New direction for economy comes too late

Watching the president’s first State of the Union address last week reminded me just how grim of a state we’re in.

The undeniable centerpiece of President Barack Obama’s speech was shown in his focus on the nation’s economy and his administration’s efforts to save it.

“One year ago I took office amid two wars, an economy rocked by a severe recession, a financial system on the verge of collapse and a government deeply in debt,” Obama said. “Experts from across the political spectrum warned that if we did not act, we might face a second depression. So we acted immediately and aggressively. And one year later, the worst of the storm has passed.”

True, but what’s changed? The wars in Iraq and Afghanistan continue as the latter war escalates. The economy is still in the depths of  a severe recession and could eventually faulter into a depression. The government remains deeply in debt and continues to pile on more every day. As for the worst of the storm passing us by, it’s more likely we are currently seeing the eye of a massive storm with a more brutal side to come.

As a follower of the Austrian theory of economics and the president of Euro Pacific Capital, Peter Schiff said Obama’s diagnosis of the economy was misleading.

“President Obama again demonstrated his poor understanding of the fundamental problems that confront our nation,” Schiff said in a Euro Pac Web site article. “By following the advice of the same people who helped guide our economy to the precipice of total collapse, Obama now threatens to push it over the edge.”

Enter more of the same.

“Rather than tightening the reins on the reckless monetary policy that undermined our savings, diminished our industrial output, inflated asset bubbles and led to reckless speculation on Wall Street and excess consumption on Main Street, we are loosing them further,” Schiff said. “Rather than repealing regulations that distort markets and create moral hazards, we are adding new ones that do more of the same.”

In addition to promoting job creation, the president also proposed a plan that would freeze government spending for three years in order to help pay for the $1 trillion used to help “rescue” the economy from tanking last year.

Considering the plan won’t even go into effect until 2011, be sure spending levels will rise dramatically before they are ever met with some kind of freeze. This plan wouldn’t be much help anyway because the freeze will not include any spending related to national security and the State Department’s budget or expensive entitlement programs such as Medicare, Medicaid and Social Security.

There are much more efficient ways to go about in cutting spending quickly in significant ways. For instance, scaling back our unnecessary foreign military adventures would be an impactful way to sooth economic wounds — the government spends trillions of dollars a year on that alone. Are we seriously expected to believe Washington, of all places, will cut spending anytime in the near future? If only we could be that naive.

And right off the heels of the State of the Union address, the Obama Administration released its $3.8 trillion fiscal year 2011 budget Monday, which has so far been met with scrutiny by both Democrats and Republicans.

“It is interesting that in the week since the speech, the executive budget has been announced,” said Barbara Bardes, a political science professor at the University of Cincinnati. “In that document are a number of tax increases and other changes in the tax laws that would pay for some of these initiatives. He did not mention those in his speech.”

The running theme when it comes to the government and the economy is always centered on how much they can possibly spend and how much they can possibly intervene in a system that works best when the government governs least.

What I basically took away from the speech, aside from how well the applause sign was working, was that it was just another attempt to sell the American people on accepting further government intervention in the economy. Obama and his supporters might be confident in their view of the state of the union, however I remain anything but.

Is America on the right track? Tell Jeremy at daj8@mail.uc.edu.