Previews of coming attractions


Filed Under General on Mar 24 

I’m sure by now you’ve probably heard the rosy predictions of an economic “recovery” forecast by Team Obama’s overly rosy economic crystal ball. I’m not sure about anyone who considers trillion dollar deficits for as far as the predictors can prophesize to be a sign of recovery – but I’m old fashioned. I consider a trillion dollars to be quite a chunk of change.

This nation has never run a trillion dollar deficit. Love him or hate him, W somehow managed to keep his red ink to a measly $163 billion in 2006 and $248 billion in 2007. He took withering political fire for those numbers. Obama proposes $10 trillion in red ink over the next decade and most democrats just consider it a cost of doing business. Chris Matthews’ leg continues to spasm uncontrollably and life goes on.

But I digress.

Obama’s overly rosy economic forecast is based on a prediction that the USA will recover from its current recession and experience a 4% growth rate from 2011-2013. However, as I read through John Steele Gordon’s piece over at Commentary Magazine, I found it interesting that the very plan which promises to bring the USA out of recession includes built in growth killers – mainly the much hyped but little understood “Cap & Trade” proposal – that will do just the opposite. I encourage you to read the whole thing, but here are some of the primary paragraphs worth understanding:

The Obama budget envisions an explosion of economic growth as the country recovers from the current recession—more than four percent a year from 2011 through 2013. This will supposedly be sufficient to halve the $1.75 trillion deficit it projects for 2009. But there is something off here. Many of the policies Obama and his team are pursuing, cap-and-trade being the most obvious, are likely to interfere with growth in exactly the sectors in which the United States will need it. If the goal is growth, as it should be, the role of government should be to determine ways in which its conduct can fuel that growth. And that is precisely what Obama is not doing.

The cap-and-trade tax will inescapably and adversely impact the economic recovery and future growth rates. If passed, it will act on the economy as a whole exactly the way a governor acts on a steam engine, increasingly resisting any increase in revolutions per minute. With the supply of licenses to emit carbon dioxide fixed, the price of the permits will inevitably rise as economic activity picks up. That means that any increase in overall demand will increase the price of energy, and thus, in a feedback loop, nearly everything else. That will damp down demand. The more the economy tries to speed up, the more the carbon tax will work to prevent it from doing so.

Think about trying to drive your car with the accelerator floored while your brakes are set. You’ll end up making a lot of noise, wearing through a set of tires and probably burning out your engine in addition to ruining a set of brakes. You’ll spend a lot of money and not get very far.

Never the less, this will no doubt be Obama’s primary message tonight during his prime-time media blitz this evening. I predict a lot of style and very little substance. By my count Obama took thirteen questions during his last foray with the White House Press Corps. Most of the questions were softballs with one A-Rod query thrown in. I’d love to see someone throw a few hardballs at him about just how cap and trade will stimulate the economy. That said, I’m not holding my breath.