Frenzied spending caused a feeble recovery

A view from America …

Would you happily sign an IOU for $126,000 to allow Barack Obama to keep his Big Spender status going? In some ways, that’s the bottom line on how people are going to vote on November 6th. That’s what the nonpartisan Congressional Budget Office estimates Obama’s proposed deficits, from 2011 through 2020, will add to a family of four’s share of America’s liabilities.

What do you get in return for a tab of that size? According to Grover Norquist and John Lott, Jr.’s new book, Debacle, you get higher unemployment, reduced economic growth and depressed housing prices.

Norquist is widely — even, in a backhanded way, by Mr. Obama — considered one of Washington’s most effective advocates for limited government. Lott is an influential scholar who repeatedly has shown more interest in determining what effect policies really have than in doctrine and dogma. His statistical analyses tend to the rigorous, elegant and counterintuitive.

Lott and Norquist recently trained their sights on the claims of the Big Spenders of Washington. The Big Spenders, like any addicts, are always ready to provide facile rationalizations for their maladaptive behavior. In the case of the U.S. economy, of course, the Big Spender claim is that matters would be much worse but for Obama’s spending frenzy. Extremist commentators such as Paul Krugman insist that the spending was not frenzied enough. This is, of course, a nonfalsifiable, unverifiable, brazen claim!

Is there any evidence for their claims? Norquist and Lott drill down into the data from the real world rather than consulting an Oracle composed of the bon mots of Lord Keynes (or even Milton Friedman). The evidence they found shows we are experiencing the worst recovery ever recorded. “Astoundingly, the unemployment rate during the 29 months of recovery averages three full percentage points higher than the average unemployment rate during the recession.”

Previous U.S. recessions ended faster … and the economic growth of the ensuing recoveries were much higher … in eras without a spending frenzy. If history is any guide, Obama’s claims for Big Spending are unfounded — and destructive.

Maybe … that was then and this is now? But our geographically, culturally and politically closest neighbor Canada did not engage in a comparable spending frenzy during this very recession and, in fact, cut corporate tax rates. “By October 2011 … Sixty-three percent of Canadians were then viewing their economy as ‘in good or very good shape.’ For Americans, only 9 percent viewed theirs as ‘good or excellent.’” Similar conclusions about the toxicity of the spending frenzy on job creation can be drawn from the experiences of France and Germany in and after the Great Recession.

Maybe … that was there and this is here? So … how did the states that got the most stimulus money fare compared to the states that received the least? “The Stimulus didn’t create more jobs in the states that got more money. This is a very important result.”

Norquist and Lott meticulously document the lack of evidence for Obama’s claims that hyperspending programs helped, then or now, here or there, or even simply here. They adduce massive evidence that Obama’s spending frenzy retarded the recovery.

They are not the only ones. As my colleague Charles Kadlec wrote in Forbes.com,

Remember … how the President last fall demanded House Republicans pass ‘now’ $400 billion in new stimulus spending, relabeled a ‘jobs bill,’ or be held accountable for the coming slow-down in economic growth?

Well, here is what putting a stop to Obamanomics has produced: The strongest six months of employment growth since the President took office.

Debacle is no ordinary indictment. It even might be rattling Obama himself. Rolling Stone recently ran a very (speaking as a regular reader and admirer, perhaps excessively) affectionate Oval Office interview which asked “Is there any way to break through that obstructionism by Republicans?”

Obama responds:

My hope is that if … they suffer some losses in this next election, that … [t]hey might say to themselves, ‘You know what, we’ve lost our way here. We need to refocus on trying to get things done for the American people. Frankly, I know that there are good, decent Republicans on Capitol Hill who, in a different environment, would welcome the capacity to work with me. But right now, in an atmosphere which folks like Rush Limbaugh and Grover Norquist are defining what it means to be a true conservative, they are lying low.

So… Norquist is defining what it means to be a true conservative? Has Obama read Debacle? Unlikely … but not impossible. As for defining what it means to be a true conservative, all conservatives oppose Big Government. Using Obama’s favorite rhetorical flourish “everybody knows” — the government will spend every penny it can get its hands on to get bigger.

