by Richard Larsen, AP award winning columnist and President of Larsen Financial
July 21, 2012 (TSR) – I recall vividly an experience growing up on a farm years ago when I claimed credit for doing something one of my brothers did. It was a task assigned to me, which I failed to carry out. But my brother completed it before I could. My father, in his wisdom, upon learning of my unearned credit, sardonically asked me, “Don’t you know how dishonest that is?”
I did know it was dishonest, but that experience piqued my attention to claims of credit unearned. And now that presidential politics are into full swing, the claims of unearned credit are being self-proclaimed nearly every day.
A visit to the official presidential reelection campaign website reads like a bad fiction novel. Improvements in various sectors of the economy and our collective financial viability as a country are claimed as “accomplishments” of the president.
Obama claiming credit for an economic rebound is like an old girlfriend of mine in high school who claimed credit for every time our Snake River High School football team won. She claimed that whenever she went to a game, we won. Just “showing up” caused the win. Correlation is not to be mistaken for causation.
Certainly, if Obama’s to be given credit for an improving economy, we should be able to identify and quantify, to at least some extent, what he has done to ameliorate our moribund economy. Any policy of his, any legislative accomplishments, any executive orders that he has issued or implemented should provide the evidence to validate his claims.
His three most significant legislative exploits provide no evidence of causation for improving the economy. Obamacare certainly doesn’t stimulate the economy, for it is laden with new taxes and fees imposed on individuals and employers to be implemented over the next few years. And actually when those new taxes hit, the adverse impact on the economy will be considerable. For as Christina Romer, former chair of Obama’s Council of Economic Advisors, revealed last year, “Tax changes have very large effects: An exogenous tax increase of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent.”
How about the FinReg, Dodd-Frank financial regulatory reform? As with Obamacare, there is nothing stimulative in it either. It only solidifies the crony capitalistic relationship between Wall Street, the major banks and Washington by assuring further government intervention with institutions deemed “too big to fail.” The costs of implementation at the private sector level will likely result in higher fees, charges and interest rates for financial institutions to recoup the implementation costs. That’s definitely not stimulative!
The claims for improving the economy must be in the president’s “stimulus” package. According to the Wall Street Journal, over half of the $850 billion ($1.1 trillion, including interest) “stimulus” bill could be more correctly classified as discretionary spending. The Congressional Budget Office “scoring” of the stimulus package indicated that only 12 cents of every dollar would have a stimulative affect on the economy within the first 18 months. The scoring process clearly indicated the impotence of the “stimulus” for creating positive economic activity.
Then there must be some evidence in his executive orders, a total of 111 that he’s issued to date. Of those, most deal with regulation, government agencies, commissions and appointments. Perusing all the executive orders I didn’t see one that was designed to augment the economy, improve job prospects for out of work Americans, or stimulate economic growth.
In three years at the helm, in real world economics, there is only one thing that I can recall that he did that had any potential to stimulate the economy, and that was the extension of the payroll tax holiday. And for the average American who is fortunate enough to have a job, that amounts to $40 per month.
Even his unprecedented increase in government spending cannot be considered as stimulative. There are some academic die-hards, many of whom are currently serving in the administration, who still adhere to that aspect of Keynesian economic theory. And it’s hard to understand why, unless it’s just “bitter clinging” to an archaic ideology, for it’s failed every time it’s been attempted, by any administration, including FDR’s.
The great Nobel Laureate for economics Milton Friedman declared a couple of years ago, “unbridled government spending is the single greatest deterrent to faster economic growth in the United States today.” He’s probably rolling over in his grave as he observes the unparalleled spending spree the federal government is engaging in.
Sorry, Mr. President, you have no grounds to claim credit for the modicum of improvement we’ve seen since the recession officially ended. Any improvement is in spite of your policies, not because of them. Just “showing up” does not a win make. And as my father taught me years ago, claiming credit where none is warranted, is dishonest.
AUTHOR: Richard Larsen
AP award winning columnist, Richard Larsen is President of Larsen Financial, a brokerage and financial planning firm in Pocatello, and is a graduate of Idaho State University with a BA in Political Science and History and former member of the Idaho State Journal Editorial Board.