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ENLARGE
Jim Clark
Dear President Obama: You must not have read my recent column in the Bonanza advising you that stimulus plans don’t stimulate but actually prolong economic downturns. Your congressional Democrats and three Republican in name only senators passed the law anyhow. I whimper at the thought of your next move.
The non-partisan Congressional Budget Office is supposedly the gold standard on economic matters and says there is no way to tell if your profligate spending law will actually rescue the economy. Your Vice President Joe Biden told the public “there’s a 30 percent chance this won’t work” — and he’s a politician. Last weekend Reno’s media reported several University of Nevada, Reno economics professors who agree with the CBO. I don’t share their uncertainty ... I’m convinced it’s a dog.
We know that Roosevelt’s New Deal and Lyndon Johnston’s Great Society spending programs as well as Japan’s “lost decade” in the 1990s trying to spend itself out of its economic doldrums were abject failures. Winston Churchill once said: “a nation trying to spend itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” How could all the Democratic congresspersons and one president do something so stupid? (excuse me, Mr. President, I meant to say “intellectually challenged”).
I did some research trying to shine the light of truth on this subject and I found a scholarly analyses by Thomas Sowell, economics fellow at Stanford’s Hoover Institute. In his work, “Politics versus Economics,” Dr. Sowell explains why perfectly intelligent, educated politicians screw up. He blames it on “one-stage thinking” — decision-making where only a proposal’s initial impact is considered.
Consumers weigh the probable outcomes of economic decisions and behave rationally. Politicians, however, are guided by considerations of political consequences. Both Richard Nixon’s and Bill Clinton’s economic advisers publicly lamented on how little thinking ahead about economic consequences goes into decisions made at the highest level. Why should there be?
Both Nixon and Clinton were re-elected by wide margins and that, to them, is what counted.
This produces what Sowell calls “do something” government policies. A market economy is a “self equibilibrating system,” always undulating and changing in response to market forces. This can present difficulties for some groups of people and enterprises during periods of adjustment, Sowell explains. These difficulties present opportunities for politicians to intervene in response to demands that they “do something” to solve economic problems. It is this tinkering with free markets that Adam Smith railed against in “Wealth of Nations” during our nation’s earliest days. It seems we haven’t learned yet.
Sowell examines the actions of President Ronald Reagan after the October 19, 1987, stock market crash, the worst percentage decline day in history. Reagan’s response? He did nothing. What followed was the longest period of high employment, low inflation and general prosperity in American history.
Reports say your next task is to bail out the banks. Take a look at the 1989 savings and loan crisis. The first President Bush let the losers fail and let the regulators take them over under existing law. They paid off depositors, liquidated the bad assets and sold the good assets, branch networks and customer bases to healthy banks. Total taxpayer cost: $125 billion. Not cheap but a lot better than dragging out the process for decades by subsidizing losers and then ending up having to apply the tough love remedy anyhow.
It’s always a pleasure to give you unsolicited advice, Mr. President. I hope to be around to be able to say: “I told you so.”
Jim Clark is president of Republican Advocates, a vice chair of the Washoe County GOP and a member of the Nevada GOP Central Committee. He can be reached at tahoesbjc@aol.com.
The non-partisan Congressional Budget Office is supposedly the gold standard on economic matters and says there is no way to tell if your profligate spending law will actually rescue the economy. Your Vice President Joe Biden told the public “there’s a 30 percent chance this won’t work” — and he’s a politician. Last weekend Reno’s media reported several University of Nevada, Reno economics professors who agree with the CBO. I don’t share their uncertainty ... I’m convinced it’s a dog.
We know that Roosevelt’s New Deal and Lyndon Johnston’s Great Society spending programs as well as Japan’s “lost decade” in the 1990s trying to spend itself out of its economic doldrums were abject failures. Winston Churchill once said: “a nation trying to spend itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” How could all the Democratic congresspersons and one president do something so stupid? (excuse me, Mr. President, I meant to say “intellectually challenged”).
I did some research trying to shine the light of truth on this subject and I found a scholarly analyses by Thomas Sowell, economics fellow at Stanford’s Hoover Institute. In his work, “Politics versus Economics,” Dr. Sowell explains why perfectly intelligent, educated politicians screw up. He blames it on “one-stage thinking” — decision-making where only a proposal’s initial impact is considered.
Consumers weigh the probable outcomes of economic decisions and behave rationally. Politicians, however, are guided by considerations of political consequences. Both Richard Nixon’s and Bill Clinton’s economic advisers publicly lamented on how little thinking ahead about economic consequences goes into decisions made at the highest level. Why should there be?
Both Nixon and Clinton were re-elected by wide margins and that, to them, is what counted.
This produces what Sowell calls “do something” government policies. A market economy is a “self equibilibrating system,” always undulating and changing in response to market forces. This can present difficulties for some groups of people and enterprises during periods of adjustment, Sowell explains. These difficulties present opportunities for politicians to intervene in response to demands that they “do something” to solve economic problems. It is this tinkering with free markets that Adam Smith railed against in “Wealth of Nations” during our nation’s earliest days. It seems we haven’t learned yet.
Sowell examines the actions of President Ronald Reagan after the October 19, 1987, stock market crash, the worst percentage decline day in history. Reagan’s response? He did nothing. What followed was the longest period of high employment, low inflation and general prosperity in American history.
Reports say your next task is to bail out the banks. Take a look at the 1989 savings and loan crisis. The first President Bush let the losers fail and let the regulators take them over under existing law. They paid off depositors, liquidated the bad assets and sold the good assets, branch networks and customer bases to healthy banks. Total taxpayer cost: $125 billion. Not cheap but a lot better than dragging out the process for decades by subsidizing losers and then ending up having to apply the tough love remedy anyhow.
It’s always a pleasure to give you unsolicited advice, Mr. President. I hope to be around to be able to say: “I told you so.”
Jim Clark is president of Republican Advocates, a vice chair of the Washoe County GOP and a member of the Nevada GOP Central Committee. He can be reached at tahoesbjc@aol.com.
