It is now very clear to me, and I am convinced eventually will be clear to other observers, that the Obama administration has pushed the "agenda envelope" too far and too fast, and may be seeing that the polls are moving against them much faster than they had expected. The agenda may not yet appear in trouble, but the Cap and Trade and Health Care initiatives are now being "negotiated" even though the theoretical "filibuster proof votes" are there to pass the legislation. In my view, this is the first sign of a weakened President. I know that I may sound like a Pollyanna, but I am convinced that they are now, more on defense than offense.
I am certain that the Obama team decided that most Presidential goals get accomplished in the first year of the Presidency, hence they decided to be very aggressive. They probably concluded the only strategy that would get the social re-engineering accomplished would be to capitalize on the President's popularity quickly and to then use the economic downturn as the rationale for implementing the radical change. They fully, and in my view naively, expected that the "stimulus plans" would kick in faster and therefore they would have the "air-cover" to then be able to pass the Health and energy legislation. The Trillions building in the deficit have caused the voters to start to recoil from "mortgaging our future." As an economist, I certainly believe that the rampant spending will bring about rampant inflation (and potentially serious stagnation) which I then believe is going to even further weaken the dollar. Talk by the Chinese, and now others, about a potential replacement of the dollar as the world standard, should give everybody a serious concern.
The further concern that I have is that the Republicans will see this weakening as an opportunity to capitalize on, but will not see just how strong their position can be. They will see the weakness as an opportunity to negotiate a "weaker health bill" rather than to defeat the one on the table and push for the reforms that they believe in, or at least, claim to believe in. As an example, anything that open the door to a single payer plan will eventually become a wide open door to full socialized medicine. They must not give an inch. Instead, they must work on creating reforms in the existing health insurance care plans that are already bankrupt: Medicare and Medicaid. To create a new health initiative that moves in that direction will simply amplify the already impossible problem with those plans.
Further, I fully believe that the "stimulus" spending plans can be changed. So much of that pork will have no impact on growth in the economy, and certainly will not generate jobs. The private sector must be encouraged and that can not be done by having the public sector spend money which then gets funded through substantially higher taxes on the wealth creators. The worn out Keynesian solutions, are the wrong tactics. Stimulating aggregate demand is the buzz word, but the solution of using further deficit spending by government is a disaster, not unlike the years of the New Deal. W can not let Barack Obama become Franklin; we can not afford the financial markets to fall apart over a badly weakened dollar, and that is what Trillions of added deficit will do.
This administration and the democrats in Congress are planning to fund all these initiatives with added taxes, and they will impact the broad middle class as well. These tax increases must be the primary focus of the minority concerns. Taxes are the one issue that can rally conservatives and moderates alike. Cap and Trade is an enormous tax on energy and will hit every consumer's pocket. There must be a full court press to stop that legislation, and I am convinced that making certain that it is seen as "a tax," is a crucial component of that fight.
It is my strong conviction that the Republicans are now in the best position they have been in some time to actually brandish their fiscal conservative principles and to hold the Administration and the Congress to fiscal restraint. That is not easy for the traditional Beltway gang, but if they want to ever have a chance to have control again, they need to stand up and be counted. In my view, the Congress and the administration are "running scared." They are afraid that the economy will not turn around fast enough and that the pressure for "doing more" will increase. Even they know, that doing more may be completely irrational, but is they do more, they will not be able to avoid doing some of the programs that the Republicans wanted...like tax cuts. That would be a devastating blow to their previous rhetoric.
In short, Republicans...stand up and be counted! Make this your fiscal policy stand, and do it now!
I agree with you, Gerry (not surprising), but I am waiting for the first Republican Senator or Governor to go out front, like Reagan did when he took Kemp's advice and advocated a major tax reduction.
Someone, like Haley Barbour or Bobby Jindal could make national news out of a call to repeal what is left of the unspent stimulus and institute major tax cuts for people who really pay taxes. Stop collecting payroll taxes for six months and you will get more stimulus in the economy that hiring all these new government workers who just create more bureaucracy and waste.
But alas, no one has the balls to do stuff like that. If they did, I think they would get elected just like Jim Gilmore did when he ran for Governor of Virgina. Nobody knew much about him until he announced he would repeat the Car Tax in VA which cost everybody who owned a car thousands of dollars every year in taxes. The Democrat said that would take too much money out of government services. No one cared and voted for Gilmore anyway. He won big. The Democrat legislature eventually got half of it done, but never would totally repeal it.
It may be too early for a presidential aspirant to do it, but if I was advising some long shot on how to get noticed, I would do it.
Posted by: Jay Stone | July 12, 2009 at 06:14 PM