Obama’s Second Term

Yesterday, President Obama delivered an unpleasant, nasty piece of demagoguery which apparently he and his surrogates will excrete relentlessly for the next 11 months, which is: The country is in terrible shape and it is all the fault of the Republicans and their “rich,” selfish supporters.

It is unusual for an incumbent to run for reelection on an entirely negative message, but it has been done before; Truman in 1948 and FDR in 1936 come to mind. So Obama just might pull it off.

So we had better start thinking about a second Obama term. First off, let us accept that Barry is no Bill Clinton. Clinton, when faced with no other choice, could pivot on a dime, accept all of his opponents’ proposals and then claim that they were his ideas all along. For example, Clinton signed a welfare reform bill written by the Republican Congress, which he and his supporters hated, and then claimed later that he reformed welfare. Obama is neither that clever, nor is his ideology that, er, pragmatic. Try to imagine Obama standing before Congress and saying, as Bill Clinton did after the 1994 massacre, that “the era of big government is over.”

The Democratic Party’s reason for being is to increase the size of government and expand government entitlements. So how is Obama, should he win reelection, going to do what the Democratic Party is compelled to do in an era when the government is broke, when almost half of every dollar it spends is borrowed, and when it has promised millions of people benefits it cannot pay for?

Republicans idolize Ronald Reagan and some Democrats give him credit for “reaching out across the aisle” to “fix” Social Security. Face it: If Reagan and Tip O’Neill had really fixed Social Security, we would not be faced with the crisis we are facing now. In fact, Reagan and O’Neill tinkered with the system a bit which just, as they say, kicked the can down the road for a couple of decades.

You didn’t have to be genius to figure out that Social Security and Medicare were going to collapse some day. It was absolutely predictable that medical science would prolong life so that millions of people would live well into their 70’s, 80’s and 90’s who without new drugs and “procedures” would have expired much earlier. It was absolutely predictable that the medicines and surgeries responsible for longer life would be very expensive. And it was also predictable that people would have fewer children, believing they could depend on the government to “care” for them in old age. But fewer children means fewer young adults contributing to a system serving an ever growing number of elderly recipients. It was the Democrats who devised this system while the Republicans mostly went along. Who wants to be against “free” stuff for the poor and middle class, even when it was always clear to anyone who thought beyond the next election that the system was eventually going to be unsustainable?

But back to Obama. All sentient, reasonably informed people know that raising taxes on millionaires and billionaires (who make more than $250 thousand) will do nothing to solve this mess and may actually harm economic growth. It’s just election demagoguery.

Most of those who dwell in the common sense community know that when you’re broke, you need to stop spending and borrowing. Only really smart people like Obama and Paul Krugman believe the opposite. As Nile Gardiner writes:

All over Europe governments have begun to implement austerity measures in an effort to rein in spending and reduce crippling budget deficits. It is hard to find a major European leader these days still advocating the kind of large-scale stimulus spending championed by the Obama Administration in the United States over the past three years. Ironically, the most vocal supporters of greater government spending in the EU can be found today in America.

In yet another hectoring New York Times piece last week on the European financial crisis (a follow-up to his November 10 article “Legends of the Fail”), imaginatively entitled “Killing the Euro”, Nobel Prize-winning economist Paul Krugman attacked “deficit scolds and inflation obsessives”, completely dismissing the idea that the EU debt disaster has anything to do with out-of-control spending:

“How did things go so wrong? The answer you hear all the time is that the euro crisis was caused by fiscal irresponsibility. Turn on your TV and you’re very likely to find some pundit declaring that if America doesn’t slash spending we’ll end up like Greece. Greeeeeece!

“But the truth is nearly the opposite. Although Europe’s leaders continue to insist that the problem is too much spending in debtor nations, the real problem is too little spending in Europe as a whole. And their efforts to fix matters by demanding ever harsher austerity have played a major role in making the situation worse.

“So the next time you hear someone claiming that if we don’t slash spending we’ll turn into Greece, your answer should be that if we do slash spending while the economy is still in a depression, we’ll turn into Europe. In fact, we’re well on our way.”

Krugman’s piece followed a November 29 editorial in the New York Times, “Germany’s Denial, Europe’s Disaster”, which blasted the Germans for standing in the way of “a real bailout of Europe’s weakest economies by their richer neighbours of the European Central Bank”:

“European budgets must be brought into balance over the long term. And the euro zone will need much more fiscal coordination to survive. But right now the only way to stem the crisis is to give weak countries more cash and room to recover. Almost two years into the European crisis, it should be obvious that forcing weak countries to keep slashing their budgets will only make things worse — tipping them into deeper recessions that make it even more difficult for them to grow, raise revenues and pay off their mounting debts.”

Krugman and US liberal elites remain firmly in denial on the debt question, stuck in a time warp even as most of the free world has moved on. If this crisis is not caused by borrowing that markets find unsustainable, then what is it caused by?

Their foolhardy solutions for the European economic crisis as well as their prescriptions for America’s financial mess – more government spending and of course borrowing – simply beggar belief. The building up of towering levels of debt is at the very heart of the economic turmoil engulfing Europe, and it threatens to bring down the US economy as well.

All of the major European economies that are now in trouble have two things in common: membership of the eurozone and staggering public debts. According to IMF figures, Greece’s gross government debt as a percentage of GDP (2011 forecast) stands at 165.6 percent, up from 105.4 percent in 2007. Italy’s government debt now stands at 121.1 percent of GDP, up from 103.6 percent in 2007. Portugal’s debt has risen from 68.3 percent of GDP in 2007 to 106 percent in 2011. Even the EU’s second biggest economy, France, is not immune from the debt crisis. France’s government debt is now at 86.9 percent of GDP, up from 64.2 percent four years ago. And the United States is in an even worse situation – with gross government debt as a percentage of GDP standing at a towering 100 percent, a dramatic increase from the 2007 level of 62.3 percent.

So this is what it comes down to: A vote for Obama is a vote against doing what must be done. The European politicians are currently in the process of washing their hands of their problems and handing power to unelected technocrats who will try to slash spending and raise the sales (VAT) tax on the poor and middle class since they have run out of millionaires and billionaires who are experts at evading taxes.

There is, of course, no guarantee that the Republicans will do what needs to be done either. They are, after all, politicians. But it is either the elected Republicans or unelected technocrats.

One thing for sure: A vote for Obama is a vote for denial.

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