Bah Humbug to a Dickens’ Economy: Scrooge lives in the White House

Posted by By at 20 December, at 12 : 07 PM Print

Scott Paterno

I woke up this morning, a week before Christmas and after suffering the twin pain of a ridiculous Eagles win and the utter agony of the Steelers loss, to learn that – yet again – its all Bush’s fault.  I think – I may be simplifying.

Let me say it this way – its all those unprogressive types who voted for Bush’s fault.

Phil Gimson, (Rock The Capital Contributor) is someone I do not know, but I know his type after having read his piece, “A Modern Economy Steeped in Dickens,” this morning.  I am not going to critique every line – although it is replete with glib conclusions and accusations that are repeated so often that many believe they are true (they “forced Colin Powell to lie about WMDs,”), for example, an accusation the man himself has refuted, is one that ignores the FACT that the entire free world’s considered conclusion was that Iraq had WMDs.  Get over it fellas, we blew the call, but the “we” was the free world, UN included.  But, like Phil, I digress.

I am not disagreeing that it is hard out there and we need to find ways to grow the economy.  I do disagree that the villain is lower taxes, military spending, the war in Iraq, etc.  The $3Trillion increase in the national debt the last 2 years, the explosion of federal spending on the horizon that dwarfs that, has NOTHING to do with the last Administration or defense spending.  It is the Obama administration and its policies that have created such uncertainty that it has become systemic economic instability, and it will compound those problems if they follow Mr. Gimson’s advice. I will make two observations in support of this.

1.  Employers aren’t hiring in spite of making money again because of tax policy and Obamacare.  This is a fact; the private sector is making more money than a year ago yet job growth is extremely slow.  Mr. Gimson seems to imply that there is something mean spirited here when he aligns this fact with Mr. Scrooge – an implication that many have made.  What this ignores is the why employers aren’t hiring:  uncertainty in two enormous areas, tax policy and healthcare.

The engines of job growth in an emerging from recession economy are small businesses – ones that have typically been subject to individual tax rates, who lack the resources and sophistication to maximize the tax code to protect their income, and – bluntly – who have not typically offered health insurance or who have done so at a reduced rate.

Enter the Obama administration.  In less than 18 months, they hear that tax rates for people making over $250,000 a year are going up and that they will have massive new benefit they need to provide or pay the Government for providing.  The election of a Republican congress has not assuaged them, either – Obamacare cannot be repealed in any significant form for at least 2 years and the tax cut deal, which expires in 2012, is a Damocles Sword hanging over their heads, just farther in the future.

All of this uncertainty about income, benefit costs, and policy shifts makes  it hard to hire employees.  So if you are looking for  a Scrooge this Christmas, he lives CURRENTLY at 1600 Pennsylvania Ave.  Agree to a 5 year freeze on tax increases, agree to postpone ALL of the effective dates of Obamacare for 5 years, and watch the hiring begin.

I know, I know – I am such a Scrooge.

2.  The Defense Department is not the cause of our budget issues.  Mr. Gimson also falls into the classic liberal trap – lamenting the spending on defense as a place to cut without ever examining what that means economically in the long term.  The fact is, even with the Chosen One in the White House, the world’s waters have not stilled in the pleasant glow of international peace.

In fact, if anything, the world has gotten significantly more dangerous since January 20, 2009.  The Iranians are going to get a bomb, and there is nothing tangible this Administration is willing to do about it.  The Korean Peninsula’s cease fire agreement (yup, they are still in a state of declared war) looks more fragile as Kim Jong Il faces his own mortality and seems interested in taking some people with him. Al Queada has not been appeased by our internationally debasing ourselves and retreating in the face of inferior power, and all the while the Chinese build strategically and tactically to first rise as a bi-polar balance and then ultimately to assume hegemonic status.

Against this backdrop, we now have – in REAL terms – a Navy that will be the smallest we will have had since 1914, a time BEFORE we were a world power.  Obama’s Secretary of the Navy has said we need at least 315 ships to meet our obligations; by 2012, we will have less than 280.  Under Reagan, a mere generation ago, that number was over 600.  And that was before we had to attend to the Chinese and their interest in Africa (China, by the way, will launch its first Aircraft carrier later this year, a mega carrier that will be the first to rival a US Super carrier in fire power and planes).

The American military dominance of the last 65 years has been costly, no doubt, but it has also been extremely beneficial. Without the belief that we are militarily dominant the world is less economically stable.  Look at the 70s, a time when Russian ascendancy was almost conceded by the left, and the economy and mood of the country followed it – we had the worst economy in almost two generations.  Reagan reversed it by being strong and providing a sense of stability – one that we enjoyed through 9/11/2001.

People looking for cuts always look at the dollar number of the defense budget and think what else they could do with the money.  What they ought to consider is what it will cost us to have global instability – especially when we get 97% of our needed Rare Earth minerals, critical for defense and “renewable” energy technology, from none other than China.

You want a stimulus? Build ships here made from American Steel.  You want long-term unemployment in the high single digits and low double digits? Cut defense spending and use it for entitlements.

Mr. Gimson is making a seasonally topical, if misplaced, analogy.  The temptation is to look at these things in a “this or that” manner – guns or butter, tanks or bread.  But in reality, one must have stability and certainty in order to have ANY of the blessings we wish for at this time of year – the type of stability and certainty that comes from settled expenditure, tax policy and a robust defense.

(To see what Scott’s all fired up about read this piece here on Rock The Capital.)


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This post was written by:
- who has written 77 posts for Rock The Capital
Scott Paterno is an accomplished policy analyst and political consultant based in Hershey, PA. Mr. Paterno, never one to sit still, has practiced law, run for a house seat, and worked as lobbyist in Harrisburg and Washington. Paterno is Vice Chairman of the Sustainable Energy Fund and is currently pursuing a master’s degree in Political Science. He is happily married with three children. - Email scottp

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