Big Spending increases the power of officials and makes them feel like bigshots. They will spend all they can, always with facile rationalizations. Hence it is an imperative — for prosperity and liberty — to keep avaricious and sanctimonious officials from getting their hands on our money. Norquist is a first line of defense and they find our resistance to handing over our wallets galling.

There are three main ways the government can get its hands on money hard-earned by us mere workers and savers: taxing, borrowing, and printing. Norquist is the prime mover in getting candidates and elected officials to solemnly swear not to raise tax rates or to close loopholes except to lower tax rates. The ATR Pledge is ironclad and Newsweek’s Jonathan Alter observed, “It has transformed American politics.” The Pledge has proved so effective at fighting government avarice that in a recent personal conversation with Norquist this columnist urged him to convert it into a federal Constitutional Amendment.

Obama’s self-righteousness, irrespective of the painful consequences of his mistakes on the lives of working people and the unemployed, is reminiscent of that of Herbert Hoover. Hoover fought the Great Depression with public works projects, raising taxes on the affluent (bringing the top rate up from 25% to 63%), raising corporate taxes, and, of course, badly neglecting monetary reform. Hoover’s crazed policies made matters worse. Because Obama worships at Hoover’s Big Government altar, Hoover’s failures are not getting through to Obama.

Debacle’s most compelling moment may not be in the rigorously analyzed data but rather a telling personal incident. Lott:

When I was first introduced to Obama [when both worked at the University of Chicago Law School, where Lott was famous for his analysis of firearms possession], he said, ‘Oh, you’re the gun guy.’

I responded: ‘Yes, I guess so.’

‘I don’t believe that people should own guns,’ Obama replied.

I then replied that it might be fun to have lunch and talk about that statement some time.

He simply grimaced and turned away …

Unlike other liberal academics who usually enjoyed discussing opposing ideas, Obama showed disdain.

The evidence is becoming irrefutable. Obama does not govern based on results.  He is curiously, disdainfully, incurious as to what works in practice.   He shows disdain, which is nothing but a refined form of dogmatism and arrogance. Obama governs not for hope and change, but from disdain.  And that’s a recipe for … a Debacle.

This article was previously published at Forbes.com.

5 Comments

  • Frenzied Spending Caused a Feeble Recovery.
    Yeah.
    Because it was too meager.

    I haven’t read Norquist’s book but what I see here is that, jobs-wise, things have gotten a whole lot better under Obama compared to what they were under the deregulating conservative Bush, yet somehow not good enough for Grover.
    Wow, big surprise.

    There is zero discussion of what the $400 Bil in stimulus might have done FOR jobs. Certainly MUCH more than the bank-saving QE bullsh*t of the Fed.

    I hope the question comes to mind of what the employment growth would have been under the no-tax austerians that head Norquist’s cadre in the Congress.

    This is kind of a ridiculous meme.
    Since when are conservatives worried about employment?

    Finally, regardless of what the CBO says, nobody is ever forced to buy government debt issues.
    The ridiculous thing about them is that that same government has the power to issue the money instead of the debt.

    I’m not a supporter of Obama.
    Never voted for him.
    Never will.
    Unless he reaches back and grabs his big ears to pull his head out of his arse and realizes that issuance power of public money.
    Thanks.

  • Paul Marks says:

    Bush was not a deregulator and he certainly was not a fiscal conservative.

    As for the trillians of spending under Obama (on top of the wild spending of Bush) being “meager” – a comment like that deserves no civil reply.

    Joe under the techincal rules of this site your comment may be “civil” (various insults concerning conservatives not careing about unemployment, and talking people removing their heads from their backsides not withstanding).

    However I do not believe a man saying things he knows to be untrue (i.e. LYING) is really “civil”.

    You know that Bush was not a deregulator.

    You know that Bush was a wild spending – not a conservative.

    And you know that Obama has spent trillions on top even of what Bush spent.

    Yet you say the opposite on all these points.

