamas-policies-heal-the-us-economy/

Can President Obama’s Policies Heal the US Economy?

May 20, 2009 by

We suspect that President Obama has adopted the approach of a patient and his doctor with respect to managing the US economy: deferring to the supposed experts. He is very much influenced by the ideas of Joseph Stiglitz, Larry Summers, and Paul Volcker. During the interview he also expressed his admiration for Robert Reich and Paul Krugman. Although he didn’t say it, we suggest that the US president is also greatly influenced by the ideas of Federal Reserve Chairman Ben Bernanke. FULL ARTICLE

{ 21 comments }

Phil David May 20, 2009 at 10:26 am

Am I going nuts or is Obama leading us towards a planned economy and down the road to serfdom?

newson May 20, 2009 at 10:41 am

“His intentions are good. However, his actions have already laid the foundation for a gigantic bubble and a further weakening of economic fundamentals.”

we really can only conclude that his rhetoric rings well-intentioned.

fundamentalist May 20, 2009 at 10:50 am

You can’t really blame President O for following the advice of the leading economists in the country. He is not an economist and to be a good leader he must practice division of labor and not try to become an expert on everything. The president is not the problem; the problem is mainstream economics.

Franklin May 20, 2009 at 10:59 am

Mr. Shostak’s scholarship is dead on, thoughtful, as always. I quibble only with, “His intentions are good….”

A throw-away line. Why pander? Everyone’s intentions are good. We’re all nice guys. So what.

Which road was paved with good intentions?

Enjoy Every Sandwich May 20, 2009 at 11:02 am

But whether we like it or not, history has repeatedly shown that when nations do not take early and aggressive action to get credit flowing again, they have crises that last years and years instead of months and months — years of low growth, low job creation, and low investment that cost those nations far more than a course of bold, upfront action.

What “history” is Obama’s teleprompter referring to here?

Tim Kern May 20, 2009 at 11:46 am

“Everybody was making record profits — except the wealth created was real only on paper.”

So, the solution, Mr. President, is to what — print more paper?

As for “His intentions are good,” this is possible only if he’s a complete idiot, which he is not. His intentions, as the intentions of all who seek power, are to increase and consolidate power.

We need to stop pandering to those who are destroying us. Resistance may be futile, but acquiescence is fatal.

Ron May 20, 2009 at 12:36 pm

The problem with Reich and the president and the rest of these promoting more government spending is they are not truthful men.

If it was true that spending more government cash would heal the countries economics then it would be true of Chrysler and GM. So if they would expand their dealerships, build more cars and pay larger salaries the company would grow exponentially. However we know that isn’t true as does Obama.

Since the Obama administration is cutting dealerships, salaries and production we now know they actually do know how economics works in the real world so the question needing to be asked is why the government is choosing the current path of debt increasing frivolous spending.

My conjecture would be they are building a bigger government despite the economic conditions and will say anything in hopes America will work itself into socialism and its crushing debt to those that toil while building a power base through programs built around coercion and political favor.

Reich has always been a preacher of enthusiastic government growth and devoid of any economic aptitude other than more taxation. He fits well with Obamanomics.

These people can’t be brilliant on one end of the spectrum and naive on the other. They know what they are doing and it takes being dishonesty on their part to continue the charade.

If they had any courage or pride in what they were trying to do they would just say that they think socialism is the cure for what they believe ails America and start the debate on a basis of honest opinion.

Eric May 20, 2009 at 12:58 pm

So the President doesn’t double check his doctors. Well, that explains it. The first thing I do on every new prescription by my doctors is to check it out on the internet.

I won’t go into details here with my blood pressure meds horror story, except to say that after a year of suffering and getting tests for all sorts of unlikely problems, I found by using the internet that my health problems were actually being caused by the meds my doctors prescribed. I changed them, went on a diet, and now all my previous problems are gone.

But the doctor with the degree (which he got back in the dark ages of the 60′s) never figured out that I didn’t have all the diseases he suspected but was instead being poisened by HIS prescriptions.

As in medicine, politicians should adhere to “First do no harm”. But then they’d probably have very little to do.

John Brock May 20, 2009 at 1:23 pm

fundamentalist wrote: “The president is not the problem; the problem is mainstream economics.”

