Liberal pundits like Jonathan Cohn are moaning and groaning about Mitt Romney’s economic speech in Iowa yesterday because a) he seemed to blame the sickly recovery on high debt levels, and b) he thinks the stimulus was a failure.
He are the two parts in question that liberals dislike:
President Obama is an old-school liberal whose first instinct is to see free enterprise as the villain and government as the hero. America counted on President Obama to rescue the economy, tame the deficit and help create jobs. Instead, he bailed out the public sector, gave billions of dollars to the companies of his friends and added almost as much debt as all the prior presidents combined. The consequence is that we are enduring the most tepid recovery in modern history. …
President Obama started out with a near trillion-dollar stimulus package – the biggest, most careless one-time expenditure by the federal government in history. And remember this: The stimulus wasn’t just wasted – it was borrowed and wasted. We still owe the money, we’re still paying interest on it and it’ll be that way long after this presidency ends.
A few thoughts:
1. Debt might well be retarding growth. Economists Carmen Reinhart, Vincent R. Reinhart, and Kenneth Rogoff just put out a new study looking at the economic impact of high debt levels: “We identify 26 episodes of public debt overhang–where debt to GDP ratios exceed 90% of GDP–since 1800. We find that in 23 of these 26 episodes, individual countries experienced lower growth than the average of other years. Across all 26 episodes, growth is lower by an average of 1.2%.” The economists also recommend not waiting until bond markets freak out before acting.
2. Some models have the stimulus plan creating lots of jobs and growth, others do not. But here’s what’s for certain: The Obama administration, in the form of Vice President Joe Biden, said the stimulus would “literally drop kick us out of the recession.” But no one thinks we’ve returned to prosperity. Michael Grabell, a reporter for ProPublica, documents the many failings of the American Recovery and Reinvestment Act in Money Well Spent? The Truth Behind the Trillion-Dollar Stimulus, the Biggest Economic Recovery Plan in History. Rather than focus on the questionable Keynesian economics behind the stimulus, Grabell focuses on its execution and management. Grabell concludes that “the stimulus ultimately failed to do what America expected it to do — bring about a strong, sustainable recovery. The drop kick was shanked.”
3. There was an alternative to the Obama stimulus, such as a permanent cut in individual and corporate taxes. Worked pretty well for Sweden.
Romney also had a great bit on the difference between government and the private sector:
During my time in business and in state government, I came to see the economy as having three big players – the private sector, the states and localities and the federal government.
Of these three, the private sector is by far the most efficient and cost effective. That’s because scores of businesses and thousands of entrepreneurs are competing every day to find a way to deliver a product or a service that is better than anyone else’s. Think about smart phones. Blackberry got things going. Then Apple introduced the iPhone. Now the Android platform leads the market. In the world of free enterprise, competition brings us better and better products at lower and lower cost. Innovate and change or you go out of business. And the customer — us — benefits. …
Imagine if the federal government was the sole legal supplier of cell phones. First, they’d still be under review, with hearings in Congress. When finally approved, the contract to make them would go to an Obama donor. They’d be the size of a shoe, with a collapsible solar panel. And campaign donors would be competing to become the all-powerful app czar.
My point is this: As President Obama and old-school liberals absorb more and more of our economy into government, they make what we do more expensive, less efficient and less useful. They make America less competitive. They make government more expensive.
What President Obama is doing is not bold; it’s old.