Invasion of the Wallet Snatchers

Hello and welcome to Advanced Obamanomics at WEEKLY STANDARD U. If you are in this class, you have passed Remedial Rubinomics, Identity and Globalization in the Works of Barack Obama, and Introduction to Contemporary Religion with Professor Jeremiah Wright. Also, your check has cleared. Congratulations.

As noted in the syllabus, the required reading for today's class includes The Audacity of Hope pp. 220-257; Obama's March 27, 2008, speech in New York City on "Renewing the American Economy"; Richard Thaler and Cass Sunstein's Nudge; David Leonhardt's indispensable August 24, 2008, New York Times magazine article "Obamanomics," from which the title of this class is drawn; and Robert Kuttner's Obama's Challenge.

Now, most of your classmates probably spent last night experimenting with the booze luge they had constructed out of plywood and a bag of crushed ice. You, however, made it through the required reading without--and this is no small feat--falling asleep. This means that there is a bright future in store for you at either the Bureau of Labor Statistics or the Congressional Budget Office. Good thing you didn't miss this incredible opportunity by going to last night's underwear party, getting wasted, and setting a couch on fire.

Since this is a conservative institution with the highest academic standards, each class will begin with a quiz. Who said the following?

NUMBER ONE: "I accuse the present administration of being the greatest spending administration in peace times in all our history. .  .  . I regard reduction in federal spending as one of the most important issues of this campaign."

NUMBER TWO: "The market is the best mechanism ever invented for efficiently allocating resources to maximize production. .  .  . And I also think that there is a connection between the freedom of the marketplace and freedom more generally."

Correct! Speaker number one is then-presidential candidate Franklin Delano Roosevelt, campaigning in 1932. And speaker number two is presidential candidate Barack Obama, campaigning in 2008. It's often forgotten, today, how FDR campaigned for the presidency as a budget balancer who was going to rein in federal spending. And while Obama may be a liberal who spent his youth as a leftwinger, he has plenty of nice things to say about the free market. He is not going to collectivize agriculture or nationalize the banks. The Bush administration has already done that anyway.

The larger point of this quiz is to illustrate just how unpredictable politics is. As Professor Barnes likes to say, the future is never a straight-line projection of the present. This is true in life, culture, economics, and politics. A corollary is that presidents almost never govern in the manner in which they campaigned. Stuff happens. Woodrow Wilson ran for reelection on a peace platform. FDR ran as a fiscal conservative. George H.W. Bush promised he wouldn't raise taxes. George W. Bush said the United States ought not to "nation build." In each case, events interfered.

So, as we examine Obama's economic policy proposals, we ought to look at them with a skeptical eye. Many of the proposals won't become law. Others will be modified beyond recognition. Still others will be cast aside, as unforeseen developments force the rejection of old ideas and the adoption of new ones. The economy could worsen. The wars in Iraq and Afghanistan could worsen. The United States could become involved in new conflicts in Darfur, Iran, Pakistan, the Korean peninsula, Taiwan, or someplace no one has ever heard of. Al Qaeda could strike again. And don't forget Putin.

There are, however, a few basics we can take for granted. If Obama is elected president in a few weeks, not only is enrollment in this class going to spike, but federal taxes, spending, and the deficit--at least in the short term--are all going to rise. As taxes on the rich go up, the income threshold at which one becomes "rich" is likely to go down. Obama wants billions in new spending, and, if the Bush presidency is any indication, he won't stop Democrats in Congress from spending even more. And the new spending, combined with the loss in revenue from an economy in recession, will increase the deficit.

The outcome of many policies will be unrelated to their author's purpose. Sometimes those outcomes will be perverse. They'll exacerbate the problem. And the whole darned thing will be extremely difficult to roll back. As a wise man once said, the closest thing to immortality in this life is a government program.

It's possible to divide Obama's economic agenda into three parts: the Not-So-Bad, the Bad, and the Really, Really Bad. Let's take a brief look at each.