May 18, 2009

May 18, 2009 | Commentary on Economy

'Economic Policy Insanity': Obama's Approach Threatens to Prolong Recession, Weaken Recovery

Last week the government reported 539,000jobs were lost in April. As a sign of the times this was considered good news. Some are crediting government, including President Obama's just implemented policies, for the good news. Spring is in the air.

On balance, the Federal Reserve has performed admirably, meeting its responsibility and implementing bold new approaches to sustaining financial markets. The Bush and Obama administrations also played important, but decidedly mixed, roles in this crisis. Sometimes they offered a steady hand, but more often they sowed seeds of uncertainty, doubt and confusion.

Obama could pursue policies designed to help restore the broader economy to health. Unfortunately, his policies likely will have the opposite effect -- prolonging the recession and weakening the recovery.

Take small businesses. Obama acknowledges they are the source of most newjobs, but he intends to jack up their taxes. Indeed, Obama has issued a steady source of tax hike threats against American companies competing globally, family businesses, energy producers, energy consumers and many others. There is no modern school of Economics that counsels raising taxes, or threatening tax hikes, during a recession.

President Obama talks about responsibility, but the budget deficit this year is approaching $2 trillion and the national debt is set to double in just four years. Imagine what he would deem irresponsible! Yes, he inherited a plunging economy and soaring deficit. But then his stimulus and budget plans made a bad picture much worse. Politically and substantively, he now owns the irresponsible deficit -- lock, stock and pork barrel.

As the economy tries to recover, Obama threatens a massively expensive and disruptive environmental program to dent global warming. It is pure fantasy to suggest this program won't weaken the economy significantly and permanently. To deal the economy such a blow when it's already weakened is economic policy insanity.

A little government intervention can be a good thing. Conservatives, after all, support limited government, not zero government. But Obama is proposing megagovernment -- massive, permanent increases in government intervention, federal spending, taxes and national debt. This remains enduringly a bad thing.

J.D. Foster, Ph.D., is the Norman B. Ture Senior Fellow in the Economics of Fiscal Policy at The Heritage Foundation.

About the Author

J.D. Foster, Ph.D. Norman B. Ture Senior Fellow in the Economics of Fiscal Policy
Thomas A. Roe Institute for Economic Policy Studies

First Appeared in USA Today