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President
Obama Doesn’t Know the First
Thing About Economics
By Iain Murray
Published July 16, 2011
As
the Oscar buzz surrounding actress
Meryl Streep keeps growing -- thanks to her portrayal of Margaret
Thatcher,
it’s worth remembering one of the real Iron Lady’s most famous
observations:
that any housewife could manage the British economy.
President
Obama should heed that
advice, and realize that economy begins at home. Unfortunately, his
recent
statements on the economy give little reason for hope on that front.
The
president’s press conference on
Monday epitomized the “do something” nature of his administration. He
wants to
do something about … well, everything—from getting more kids into
college to
fighting global warming (although the latter is less evident these
days, at
least in public). The trouble is that he thinks he needs more and more
of our
money to do it, so he wants any budget deal to include tax rises.
Let’s
take the example of college
education grants, which the president suggested should be funded by an
increase
in taxes on millionaires like himself. The president’s budget request
for 2012
contains an allocation of $36 billion for increased Pell grants for
students
from poor backgrounds to attend college. That’s out of an entire
federal budget
request of $3.7 trillion, which makes Pell grant expenditure just 1
percent of
the total.
Looking
at that from the viewpoint of
Mrs. Thatcher’s proverbial housewife, we can compare it to the median
household
income of about $46,000, which, after taxes, is about $3,000 a month.
The
size of the problem that President
Obama singles out as requiring tax increases is equivalent to a
household
budget shortfall of $30 a month. A competent economic manager should be
able to
deal with that sort of problem by tightening his or her belt elsewhere.
The
president’s seeming incapability to contemplate this demonstrates just
how out
of control the federal spending machine is.
Potential
budget savings abound. The
Heritage Foundation has identified about 90 programs that can be
reduced or
eliminated entirely at a savings of $343 billion annually. If the
president
were to agree to half of these, he could keep his Pell grant increases
and
still reduce discretionary spending by about $170 billion, no tax
increase
needed.
When
it comes to his justification for
tax increases, the president’s ignorance of basic economics shows
through even
more.
He
has suggested that tax increases
would stop him personally from keeping hundreds of thousands of dollars
that he
doesn’t need. So now we know what the president does with his book
money – he
throws it on a pile, like Tolkien’s dragon Smaug.
However,
that’s not what wealth
creators do. They either spend that “excess” money, providing jobs for
people
who make or import the things they spend it on, or invest it, thereby
creating
more jobs and more wealth which they can reinvest.
The
obstacle in this virtuous circle
is government’s intervention, which either makes the investment
unviable owing
to too much regulation, or takes away the profit through taxation,
which is
what Obama seems to want more of.
The
president’s “do something”
government is grossly exacerbating the great jobless recovery he
laments.
Sixty-four percent of small businesses will not hire any new employees
over the
next year, while 79 percent state that taxation, regulation, and
legislation
make it harder for them to hire more employees, according to the U.S.
Chamber
of Commerce.
This
should come as no surprise. As I
explain in my new book, “Stealing You Blind,” regulations cost the
American
economy at least $1.75 trillion a year, and the burden falls harder on
smaller
businesses than on larger ones, which can afford to hire professionals
essentially to work full-time for the government within the firm.
While
the president has paid lip
service to the idea of reducing regulatory burdens, the savings he has
identified to date are orders of magnitude too small to provide any
relief to
struggling businesses.
For
all these reasons, Mr. Obama
should do something about the size of the government he heads. To the
average
housewife, economy means “making savings,” not adding revenues.
Whatever
deal is reached on the debt
limit and budget deals, if it does not include substantial
belt-tightening, it
won’t work. I’m sure the real Margaret Thatcher would be happy to tell
him that
if he asked her.
Iain
Murray heads the Center for
Economic Freedom at the Competitive Enterprise Institute and is the
author of
“Stealing You Blind: How Government Fat Cats Are Getting Rich Off of
You,” just
released by Regnery.
Read
it at FoxNews
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