Obama's RINO (Recovery-In-Name-Only)
In his column today in the Wall Street Journal, Stanford economist John Taylor compares and contrasts the '83-'84 economic recovery with the '09-'11 RINO (recovery-in-name-only). The root cause of the recessions leading up to the two recoveries, Taylor argues, was heavy government intervention. In the '70s, this intervention took the form of damaging price and wage controls. And our most recent recession found its source in myriad interventionist policies including
increased federal intervention in the housing market beginning in the late 1990s[;] the removal of Federal Reserve reporting and accountability requirements for money growth from the Federal Reserve Act in 2000[;] the return of discretionary countercyclical fiscal policy in the form of tax rebate checks in 2001[;] monetary policy moving in a more activist direction with extraordinarily low interest rates for the economic conditions in 2003-05. And, of course, interventionism reached a new peak with the massive government bailouts of Detroit and Wall Street in 2008.
But unlike the causes of both recessions, which are alike in many ways, the government response to each could not be more dissimilar. Economic policy under Reagan, Bush, and the early Clinton years, Taylor notes, was noninterventionist, and that made all the difference.
Attention was paid to the principles of economic and political liberty: limited government, incentives, private markets, and a predictable rule of law. Monetary policy focused on price stability. Tax reform led to lower marginal tax rates. Regulatory reform encouraged competition and innovation. Welfare reform devolved decisions to the states. And with strong economic growth and spending restraint, the federal budget moved into balance.
This approach worked, as evidenced by an unprecedented period of economic stability and expansion through the '80s and '90s. But bafflingly, instead of following the tried and true path to recovery and easing off the government intervention that got us into this mess in the first place, George W. Bush and then Barack Obama "doubled down on [Washington's] interventionist policy."
The Fed has engaged in a super-loose monetary policy—including two rounds of quantitative easing, QE1 in 2009 and QE2 in 2010-11. These large-scale purchases of mortgages and Treasury debt did not bring recovery but instead created uncertainty about their impact on inflation, the dollar and the economy. On the fiscal side, we've also seen extraordinary interventions—from the large poorly-designed 2009 stimulus package to a slew of targeted programs including "cash for clunkers" and tax credits for first-time home buyers. Again, these interventions did not lead to recovery but instead created uncertainty about the impact of high deficits and an exploding national debt.
Big government has proved to be a clumsy manager, and it did not stop with monetary and fiscal policy. Since President Obama took office, we've added on complex regulatory interventions in health care (the Patient Protection and Affordable Care Act) and finance (the Dodd-Frank Wall Street Reform and Consumer Protection Act). The unintended consequences of these laws are already raising health-care costs and deterring new investment and risk-taking.
Dr. Taylor's prescription for our economic malaise is at once so simple and yet politically impossible. "If these government interventions are the economic problem," he argues, "then the solution is to unwind them."
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Comments :
Jun '11
Re: Obama's RINO (Recovery-In-Name-Only)
Seems so simple, but unfortunately the public clamors for "the government to do something".
Amity Shlaes "The Forgotten Man" and "New Deal or Raw Deal" by Burton Folsom, Jr. effectively back up the premise of non-interventionist.
As this economy sputters or lies on its back, I see George W. as Hoover who greased the skids for Obama who as FDR (on the economy) is ruining the economy for years.
May '11
Re: Obama's RINO (Recovery-In-Name-Only)
I will never forgive Nixon for the wage/price controls. They only controlled wages. Prices went up anyway. Then came Carter. No, I didn't vote for him. I wasn't sure Reagan could fix things but he couldn't have been worse than Carter so I voted for him. Things got better.
Now I find myself in the same situation again. A RINO big government republican with horrid monetary policies that could not spell "veto" plus a war to distract. Nixon again. Followed by Barry Carter Obama.
Will Mitt Romney be another Reagan? He's going to be our next candidate so he'd better be.
Jul '11
Re: Obama's RINO (Recovery-In-Name-Only)
Lord help us if it is Romney. He is smart but deeply entrenched with some of the people that need a haircut too. Crony capitalism will not be our savior and I have had just about enough of the government picking the winners and losers.
Andrew Breitbart describes Obama's economic policy as " Doubling down on stupid" If there is a second term the Obama will be FDR. Lets hope someone objective writes the history books this time.
Jan '11
Re: Obama's RINO (Recovery-In-Name-Only)
Yes, but consider how others view this. Let's consider Ron Brownstein, an establishment liberal, in a recent column.
The liberal argument rests on the evidence that revenue went up after Clinton raised taxes, and that they went down after Bush cut them, which goes against Dr. Taylor (and most conservatives).
That's a case of a correlation but not a cause; other factors can override the normal process.
Jun '10
Re: Obama's RINO (Recovery-In-Name-Only)
Tax revenue went up every year from 2004 thru 2007 from 1.88 trillion to 2.5 trillion. http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200
KC Mulville
"The liberal argument rests on the evidence that revenue went up after Clinton raised taxes, and that they went down after Bush cut them, which goes against Dr. Taylor (and most conservatives)."
Where do those facts come from KC?
Jul '10
Re: Obama's RINO (Recovery-In-Name-Only)
Diane Ellis, Ed.:
Dr. Taylor's prescription for our economic malaise is at once so simple and yet politically impossible. "If these government interventions are the economic problem," he argues, "then the solution is to unwind them." ·
Would you please unpack that claim Diane?
It seems to me that unwinding Obamacare is a potential outcome of a 2012 GOP presidential election victory.
Jan '11
Re: Obama's RINO (Recovery-In-Name-Only)
To be clear, I dispute them as facts. I only relayed what Brownstein was saying. Also, Brownstein didn't address government revenues (that was misleading on my part, generalizing too quickly).
From his column:
"And although the median income for average families rose by about 12 percent in the eight years after both the Reagan tax cuts and the Clinton tax increase, income for average families declined almost $1,400 (or 2.7 percent) in the equivalent period after Bush signed his reductions.
If that experience doesn’t demolish the idea that tax cuts always produce prosperity, consider more recent history. The big deal that Obama and congressional Republicans reached in late 2010 was to extend the Bush tax cuts through 2012—and to turbocharge them with a new payroll-tax reduction. Despite those incentives, job growth has collapsed this year."
Brownstein is just another liberal playing fast and loose. The Bush Tax Cuts were overwhelmed by other spending. The GOP argument is that tax cuts AND spending cuts will bring growth.
But liberals think Brownstein's argument is a slam dunk.