Monday, December 08, 2008

Obama's new New Deal

President-elect Barack Obama is not wasting any time in outlining his plans to prop up America's economy.

As the nation heads into the twelfth month of a recession (only officially announced last week), Obama is proposing huge government spending on infrastructure and works projects, programs that could cost $700 billion or more according to his own advisers.

Deficits be damned.

From, "Obama to focus on stimulus, not deficit" (Financial Times):

"Barack Obama on Sunday spelled out his plans for the biggest infrastructure investment in the US for half a century. The president-elect argued that with the economy reeling, his incoming administration could not afford to worry about a spiralling budget deficit.

Mr Obama’s proposals for government works on roads, bridges, internet broadband and school buildings, together with energy efficiency measures and health spending, are far more detailed than the normal announcements during a time of transition...

...Things are going to get worse before they get better,” Mr Obama said on Sunday on NBC’s Meet The Press. He emphasised that his plans represented the largest US infrastructure programme since the federal highway system in the 1950s.

“The key is making sure we jump-start the economy in a way that doesn’t just deal with the short term, doesn’t just create jobs immediately, but also puts us on a glide path for long-term sustainable economic growth.”

Noting the US budget deficit might surpass $1,000bn (€785bn) before his spending plans are factored in, Mr Obama added: “We understand that we’ve got to provide a blood infusion to the patient right now to make sure that the patient is stabilised. And that means that we can’t worry short term about the deficit. We’ve got to make sure that the economic stimulus plan is large enough to get the economy moving.”"

Looking over the news coverage of this latest announcement, it seems there is a common thread running through the Obama team's promotion of this "bold economic recovery plan".

Newly anointed Obama administration staff, from Lawrence Summers to future chief of staff Rahm Emanuel, all seem eager to use this "crisis" as an opportunity to implement some kind of social or structural economic change.

Few people seem to question the Obama administration's supposed authority over matters concerning the nation's economy. There are no powers enumerated in the Constitution which grant the federal government or the president the ability to approve industry bailouts or to act as the country's economic czar.

Sadly, ever since FDR's 1930s New Deal programs were enacted, the precedent and template for our current boom/bust cycle and the inevitable, accompanying "government solutions" has been set.

Will these policies help or hurt our economy in the long run? What do you think?

Related articles and posts:

1. "Impatient Obama fills Bush vacuum" - Financial Times.

2. "Stocks rally worldwide on Obama plan" - Bloomberg.

3. "Obama bonds offer taste of Japan's lost decade" - Bloomberg.

4. "Obama's "New" New Deal" - United Liberty.

5. "Government intervention fuels the crisis" - Finance Trends.