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Reason Foundation

Obama's Unapologetic Desire to Expand Government

Samuel Staley
July 17, 2009, 5:00pm

Over at Reason magazine, Harvard economist Jeffrey Miron has an excellent essay on the road not taken: letting the market work itself out rather than bail it out. He does a great jobs of working through why business failures show capitalism is working, and how the better and fairer path would have been to let markets sort themselves out.

But, is this really the point? Miron's concluding paragraphs probably say all that really needs to be said:

"Add in Obama’s $787 billion stimulus and his $3.6 trillion budget, and a picture emerges of an administration totally unapologetic about its designs to expand the size and scope of government. There is no question that the people advocating this spending want much more government intervention with respect to unions, energy, health care, infrastructure, and other areas. The crisis has given them the opportunity to ram through a bunch of things they’ve been pursuing for a long time.

"As a matter of accounting, they are almost certainly understating the budgetary implications of their programs. Their assumptions about economic growth are optimistic relative to those of private forecasters. Furthermore, many of the items in the stimulus package that were supposed to be temporary are not going to be temporary. Thus, my guess is that deficits will be much bigger than the administration predicts.

"The stunning thing about Obama’s spending proposals is that there’s almost nothing you could defend from the perspective of efficiency. It’s all about redistribution--not redistribution to the poor but redistribution to Democratic interest groups: to unions, to the green lobby, to the health care industry, and so on. At some point these everescalating government interventions will affect the size of the economic pie. If we start looking more like France, with more than 20 percent of GDP controlled by the federal government, output growth and economic freedom will all suffer.

"The fundamental problem underlying the financial crisis was government policy. Instead of undertaking enormous new policies, we should try to fix or eliminate bad policies and focus on efficiency rather than redistribution. Doing nothing new and simply working with pre-existing procedures would have been much better than anything we’ve done so far."


Samuel Staley is Research Fellow


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