As Mark Twain would have understood, he’s taking us back to the 6th century.
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President Obama’s $1.6 trillion deficit for this year, following his $1.4 trillion deficit for last year, has been sucking the capital investment needed to create jobs and economic growth right out of the economy into runaway government spending and government employment. In fact, total gross federal borrowing this year and last is much higher. This and the threatening prospect of what lies ahead is what has delayed and slowed recovery so seriously so far.
Now it appears that Obama’s policies, hearkening all the way back to FDR’s 1930s, may be leading us into another Great Depression, in fact. The economy is wobbling now potentially into another downturn because of the specter of President Obama’s sweeping, across the board tax increases set to go into effect next year, raising virtually every tax Federal tax rate, echoed by pending and actual state and local tax increases. On top of that he is feverishly adding to regulatory cost burdens. In his Carnegie Mellon speech, he perversely proclaimed he would lead us into renewed economic growth and prosperity by dumping another multitrillion dollar cost on the economy through his cap and trade tax.
As Art Laffer predicted in Monday’s Wall Street Journal, “When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe ‘double dip’ recession.” Laffer recounts how the delay in Reagan’s tax cuts to 1983 delayed that recovery, but once they became effective the economy skyrocketed into a 25-year boom. He explains the lesson for today:
Reagan’s delayed tax cuts were the mirror image of President Barack Obama’s delayed tax rate increases. For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10%. But at the tax boundary of Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5% in 1983, and 5.5% in 1984. It has always amazed me how tax cuts don’t work until they take effect. Mr. Obama’s experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
As this analysis implies, the prospect of sweeping, across the board, tax rate increases next year is actually boosting the economy this year, as people scramble to earn what they can before Obama closes the barn door. That is why as bad as the economy is right now, this for the next 6 months is the best the Obama economy is going to get.
This is why the stock market is dropping again now, with the Dow never returning anywhere near its previous peak over 14,000. The stock market looks 6 months ahead, and what it sees is Obama’s tax massacre, and other foolishly counterproductive policies. Many have been playing the market for the short term natural business cycle recovery, before the effects of President Obama’s anti-growth, neo-socialist policies kick in. But there is no longer enough upside in the economy and the market to make that game worthwhile. That is why the capital flight is beginning now.
And how much further will the already record shattering deficit of $1.6 trillion soar with renewed economic downturn? How much longer will it be before Greece comes to these shores, and the bond markets refuse to lend us vast chunks of the world’s resources to finance President Obama’s further exploding budgets and deficits?
War Through Weakness
Reagan brought us Peace Through Strength, winning the Cold War without firing a shot. Now President Obama, so comprehensively pursuing the opposite of every Reagan policy, is bringing us war through weakness, quite possibly as early as this summer, just as FDR’s liberals and the isolationists of the 1930s ultimately did. This would complete President Obama’s total eclipse of America.
Already North Korea has attacked South Korea, our ally America is pledged to defend, with American troops still stationed there. The non-response to North Korea’s traditional act of war in sinking a South Korean naval vessel is communicating fear of military conflict to our adversaries worldwide.
President Obama’s distancing of America from Israel is now further encouraging Israel’s murderous enemies to attack while the opportunity apparently beckons. President Obama has been withdrawing American naval fleets from around the world, including the eastern Mediterranean, because he thinks such a show of naval force is “provocative.” He will soon learn how provocative the withdrawal of such naval force can be.
Turkey is joining Iran in promising still more peace flotillas to run Israel’s well-justified blockade of Gaza, perhaps armed with Iran Revolutionary Guard forces. That blockade was adopted to stop the elected Hamas government from continuing to launch hundreds of rockets at civilian targets in Israel, another traditional act of war. The blockade has proved successful in depriving Hamas of further missile supplies to continue their attacks. Egypt has joined in enforcing that blockade because the Hamas militants threaten that country as well. But instead of firmly backing our ally Israel in this legitimate act of self-defense, President Obama has equivocated, inviting expanded military conflict with such weakness.
America’s fiscal and economic disarray further projects inviting weakness. For where is America going to get the money to fight any significant conflict? Borrow still more from the Chinese? Will they really lend us money to fight their client states of Iran or North Korea?
Meanwhile, the Iranian Islamist extremists race to the final acquisition of nuclear weapons, with no meaningful counter from the Obama Administration, sharply focused on what it sees as the real threat to America: the Republicans. What horrors for Israel, and America, will such nuclear weapons in the hands of genocidal suicide bombers bring? Is this already emboldening Iran to attack Israel?
The American people already seem to be waking up to the grave mistake of President Obama. But will the American revival come soon enough to prevent the New Left from leaving permanent scars on the beautiful face of my country? That is becoming doubtful.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
Was the President done in by the economy, or by the politics of the economy?
H/T to National Review Online