At the end of September, 2008, presidential candidate Barack Obama released a two minute internet ad blasting trickle-down economics. Within the first 15 seconds of the ad, Obama said of trickle-down, “it didn’t work.” But yesterday, when speaking of the most recent pork-laden federal spending bill that he just signed, he changed his tune. When trying to justify all of the earmarks contained in the bill he said, “When you give it [tax dollars] to public companies, public entities like fire departments and if they are seeking taxpayer dollars, then I think all of us can feel some comfort that the state or municipality that's benefiting is doing so because it's going to trickle down and help the people in that community. When they're private entities, then I believe they have to be evaluated with a higher level of scrutiny.” In other words, trickle down works when it is the government wasting your money but its bad economics in the private sector.
Throughout his campaign, Obama was relentless in his attacks on trickle-down economics. "The decline in our GDP didn't happen by accident. It is a direct result of the Bush administration's trickle-down, Wall Street-first, Main Street-last policies that John McCain has embraced for the last eight years," he said in October. Or how about another quote of his from September. “I think that's all fine and good but here's what I think. In the next 47 days you can fire the whole trickle-down, on-your-own, look-the-other way crowd in Washington who has led us down this disastrous path.” And these are just the tip of the iceberg. He consistently cited Trickle-Down economics as one of the primary reasons for ousting Republicans from the White House and as the cause of many of the country's economic woes.
In the same September speech, when speaking of John McCain, Obama said, “He’s not clear about what he thinks or he believes.” He went on to say, “You can not just run away from your long held views or your life-long record.” It would appear that these words can now just as easily be used when speaking of the new president’s views on economics.
According to the logic being used by the president, somehow or another, we are supposed to believe that the government is better qualified to spend our money than we are. And if the government is the one doing the spending, then the benefits of that spending will trickle down to everyone. But if corporations are doing the spending, then only the rich will get richer.
Not only does this argument not make any sense, it also defies what every Econ 101 student is taught at every university in the country. Any economist can tell you that government spending produces only about half of the benefit to the overall economy when compared to private sector spending. This is a fundamental principle of economics that even the most liberal of economics professors would have trouble disagreeing with.
To be sure, President Obama is not the one responsible for inserting more than 7,000 earmarks in the bill. That responsibility rests solely with Congress. But in signing the bill, the President broke two of his campaign promises.
First, he broke the promise he made to overhaul the earmark process. He justified this by saying that this more that $400 Billion bill would be the last of its kind under his administration. Somehow I doubt that, but we’ll see.
Second, he broke a promise he made to wait five days from the time a bill passes through Congress to his desk before he would sign it. Unfortunately, he has only been in office for 50 days and this is not the first time he has broken that promise. The purpose of waiting was supposedly to seek public comment on bills prior to enacting them.
Just as importantly, by citing Trickle-Down economics in his speech yesterday, the President endorsed a policy that he has spent the past two years complaining about. And he did it to justify pork-barrel spending that he has also been complaining about of late and which he has said he would veto. The only clear message there is that “Change you can believe in” has apparently been replaced with “Business as usual that you can count on,” and Obama is the one at the helm.
byJim Malmberg
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