This is very good point. Mainstream economics has become dominated by one school of thought for too long. Keynesian applications have blanketed the landscape. What we have now is a classic situation; finally a President who is open and self confident enough to listen to experts but experts that are part of the problem, not the solution.

I really do not think the President cares how big the government is, as long as he is the one is charge. And this could also be achieved via the Austrian method. Therefore, I believe that he would have been open to all options, had they been presented to him properly. However, he was surrounded by the dominant form of thinking and thus made a decision in good faith from within a bubble.

A question for Austrian thinkers is “how to pop that bubble”, to get Austrian solutions to play a consultant role in the decision making process of the executive branch?

The answer starts at home. The Austrian school needs to be on the lookout for those that are more bent on being anti-government than they are at applying proper Austrian solutions to current economic problems and promptly dismiss their behavior. Austrian methodology is about limited government, not an absence of government and certainly not anarchy. But when a first time reader that enters this site comes across many of its posts, the reader would surely think the opposite.

Franklin May 20, 2009 at 6:15 pm

“….Austrian school needs to be on the lookout for those that are more bent on being anti-government…. and promptly dismiss their behavior.”

A call for some watchers, perhaps. Yet who watches the watchers?
Would you have dismissed Jefferson following his quotes concerning the “best” kind of government, or Thoreau’s which were even more pointed?

Obama would be as open to the Austrian perspective as much as Arlen Specter is open to term limits.

Bob Stafford May 20, 2009 at 7:23 pm

You can believe what you want about “free markets”, that is not the point. The point is not the correctness of the theory, but its relevance. And this theory is completely irrelevant because it is describing a world alien to us. The laws of physics would themselves have to be nonexistent for these free market theories to be applicable – why, for example, are organized, hierarchical firms the main production units of capitalist society as opposed to the decentralized market mechanism? There exist many problems – for example, for an economy to be a “free” market economy, there must exist a self-regulating market. This requires nothing less than the institutional separation of society into a political and economic realm, i.e. no interference of any kind in markets. This also requires that all elements of industry – including land, labor, money – be commoditized, i.e produced for the purpose of sale. We run into a problems here: First, throughout history, markets have always been subordinate to society – be it through tradition or custom or through law or force. What a self regulating market economy needs is the subordination of all walks of life to economic laws and progress. However, aside from social catastrophes of a utilitarian nature, this comes at the expense of every other form of human relation – spiritual, social, political, ect. Economic growth comes at the expense of social dislocation. Essentially, for economic growth to continue unabated in a ” self regulating” “free” market economy, society – people – would be required to either not think in terms of their own conditions, through propaganda, or be tyrannized. Indeed, Soviet tyranny was exceptional for growth – which was the plan all along; administer capitalist growth through dislocative tyranny – just as prior capitalist societies did with enclosures and dislocations of labor – and ‘fast forward’ the evolutionary process towards socialism.

K Ackermann May 20, 2009 at 7:23 pm

The answer starts at home. The Austrian school needs to be on the lookout for those that are more bent on being anti-government than they are at applying proper Austrian solutions to current economic problems and promptly dismiss their behavior.

How can you tell? Both Reagan and Bush talked about getting the government out of the government, and both increased the size and reach of government.

Bush actually employed the government as a tool of private industry. Anarchy is vastly superior to to that.

damocles May 20, 2009 at 9:14 pm

Obama is wrong about his doctor too–books like “How Doctors think” conclude that it is important to research and question your doctor’s diagnosis; it can save your life .

N. Joseph Potts May 20, 2009 at 9:33 pm

Keynesianism is to the economy what war is to international relations – an incredibly destructive, expensive, counterproductive measure whose adoption yields enormous benefits to the scope and power of government.

We must expect economists to advise governments to adopt such measures for as long as the government selects its advisors and provides the bulk of the funding that the academic profession receives. And, of course, we must expect governments to adopt the measures recommended in the advice for which it pays so well.

It will never adopt Austrian insights because doing so must reduce the scope and power of government and the class that commands and benefits from it.

Ascribing “good intentions” to government actors is seriously mistaken. Bastiat explained all this long ago very succinctly.

