The post-industrial era in the United States has been dominated by two vastly different economic philosophies – the Keynesian model and the Supply Side model. Keynesian theory, generally associated with economic policies of Democratic presidents… and to a lesser degree Republican presidents… from Roosevelt through Obama, is a macroeconomic theory based on the ideas of 20th century British economist John Maynard Keynes, first published in 1936.
Keynesian economists contend that private sector decisions sometimes lead to “inefficient” economic outcomes, necessitating some form of government intervention… including fiscal policy measures by the executive and legislative branches and monetary policy actions by the Federal Reserve. Keynesian economists advocate a mixed economy – mostly private sector, but with major involvement of government and the public sector. The stimulus spending programs of the Bush (43) and Obama administrations were uniquely Keynesian in nature.
The Supply Side model, most often associated with the economic policies of Ronald Reagan, brought an era of economic expansion that began in the late 1980s and lasted throughout the 1990s. It provided the Bush (41) and Clinton administrations with twelve years of low taxes, low price inflation, full employment, ever-increasing tax receipts, and revenue surpluses.
Also known as “trickle down” economics, Supply Side theory insists that high marginal tax rates and overly-aggressive government regulation discourage private investment that fuels economic activity, and that more capital in the hands of the private sector, as opposed to government bureaucrats, will produce jobs and wealth that “trickle down” to the rest of the population. The truth of it is self-evident.
Although liberals and Democrats attempt to credit the Clinton administration with the economic boom of the 1990s, any objective analysis will show that it was the “lag effect” of the Reagan tax cuts and the regulatory reforms of the 1980s that were responsible for the decade’s economic boom. It was not until the tax increases of the Bush (41) administration, the politicization of the Community Reinvestment Act (CRA) during the Clinton years, the artificially-created real estate “bubble” of the 1990s, and the devastating economic impact of the 9/11 attacks that the positive impact of supply side economics was temporarily stifled.
Now comes “Obamanomics,” a make-it-up-as-you-go economic philosophy heretofore unknown to mankind – an economic model that might also be called “straightjacket” economics because the underlying policies are intended to restrain, not unleash, the economic vitality of the nation.
For example, the United States is a country that runs on oil. And while liberals and Democrats spend an inordinate amount of time extolling the virtues of “alternate” and “renewable” sources of energy… wind, solar, geo-thermal, biofuels, etc… when asked for a timetable when those magical sources of energy will be available, and economically viable, they simply ignore the question or change the subject.
Instead of junketing around the country on Air Force One, teleprompter in hand, an entourage of hundreds trailing along behind, touting so-called “clean energy” projects, Obama could solve most of our energy problems with a single stroke of the pen. He could open the outer continental shelf, the wilderness areas, and the Arctic National Wildlife Reserve to oil and gas exploration; he could reverse the negative impact of Bill Clinton’s decision to lock up additional low sulfur coal reserves; and he could eliminate the roadblocks to development of nuclear power plants. But he doesn’t do that. Instead, he promotes policies that increase our dependence on foreign oil while selling the liberal pipedream of “clean,” “green,” and “alternative” energy sources.
As matters now stand, approximately 85% of U.S. energy supplies come in the form of coal, oil, and natural gas and it is unlikely that we will see that percentage change appreciably during our lifetime. The United States imports approximately 60% of its 20 million barrel per day crude oil requirements (4.4 billion barrels per year) from regions of the world… the Middle East, Africa, and South and Central America… that have become increasingly hostile to U.S. interests. And while those countries control some 913 billion barrels of proven reserves… enough to supply U.S. needs for more than 200 years… the cost of that oil grows and grows as China, India, and Japan challenge the U.S. for economic supremacy.
Any reasonable person would conclude that it is long past time for the United States to produce as much of its own energy requirements as possible, but that’s not part of the “Straightjacket” economic plan. Instead, at a time when jobs are scarce and American families are struggling to buy enough fuel to power their cars and heat their homes, Obama continues his search for more and more creative ways to prevent low cost energy from reaching the U.S. market.
In the aftermath of the BP oil spill in the Gulf of Mexico, Obama and his White House czars falsified a report by a team of his own offshore drilling experts, making it appear as if the panel had recommended a six month moratorium on all new drilling in the Gulf. And when a federal district judge set aside the moratorium, Obama and his outlaw Interior Secretary, Kenneth Salazar, simply ignored the court order.
Between the time of the first offshore well, drilled in sixteen feet of Louisiana waters in 1947, and the completion of a well in 10,011 feet of water, in 2004, 200 miles offshore, some 42,000 wells have been drilled in the Gulf with little or no environmental impact. Today, some 72% of Gulf oil is produced from wells drilled in 1,000 ft. or more of water.
In a Dover, NH speech during his 2008 campaign, Obama said, “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.” However, as a result of his Gulf drilling moratorium, the Louisiana Midcontinent Oil & Gas Association estimates that the idling of 33 offshore drilling platforms will result in the loss of 46,200 jobs and some $330 million per month in lost income.
But that represents only the direct impact of Obama’s economic policies. Just imagine for a minute the indirect impact on American workers and their families. If, as has been suggested, the price of gasoline goes to $5 per gallon as a result of Obama’s energy-killing policies and his challenge to Middle Eastern populations to fight for more democratic government, the economic impact on American workers will be profound. A worker who earns $50,000 a year and who drives fifty miles to and from work, will see his/her monthly gasoline bill increase from $250 to $500 (from $3,000 to $6,000 per year)… an Obama-imposed “tax” of $3,000 per year.
Assuming that electric power costs would keep pace with fuel costs, that same worker will find his/her electric power costs increasing from $2,100 per year to $4,200, an Obama energy “tax” increase of $2,100. Together, they represent a 10.2% energy “tax” increase on that worker’s gross income. Recently we learned that the Obama administration has voided the clean water permit of a West Virginia coal producer, reversing a 2007 decision by the Bush administration. The New York Times reports that the EPA has revoked a permit for Arch Coal’s mountaintop-removal coal mining project, one of the nation’s largest. It was the first time the EPA has rescinded an existing clean water permit for a new development mine.
Inasmuch as Obama has called on corporate chief executives to unleash hundreds of billions of dollars in cash reserves to stimulate economic expansion and job creation, the EPA action is seen by business groups as “adding to a difficult economic climate because of excessive regulation.” The US Chamber of Commerce issued a statement saying that the EPA’s decision sent a “very unsettling message to American business” and threatened the fragile economic recovery. The Chamber said, “EPA’s unprecedented action to retroactively deny a permit changes the rules not just in the middle of the game, but at the end of it. This is exactly the kind of practice that will keep capital on the sidelines.”
Perhaps the most telling example of the end result of Obama’s “Straightjacket” economics can be found in the City of Detroit where people and businesses have fled the city and the school district faces a $327 million shortfall. The Wall Street Journal reports that the district has already closed 59 public schools, proposes to close 70 of the remaining 142 schools, and expects to increase high school class sizes to 62 students. A Journal spokesperson has said, “The budget gap is partly due to the property tax revenue collapse as the Motor City crumbles, as well as financial mismanagement and a surge in pay and benefits for public employees… It’s hard to think of a sadder commentary on a government so fiscally desperate and so captured by its workers that it may be forced to abandon property to thieves. But are they the scavengers or (is it) the union?”
The economic decisions and policies of the Obama administration are unlike any ever imposed on a functioning society. They are not intended to enhance the lives, the liberties, and the happiness of the people. They are intended to destroy liberty and property. What better way to accomplish that than to saddle the people with unworkable economic policies… policies that will feel like an economic “straightjacket” to workers and employers alike.