Frequent readers know that I try to avoid the topic of politics. However, the recent piece in the New York Times on Obama’s views on economics have prompted me to put on my political pundit hat an offer a few points before summarizing my overall view:
- Prior to reading the piece I could not have summarized Obama’s views on the economy. I am still unable to do so, but I do have a more favorable opinion of the Senator.
- Can we please stop making ridiculous arguments based on mere evidence of correlation? Both sides are guilty of this type of argument and perhaps it works on voters, but it irritates me to no end. Let me offer an example:
The second criticism is that Obama’s tax increases would send an already-weak economy into a tailspin. The problem with this argument is that it’s been made before, fairly recently, and it proved to be spectacularly wrong. When Bill Clinton raised taxes on upper-income families in 1993, his supply-side critics insisted that he would ruin the economy. As we now know, Clinton presided over the longest economic expansion on record, the fastest income growth most workers had experienced in a generation and the disappearance of the federal-budget deficit. His successor, Bush, then did exactly what the supply-siders wanted, cutting upper-income tax rates, and the results were much worse. Economic growth wasn’t quite as strong or nearly as widespread, and the deficit returned. At the very least, Clinton’s increases did no discernible economic damage.
This is precisely the insane analysis that I have grown tired of in the media. Both Republicans and Democrats each have their own story about how their particular policy led to the boom of the 1990s. Can anyone simply acknowledge that there were secular forces that likely had a much more prominent effect on the economy than policy? Similarly, separating business cycles by the elections of presidents has no fundamental theoretical basis. To do so is to assume that business cycles begin anew with each election.
- Another quote from the article:
He said it made him think of Warren Buffett, an Obama supporter, who, if anything, might argue that he wasn’t going far enough to change the tax code. “If you talk to Warren, he’ll tell you his preference is not to meddle in the economy at all — let the market work, however way it’s going to work, and then just tax the heck out of people at the end and just redistribute it,” Obama said. “That way you’re not impeding efficiency, and you’re achieving equity on the back end.” He continued by saying that he thought there was some merit in Buffett’s argument. But, he said: “I do think that what the argument may miss is the sense of control that we want individuals to have in determining their own career paths, making their own life choices and so forth. And I also think you want to instill that sense of self-reliance and that what you do will help determine outcomes.”
First, please tell me that Buffett does not sincerely believe this. If you want to redistribute, fine. However, let’s not presume that the market functions the same in the presence of a redistribution program as it would without. One could make the argument that the benefit is worth the distortion, but certainly one cannot argue that no distortion would be created.
I like Obama’s response.
- One final quote:
Yet laissez-faire capitalism hasn’t delivered nearly what its proponents promised. It has created big budget deficits…
I simply do not understand this statement.
Upon reading the piece, I found that there is much to like (and dislike) about Obamanomics. Fundamentally, I think that Obama seems to understand that the government can play a crucial role in providing the social institutions that allow markets to function — although there are cases in which I think that he is overly pessimistic. Also, I like the fact that he has surrounded himself with many intelligent economists and seems genuinely interested in research and ideas.
On the negative side, his health care plan seems extremely complicated and, more importantly, expensive. I am not quite sure his plan does anything to bring the cost of health care down. We have heard the same tired arguments about pharmaceuticals selling to other countries at lower prices, etc. His recent comments regarding windfall profits taxes as well as much of the populist rhetoric involved in the campaign are similarly disheartening.
I am not enthused about the election, but I grown to look at Obama more favorably.