    And pretend that conservatives do not care about unemployment.

    And on and on.

    You are a liar Joe.

    A shameless liar.

  • WOW !
    I’m hurt.
    I see some things are not debatable here, by Paul’s standards.
    Pity.
    Because that’s how we learn.

    Why would you call me a liar for saying that the ‘stimulii” of both Bush and Obama were too meager?
    This is not a debatable point?
    There are Nobelists on both sides of the question.
    How can I know that its “untrue”?
    I know that its true.

    I have NEVER called anyone a liar, a shameless liar or anything like that on any public forum.

    Bush was a deregulator and a social conservative.
    I never said he was a fiscal conservative.
    The UKs conservatives spent trillions on top of what labor spent. So what? That’s what happens with government.

    Paul, if you would care to debate me on these monetary matters, I have a website at economicstability.org and a youTube channel.

    Sorry, but if it is an “insult” to question when conservatives started posting policy proposals based on their impacts on unemployment, it must lie in the eye of the beholder, just like the shame.
    An answer with an example could have moved it forward.
    Instead of backward.

    Bush was indeed a neo-con and not a true conservative.
    I could easily claim that the falsity of saying that Bush was NOT a deregulator was a lie, rather than ignorance.
    But I will not.

    From NYT article titled: “”Bush can share the blame for financial crisis””(Sept 2008)

    “These experts, from both political parties, say Bush’s early personnel choices and overarching antipathy toward regulation created a climate that, if it did not trigger the turmoil, almost certainly aggravated it. The president’s first two Treasury secretaries, for instance, lacked the kind of Wall Street expertise that might have helped them raise red flags about the use of complex financial instruments at the heart of the crisis.

    “The crisis definitely happened on their watch,” said Kenneth Rogoff, a professor of economics at Harvard University who advises the Republican presidential candidate John McCain. “This is eight years into the Bush administration. There was a lot of time to deal with it.”

    “To some extent, Bush was simply following a deregulatory pattern set by Clinton. Perhaps the most significant recent deregulation of the banking industry – the landmark act that allowed commercial banks to expand into other financial activities, like investment banking and insurance – was signed into law by Clinton in 1999.”

    Experts from both political parties say Bush was a deregulator. Just like Clinton.

    And you call me a shameful liar for saying the same.

    Why not stick with the issues and get away from this vacuous character assassination?

  • Paul Marks says:

    Joe.

    Bush was not a “deregulator”.

    And you were indeed talking about fiscal matters – not “social conservatism”.

    Government (in both regulations and spending) got bigger (not smaller) under Bush.

    Under Obama this expansion in government (in both size and scope) has continued and got to an extreme point.

    I will not appeal to you on moral grounds – because you have no moral code (that is obvious).

    However, we know you are liar (on just about everything) so you are not going to fool us.

    So, my dear, you are wasting your time.

  • Paul Marks says:

    However, I will say that I am amused at a “defence” based on Harvard and the New York Times.

    “Members of the jury I will produce two character witnesses for my client – Caligula and Nero”.

    As for Clinton….

    The Glass Steagall Act was not about preventing credit money expansion.

    On the contrary it specifically allowed Federal Reserve Banks to buy government debt paper (Treasury Bonds and so on) so it would hardly have prevented the antics of Alan Greenspan and co.

    See Thomas Woods “Meltdown”.

    As for the division between merchant and retail banking.

    Lehman Brothers was not a retail bank anyway (it was a merchant bank – fully allowed under Glass Steagall).

    What the G/S Act was really about was NOT preventing future credit money bubbles (certainly not).

    That part of G/S that divided Merchant and Retail banking was just a hit at the Morgans – as a favour to the Rockellers (mostly to Junior I would guess).

    And Dodd-Frank now?

    Now a word in there about limiting credit money expansion.

    It is just a power grab.

    Not even Marxism (as the outer shell of “private ownership” is left in place) – Dodd-Frank is far closer to Italian Fascism or to German National Socialism.

    The form of private ownership is left – but its content is removed.

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