The Obama Watch

Determined to Decline

Part 2, in a never-ending nightmare.

By 10.28.09

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President Obama is leading a worldwide retreat for America on foreign policy, and slashing our nation's defenses, including adoption of policies for nuclear disarmament, as we discussed last week. That is being done to deliberately reduce America to the status of "just another country," because President Obama and his ultraliberals think it is immoral for any one nation to be elevated above the others. That discussion last week was based on Charles Krauthammer's Wriston Lecture given at the Manhattan Institute in New York City, "Decline Is a Choice: The New Liberalism and the End of American Ascendancy." 

American Economic Decline

President Obama and his fellow ultraliberal Democrats now in complete control in Washington are choosing decline for America on domestic policy and the economy as well. The recession has dragged on into its 23rd month now under the leadership of Obamanomics, and its wooden, ideological devotion to old-fashioned, long discredited, Keynesian doctrine. The longest previous recession since World War II, 65 years ago, was 16 months, with the average at 10 months. Another 3 million jobs have been lost since President Obama took office, with unemployment now at almost 10%.

Even the Chairman of President Obama's own Council of Economic Advisors testified before Congress last week that the outlook for unemployment remains grim. Christina Romer admitted that "the unemployment rate is predicted to continue rising" to over 10%. She added,

[T]he unemployment rate typically falls when GDP growth exceeds its normal rate of roughly two and a half percent per year and rises when GDP growth falls short of this pace. With predicted growth right around two and a half percent for most of the next year and a half, movements in the unemployment rate either up or down are likely to be small. As a result, unemployment is likely to remain at its severely elevated level….Thus, while job losses will likely end early next year, robust job gains may still be several quarters away.

Moreover, Romer admitted that the vaunted Obama stimulus, which was sold on the claim that it would prevent unemployment from rising above 8%, will not change this grim scenario. She testified:

Fiscal stimulus has its greatest impact on growth around the quarters when it is increasing most strongly. When spending and tax cuts reach their maximum and level off, the contribution to growth returns to roughly zero….Most analysts predict that the fiscal stimulus will have its greatest impact on growth in the second and third quarters of 2009. By mid-2010, fiscal stimulus will likely be contributing little to growth.

Note that the third quarter of 2009 ended a month ago.

Almost one trillion to be spent on the Obama stimulus, all to little or no good, with unemployment stuck at 10%. That has to be one of the greatest wastes of taxpayer funds in world history, brought to you by the Messiah and his ultraliberal Congressional majorities. Yet, with his ideological blinders on, President Obama rigidly refuses to change course. Instead of considering the cuts in marginal tax rates, spending cuts, strong dollar policies, and deregulation that worked so spectacularly under President Reagan, we now hear talk of another stimulus package, which would be the third Keynesian failure supported by Obama in less than two years. Moreover, Obama still insists on raising marginal tax rates in 14 months, if not sooner, still more federal regulation, and continued weak dollar policies.

The Decline of the Dollar

Yet the trillion dollar deficits brought to us by the Obama stimulus and budget are now threatening the world currency status of the dollar. As Krauthammer said at the Manhattan Institute's Wriston Lecture:

The effect on the dollar [of Obama's policies] is already being felt and could ultimately lead to a catastrophic collapse and/or hyperinflation. Having control of the world's reserve currency is an irreplaceable national asset. Yet with every new and growing estimate of the explosion of the national debt, there are more voices calling for the replacement of the dollar as the world currency -- not just adversaries like Russia and China, Iran and Venezuela, which one would expect, but just last month the head of the world bank.

If the dollar is replaced as the world currency, then when we want to buy oil or anything else from the rest of the world, we will have to buy some other currency to do so. Any weakness in the dollar will then immediately impose a higher cost on us at the time.

Yet, raising income and capital gains tax rates as President Obama still plans will cause the dollar to decline still more, as it will discourage overseas investment in the U.S., which requires purchase of dollars by foreigners. The continued weak dollar policies Obama demands from the Fed will also cause further dollar declines. So will Obama's deliberate high deficit (Keynesian economics), runaway national debt policies. As Judy Shelton wrote in The Wall Street Journal on October 14:

By the end of 2019, according to the administration's budget numbers, our federal debt will reach $23.3 trillion -- as compared to $11.9 trillion today. To put it in perspective: U.S. federal debt was equal to 61.4% of GDP in 1999,…70.2%...in 2008 (under the Bush administration),…an estimated 90.4% this year and…[will] touch the 100% mark in 2011, after which the projected federal debt will continue to equal or exceed our nation's entire annual economic output through 2019. The U.S. is thus slated to enter the ranks of those countries -- Zimbabwe, Japan, Lebanon, Singapore, Jamaica, Italy -- with the highest government debt-to-GDP ratio (which measures the debt burden against a nation's capacity to generate sufficient wealth to repay its creditors). In 2008, the U.S. ranked 23rd on the list -- crossing the 100% threshold vaults our nation into seventh place.

So America under President Obama's Keynesian budget policies is headed to the seventh-highest national debt relative to GDP in the world. No wonder the credit rating agencies are talking about downgrading the AAA rating for U.S. government bonds. Shelton continues:

The U.S. has long served as the world's "indispensable nation" and the dollar's primary role in the global economy has likewise seemed to testify to American exceptionalism. But the passivity in Washington toward our dismal fiscal future, and its inevitable toll on U.S. economic influence, suggests that American global leadership is no longer a priority and that America's money cannot be trusted.

