Obama's Economic Plan is Unworkable

From the IHT:

Democrat Barack Obama said Wednesday that as president he would spend $210 billion to create jobs in construction and environmental industries, as he tried to win over economically struggling voters.

Obama's investment would be over 10 years as part of two programs. The larger is $150 billion to create 5 million so-called "green collar" jobs to develop more environmentally friendly energy sources.

Sixty-billion dollars would go to a National Infrastructure Reinvestment Bank to rebuild highways, bridges, airports and other public projects. Obama estimated that could generate nearly 2 million jobs, many of them in the construction industry that's been hit by the housing crisis.

"This agenda is paid for," Obama said as the Republican National Committee promoted an "Obama Spend-O-Meter" online to track his proposals and portray him as a tax-and-spend liberal. Obama explained that the money for his spending proposals will come from ending the Iraq war, cutting tax breaks for corporations, taxing carbon pollution and raising taxes on high income earners.

I would love to tell everyone that this is possible; that the US has the money to spend and that we can use major federal initiatives to minimize the impact to the housing mess.

But we don't.

And this is not a problem only faced by Obama -- it's faced by every major candidate. After 7 years of Republican dominated politics the US just doesn't have the money to spend. The damage has already been done.

Let's start with the fiscal history of the last 7 years. This information is from the Treasury Department and it shows the total federal debt outstanding at the end of the federal government's fiscal year.

09/30/2007 $9,007,653,372,262.48
09/30/2006 $8,506,973,899,215.23
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/30/2001 $5,807,463,412,200.06
09/30/2000 $5,674,178,209,886.86

Currently, the total debt outstanding is $9,250,932,577,938.04.

To put that in perspective, debt as a percentage of GDP has increased from 57.29% in 2001 to 64.47% in 2007. That's a solid and steady increase.

Now -- the Republicans have created a meter on their website to track the increases in government spending. You guys ran the government for 6 years. You had complete control. YOU GOT US INTO THIS MESS IN THE FIRST PLACE. SHUT THE HELL UP.

And no -- this is not some ephemeral concept that means nothing the real world. Take a look at a chart of the US dollar:

The dollar has been dropping for the better part of the last 6 years. Over the last few years we've seen competition from the euro start to knock the dollar out of it once dominate reserve status -- which has helped to continue the dollar's downward spiral. If we don't start seriously dealing with the deficit soon, we can expect further declines in the dollar which will seriously hurt us in the long run.

No candidate will run on a cleaning up the deficit platform. It's not an economic winner -- especially during a period of economic problems. In addition, the way to clean-up the mess -- raising taxes and asking people who benefited from the last 7 years to now pay their fair share of that growth -- is a politically dicey proposition at best. So what is actually in the interest of the country in the long-run just isn't going to work politically.

And some of Obama's plan is really good -- especially the green-collar jobs idea. That makes great sense, especially in the long-run.

But the money just ain't there.

Comments

[SirReal1]

Hale,

I must admit that I am a bit confused by the accompanying chart posted in your article.

If the "gray" area indicates a "recession" (approximately March 2001 through November 2001), then what does the rather steady, and at times dramatic, (February-September 2002; December 2002-August 2003; October 2003-December 2004; March 2004-June 2004; etc.) downward trend indicate?

Isn't this what a "Depression" would look like?

[ntmessage]

The grey area superimposes the first Bush recession - which means negative growth for the country. The graph itself represents value of the dollar, our buying power against the rest of the world.

Put together, in a nutshell they indicate that to coverup the actual poor performance of the US economy in relation to the rest of the world, Bush has been pushing the dollar lower. This has been happening in fact, while the stated policy is for a strong dollar.

I would agree in straight standard of living yes we have been in a depression like spiral. It turns into a real depresson once the job start evaporating.

[PLUMPLUM]

I guess you have a better plan or is it that we should sit in this mess and do nothing? Obama started off on the right 'green' track by using one airplane for his campaign and press. Seems like he is also better at managing the money. Some people are just learning.

[rwferr]

No its Hillary who has a better plan.

[CindyV]

Plus, as mentioned earlier, Bill Clinton left the White House with a surplus! If anyone can get the debt down, it would be Hillary. Geez, I miss the peace and properity of the 1990s.

[jvarga]

Wouldn't have hurt for you to share said plan with us :P

[Gibbons]

That list and the chart could be Bush's Legacy that he is so worried about. He has good cause to worry.

[karvictho]

Let's not forget that lots of the war has been funded by bonds purchased by foreign governments, which will want to be repaid at some point. Particularly China, It is estimated that China holds over $900bn in a mix of US bonds.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml

Can we declare bankruptcy?

[JasonEverettMiller]

Yet somehow the money is there for unaccountable defense contractors and a huge, bloated federal government, mostly executive branch?

The money for Barack's plans is certainly there, we just need to spend the money we already have more strategically. We need to spend our money on long-term investments such as infrastructure, health care and education vice defense and corporate welfare.

Granted, we need to pay down the debt as well, but first we need to completely change the priorities of the government spending that remains as well as our tax policies that reward wealth over labor and leave us ham-stringed financially.

[schatsie]

I still want a CAP on Capital Gains. For the first $50,000 per year in Capital gains, use the lower rate and after that add on the deficit reduction tax of 15% to the lower rate...

No more tax dodges for hedge funders, no more corporate welfare and then we will have the $200 billion that Obama is talking about!

So glad to hear about this plan! I am moving into Obama's camp from Edwards camp.

[Merlin7]

Isn't it odd -- and deplorable -- that our government is perfectly willing to waste hundreds of billions of dollars on largely useless wars, but refuses to spend a fraction of that to expand health care, rebuild our cities or otherwise improve our nation? The reason, of course, is that the American establishment worships profit and idolizes business. Money lenders now run our country.

The president and Congress are extremely reluctant to spend tax money to help people if doing so might jeopardize some corporation's ability to maximize profits. That's why some Americans literally die in the streets from inadequate health care while our tax money is being shoveled into the furnace of Iraq.

What a sad and ridiculous nation we have become.

[paixa3]

Money has driven this nation since 1933. I believe that is the year that the USA invaded a nation with an elected president and imposed a dictator....

The country, NICARAGUA, the invaders, the U.S. Marines on businesses behalf....so, it has been going on for AT LEAST 80 years...

Please read some documented history.

[LewisR]

1933? How about since Boston folks tossed tea in their harbor. But sure, pick your ax and grind away.

[Robespierre]

Lets not forget Iran. We created that mess too. Why do we always find a way to get bit in the ass for stupid initiatives 20-40 years later?

Remember OSB? We created him just like we created Sadaam.