Economist Allan Meltzer says the reason Obamanomics has failed is clear: uncertainty about regulations and future taxes is the top enemy of economic growth.
"Administration economists and their outside supporters neglected the longer-term costs and consequences of their actions," Meltzer writes in The Wall Street Journal. “The Obama economic team ignored history.”
The two most successful fiscal stimulus programs since World War II — under Kennedy-Johnson and Reagan — took the form of permanent reductions in corporate and marginal tax rates, Meltzer points out.
“Economist Arthur Okun, who had a major role in developing the Kennedy-Johnson program, later analyzed the effect of individual items,” Meltzer says. “He concluded that corporate tax reduction was most effective.”
The contrast between the Obama and Reagan administrations is striking, Meltzer notes. “Reagan reduced marginal and corporate tax rates and slowed the growth of non-defense spending,” notes Meltzer.
“Recovery began about a year later. After 18 months, the economy grew more than 9 percent and it continued to expand above trend rates.”
Almost daily, Meltzer observes, Obama “uses his rhetorical skill to castigate businessmen who have the audacity to hope for profitable opportunities.”
Meltzer says another defect of Obamanomics was that part of the increased spending authorized by the 2009 stimulus bill was held back. “Remember the oft-repeated claim that the spending would go for ‘shovel ready’ projects?” he asks. “That didn't happen, though spending will flow more rapidly now in an effort to lower unemployment and claim economic success during the fall election campaign.”
The New York Times reports that, during a recent visit to Wisconsin, Obama both criticized Republicans and argued the economy would have been worse without his spending and policy agenda.
“I just want everyone to remember — we’ve tried the other side’s theories,” he said. “We know what their ideas are. We know where they led us.”
“So now we’ve got a choice: We can return to what we know did not work, or we can build a stronger future. We can go backwards or we can go forward. And I don’t know about you, but I want to move forward in this country.”
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