Tom Osborne May 20, 2009 at 11:10 pm

Regarding Obama’s ignorant and short-sighted quote about doctors (whose actions are generally at least one generation behind cutting-edge knowledge), I’d like to send him a copy of the movie, “Lorenzo’s Oil,” except the courage, strength, energy, fortitude, wisdom, and love shown in that movie would zip right over his very soul. And no, his intentions AREN’T good. Anybody whose every treacherous word and deed causes so much potential harm, anybody who surrounds himself with the worst and most dangerous advisors, anybody who has so quickly distinguished himself as heading toward being the most destructive elected official in United States history, must have nothing but the worst of intentions. Nobody who could be that wrong, that often, that much, could possibly be trying for anything good.

newson May 20, 2009 at 11:30 pm

to bob stafford:
free trade occurs between individuals as a result of the desire to maximize psychic gains, not necessarily monetary profit. yours is caricature of “economic man”.

Dr. Aubie Baltin May 21, 2009 at 7:10 am

This is a terrific article and it is just this kind of an Educational piece, that is devoid of politics, that educates the reader (if his mind is open) that is desperately needed. Every Ivy League economist is so steeped in Keynesian, Socialist economics that they can’t even think of a capitalist solution to the simplest of problems.
We need more of these kinds of articles that are not intertwined with Libertarian philosophy.

Thank You

Aubie Baltin

greg May 21, 2009 at 8:28 am

I am going one further than fundamentalist’s comment on mainstream economics and say all economist are off the mark with the world today. All of them are tied to the past and showing up to the latest dance club knowing only how to dance the foxtrot.

Non of them can see how people are manipulating markets around them because they just don’t see the new steps. For example, the headline in my local paper reports that gas prices rise despite high supply, low demand. Wake up, futures players are manipulating oil prices in the short run by playing the media.

Why have we not heard of Nigeria for over a year? It is because the players were working the short side of oil. Now the price of oil is going up, Nigerian rebels have hit again and CNBC is running a special report from Nigeria. Were the rebels on vacation over the past year? I don’t think so!

There are examples of this type of manipulation in the markets everyday. The the one tie they all have in common is their ability to control and use media for their PR. All the advertising in the world does not have the same effect as one good PR spot on Oprah.

Bottom line, all the economist see the players dancing, they just don’t know the steps.

greg May 21, 2009 at 8:48 am

I am going one further than fundamentalist’s comment on mainstream economics and say all economist are off the mark with the world today. All of them are tied to the past and showing up to the latest dance club knowing only how to dance the foxtrot.

Non of them can see how people are manipulating markets around them because they just don’t see the new steps. For example, the headline in my local paper reports that gas prices rise despite high supply, low demand. Wake up, futures players are manipulating oil prices in the short run by playing the media.

Why have we not heard of Nigeria for over a year? It is because the players were working the short side of oil. Now the price of oil is going up, Nigerian rebels have hit again and CNBC is running a special report from Nigeria. Were the rebels on vacation over the past year? I don’t think so!

There are examples of this type of manipulation in the markets everyday. The the one tie they all have in common is their ability to control and use media for their PR. All the advertising in the world does not have the same effect as one good PR spot on Oprah.

Bottom line, all the economist see the players dancing, they just don’t know the steps.

Paul May 21, 2009 at 10:10 am

Frank’s one of my favorite contributors, but in the article, he says “What is scarce is not demand but rather individuals’ ability to fund the demand.”

I have always had the impression that demand also refers to one having the funds for the desired good or service. It’s Wikipedia’s definition too < http://en.wikipedia.org/wiki/Demand_(economics) >. Can someone enlighten me?

Tyler May 21, 2009 at 1:51 pm

Paul,

I was taught demand referred to one’s willingness and ability to pay for a good or service at different prices during a specific period of time. Unless both willingness and ability to buy are present, there is no demand.

So what does this mean? I think we and Mr. Shostak are nitpicking President Obama. Mr. Shostak said it himself, President Obama is not an economist and it shows. Going by the above definition President Obama is correct about the reduction in demand. Sort of a weird way of saying things if you ask me. I’d have changed that phrase to say something along the lines of people’s ability to pay for goods and services has diminished so we should do x y and z…

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