Commentary Magazine


Contentions

It’s Not about Growth at All

Robert Russell of George Mason University writes of the Obama economic vision:

The short-term vision is that massive amounts of borrowed money can be spent effectively by the federal government to get us out of a recession. . .

The longer-term vision is that energy independence, restraining health care costs and improving education are keys to long term growth. This is a weird vision. Energy independence as a goal unto itself is bad for long term growth. Paying more for wind power in the name of energy independence is costly, not productive. And if I heard him correctly, he crowed about spending $15 billion on alternative energy innovation. That is not a lot of money for one of the three legs of the growth stool.

It’s nice to talk about restraining health care costs. America doesn’t get its money’s worth from its health care expenditure but that’s because it’s highly subsidized. To keep those subsidies in place and cut costs requires some serious rationing. The American people aren’t going to like that. But either way, it’s not a growth policy.

The third leg of the stool, education, is essential to long-run prosperity. Unfortunately, the federal government has shown little ability to improve it. Spending more money is unlikely to help. There is little evidence it has helped in the past. Introducing more competition via charter schools and vouchers is a good idea, but the teachers will fight such changes and the teachers are a powerful Democratic constituency.

The longer-term vision is not just “weird” — it is counter-factual. Countries with a larger share of the GDP devoted to government spending (and corresponding higher tax rates) have lower levels of growth and higher unemployment. There is lots of evidence for this. Honest.

That’s the bait-and-switch here. In the guise of somehow getting through the recession or making sure it doesn’t come back (or something), the Obama team is embarking on a set of policies that almost inevitably will lead to a worse economic outlook. We are now beyond the New Deal temporary stimulus argument because these are permanent (and sweeping) changes which the Obama team is proposing. You can, if you like the model of Western Europe, have a high-tax country with very large domestic spending. Or you can have a vibrant free market, with the benefits of higher personal wealth and low unemployment. But we haven’t seen many (any?) instances in which a country was able to manage both.

If government is going to claim more and more of our resources and restrict business activity through higher taxes and more regulation there will be less resources for the private sector and less wealth generation. So we should be honest. The “longer-term” vision isn’t about growth at all — it’s about the things Obama wants to trade for our opportunity to grow.


Join the discussion…

Are you a subscriber? Log in to comment »

Not a subscriber? Join the discussion today, subscribe to Commentary »





Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor to our site, you are allowed 8 free articles this month.
This is your first of 8 free articles.

If you are already a digital subscriber, log in here »

Print subscriber? For free access to the website and iPad, register here »

To subscribe, click here to see our subscription offers »

Please note this is an advertisement skip this ad
Clearly, you have a passion for ideas.
Subscribe today for unlimited digital access to the publication that shapes the minds of the people who shape our world.
Get for just
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
YOU HAVE READ OF 8 FREE ARTICLES THIS MONTH.
FOR JUST
Welcome to Commentary Magazine.
We hope you enjoy your visit.
As a visitor, you are allowed 8 free articles.
This is your first article.
You have read of 8 free articles this month.
YOU HAVE READ 8 OF 8
FREE ARTICLES THIS MONTH.
for full access to
CommentaryMagazine.com
INCLUDES FULL ACCESS TO:
Digital subscriber?
Print subscriber? Get free access »
Call to subscribe: 1-800-829-6270
You can also subscribe
on your computer at
CommentaryMagazine.com.
LOG IN WITH YOUR
COMMENTARY MAGAZINE ID
Don't have a CommentaryMagazine.com log in?
CREATE A COMMENTARY
LOG IN ID
Enter you email address and password below. A confirmation email will be sent to the email address that you provide.