America's Energy Decline

It doesn't have to be this way. As Krauthammer said in the Wriston Lecture:

Take, for example, the threat to the dollar (as the world's reserve currency) that comes from our massive trade deficits….In fact, fully two-thirds of our trade imbalance comes from imported oil. This is not a fixed fact of life. We have a choice. We have it in our power…to reverse the absurd de facto 30-year ban on new nuclear power plants. We have it in our power to release huge domestic petroleum reserves by dropping the ban on offshore and Arctic drilling.

In other words, the clampdown on America's energy production imposed by liberal environmentalists like President Obama and House Speaker Nancy Pelosi is further contributing to the decline of the dollar. But it also contributes directly to the decline of American wealth and prosperity, and to our power relative to other, threatening nations in the world. As Krauthammer adds, "By prohibiting the drilling of offshore and Arctic deposits, the United States is voluntarily denying itself access to vast amounts of oil that would relieve dependency on -- and help curb the wealth and power of -- various petrodollar challengers, from Iran to Venezuela to Russia."

Newt Gingrich and Steve Everley explain the vast riches of untapped oil and natural gas reserves available to America in an October 8 article for Investor's Business Daily. They write,

Researchers from the U.S. Geological Survey concluded earlier this year that there are massive amounts of oil and natural gas in the Chukchi Sea off Alaska's coast. They estimated that there could be as much as 157 billion barrels of oil in the Arctic, or nearly twice as much oil as was previously known to exist in that part of the world. The natural gas discovery is also greater than all of the previously known reserves in the Arctic. Last year the USGS had to increase its estimate of oil reserves in the Bakken formation in North Dakota and Montana by 2,500%. The area is now estimated to hold more than 4 billion barrels of oil."

Gingrich and Everley continue:

In the United States, we have a 100 year supply of natural gas. Last year, geologists discovered that gas reserves in the Marcellus Shale formation in Appalachia are actually 250 times larger than they estimated in 2002. And recently, in the Gulf of Mexico, BP announced they had made a huge new discovery of oil, estimated to be as large as the biggest oil producing spots in the Gulf, which means it could supply as much as 300,000 barrels of oil per day."

Yet, Gingrich and Everley note that Interior Secretary Ken Salazar has kept offshore energy exploration and production shut down even though Congress allowed the ban on offshore drilling to expire last fall before the election. Unleashing the private sector to tap these vast oil and natural gas reserves would produce thousands and thousands of high paying jobs, and vastly increase America's wealth as we once again become a top oil power. But President Obama and his ultraliberal extremists say no.

Decline of American Living Standards

This is all part of a general assault on American living standards by President Obama's economic policies. Today Americans enjoy the most advanced, cutting edge, high tech health-care system in the world by far. But when President Obama and the ultraliberal Democrats get done imposing their fairness, rationing, and cost reductions on it, it will be just a shadow of its former self, like the second rate, behind the times health care systems of other countries around the world.

Similarly, the clampdown on energy production and proposed cap and trade policies will greatly constrict the supply, and raise the cost, of the energy and electricity that powers America's high standard of living, with all of its modern appliances, conveniences, and technologies. Today, Americans enjoy high powered, spacious, luxurious automobiles, by far the best in the world overall. But by the time President Obama and his ultraliberals get done redesigning and remaking them, we will be driving little more than tiny, electric lawnmowers.

American economic decline is further documented by Steve McCann in an October 22 article at American Thinker. McCann writes:

[R]eviewing the actual and projected GDP data by the Congressional Budget Office, combined with the actual and projected spending by the Federal, State and local governments for the period 2009 to 2014 shows negative private wealth growth [over this period] due to dramatic increases in government spending. The Net GDP per Person is predicted to be below calendar year 2000 for this 6 year period (2014 last available spending projection).

And even this is based on overoptimistic economic assumptions. McCann writes, "[T]he CBO predicts an average GDP growth rate of 4.4% and an average unemployment rate of 6.8% for the years 2010 to 2014. However, a consensus of private economists reveals an estimate of average GDP growth at 3.0% (2010 to 2014) and an unemployment rate in the double digit range through at least 2012." McCann continues:

During the Bush presidency the country went through a recession and the devastating economic impact of 9/11 in 2001. Yet, due to pro-growth policies, the inflation adjusted Net GDP per Person showed overall growth during Bush's time in office. The apologists for the Obama Administration may try to say they are simply trying to work their way out of the economic debacle left them by the Bush Administration; however, the government's own optimistic projections show their efforts will not work even over a six year period.

He concludes, "The country will never see the net GDP per person experienced in 2000 if policies such as Health Care Reform and Cap and Trade are enacted, taxes raised dramatically and nearly trillion dollar annual deficits are experienced for the next ten years. For the first time in our history future generations will be worse off than present ones. The Bush presidency could mark the peak of economic growth and prosperity in the 21st century."

McCann offers some wise political advice for those looking out for the future of America, and their own families,

This can be reversed, but it can only happen if the voting public becomes more aware of the current and prospective situation. With that awareness, become more engaged in the political process, [and] stop being single issue voters and falling prey to the maxim that there is no difference between Republicans and Democrats. Those current elected Republicans who fail to address the future of our country should be challenged in primaries. There is not the time for third parties to ascend to power sufficient to change the course we are on. The next election cycle in 2010 may be the most important off-year election in our history. Time is something we, as a nation, have little of.

Again, all these policies for American economic decline, and declining American living standards, are what your modern Democrat party is pursuing today, from the ultraleft Barack Obama to the ultraleft Nancy Pelosi to the ultraleft Barney Frank to the ultraleft Henry Waxman, etc., etc. If you are a Democrat, this is what you are supporting.

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About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.