|President Barack Obama greets members of the audience after delivering remarks on the American Jobs Act at Manchester Central High School, Manchester, New Hampshire, Nov. 22, 2011.|
Dr Peter Morici: President Obama and his supporters are portraying the failure
of the Super Committee to slash the budget deficit by $1.2trn over ten years as
endangering the already weak economic recovery. This is absolute sophistry.
A deal acceptable to Democrats would have raised taxes on the wealthy and
corporations by $25 to $50bn, annually, and cut spending, disproportionately on
defense but some other programs too by $50 to $75bn, for a total savings of
Apparently, according to liberals, raising taxes on folks they believe the
government spoils—millionaires and corporations—and cutting spending they deem
unnecessary—defense and other civilian programs—doesn’t reduce overall spending
by consumers, businesses and government, and hence, demand and GDP. Nowhere in
the textbooks or journal articles economists read, is such a proposition
demonstrated. In fact, the reverse is true: Super Committee spending cuts and
tax increases would have slowed growth.
In the next breath liberals argue the failure of the Super Committee to reach an
acceptable compromise ensures Congress will not extend the two percentage point
Social Security tax holidays beyond the end of the year, and that endangers
The Social Security tax holiday is a separate legislative issue and could still
be enacted, but let’s suppose it is not. Had the Super Committee succeeded and
the holiday consequently extended, spending would have been cut and taxes raised
for some people—slashing demand—and the taxes cuts extended for others—boosting
demand. Overall, the net impact on GDP is close to zero.
What is really going on is the President is about his old tricks. The economy is
not performing and unemployment remains too high—and with conditions in Europe
as they are, the whole global economy may be headed for another recession in
Europe notwithstanding, structural problems—the trade deficit with China and on
oil, Wall Street banks that won’t lend and the Dodd-Frank reforms don’t reform,
health care reforms that didn’t lower costs but instead raised them, and a
federal regulatory apparatus that drives investment and jobs offshore, together,
handicap the U.S. economy beyond all recognition by the Oval Office and its
allies on Capitol Hill.
President Obama never intended for the Super Committee to succeed. He and
Speaker Boehner created it in a compromise last August, but he never
demonstrated any leadership or intention to negotiate seriously. The President
never moves off his soak the rich and scapegoat oil company campaign message.
Now, he can blame the failure of the Super Committee on Republican unwillingness
to tax millionaires, and urge voters to blame the GOP for a lousy economy, when
he bears considerable responsibility for high unemployment.
Sadly, Speaker Boehner is outclassed. He negotiated a bad deal - - and gave the
President a winning hand - - when he agreed to the Super Committee last August,
and he continues to let Mr. Obama out-speak and out-maneuver him.
The President spends all his time campaigning, while the nation’s economic
problems go unaddressed. For Mr. Obama, the fact of his presidency is more
important than solving the problems he was put in office to fix.
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