There are at least 5 reasons why Obama will deepen the depression:
(1) President Obama will institute policies that will prevent wages from dropping to market rates. This is exactly what Herbert Hoover and his successor Franklin Roosevelt did in the 1930’s. Such policies by Hoover and Roosevelt dramatically increased the unemployment rate. By preventing wages from adjusting to market forces during the Depression, businesses were unable to afford to keep people employed. As a result, the unemployment rate skyrocketed to 25%. Barack Obama is of the same ilk, and he will not be able to resist policies that keep wages, and thus, unemployment higher than the free market would dictate. In this cycle, an unemployment rate between 10 and 15 percent is a very real possibility.
(2) He will raise capital gains taxes. We are in a period when capital is desperately hard to come by. Great American companies are begging our own government and foreign sources for capital. Raising the cost of capital by raising the capital gains tax rate is exactly the opposite of what we ought to do. It will choke off capital and deepen the depression. In addition, every notch upward in the capital gains tax rate will bring a notch downward in the stock market. Every notch downward in stocks will add more fear and will keep Americans from spending to support the economy.
(3) Obama and his pals in Congress will raise taxes not only on the upper echelon but also on the middle class. He has promised free health care, free college, free child care, free this and free that. Guess what. There is no free lunch. The working class will be hit with higher taxes along with the employer class. According to the National Taxpayers Union, Obama’s fiscal agenda will cost $344 billion per year. This agenda will force higher taxes on everyone. Herbert Hoover dramatically raised taxes in 1932 during the Depression. Economists now recognize this as perhaps the biggest tax blunder in American history. This sucked money out of the productive economy and sent the economy into a death spiral. The handwriting is on the wall; Obama will repeat the mistakes of the Great Depression.
(4) Obama’s policies will skyrocket the federal deficit. It is clear that his spending priorities far outweigh his revenue enhancements. Under normal circumstances, our economy can handle more debt during a recession. But in a period of asset deflation and credit contraction which began when debt was already too high, to balloon the deficit further is to risk the very foundation of our economy. His spending policies will expand the already incredible deficits created by the Bush TARP program. The risk is worldwide loss of confidence in the US government and its debt and a potential collapse of the bond market.
(5) Obama is committed to spending huge amounts of money on uneconomic ventures—such as the auto industry and solar energy. The American auto industry is hopelessly uncompetitive against the Japanese manufacturers.
In large measure because of the monopolistic power of labor unions, American manufacturers suffer a $1500 per car cost disadvantage. Throwing more money at the problem will not help unless the unions capitulate—an unlikely event. Government loans to the auto industry will never be paid back. It is a black hole. As for solar energy, it will account for only around 5% of the U. S. energy needs by 2020. And it is multiples more expensive per kilowatt hour. Every dollar spent by the government to support this industry, like other government wasteful spending, is money down a rat hole. And no doubt, Obama will find many other uneconomic projects to support.
These things will be explained to President Obama. But he will reject them because of his ideology. Obama is a left-wing ideologue. Other Democrat presidents have been fairly utilitarian. But not this man.
Nothing will stop Obama from pushing leftist/socialist economic policies on our country. And the results will be disastrous.
Mr. Meek can be reached by email at cmeek01@msn.com.
(6) He's said he wants to "renegotiate NAFTA" and is opposed to the free trade agreement with Columbia. The affects of such a protectionist trade policy could be the similar to that of the Smoot-Hawley Tariff of 1930.
“Obama is committed to spending huge amounts of money on uneconomic ventures—such as the auto industry and solar energy.”
there are some things I would like to see. Universal broadband is one of them. If everyone from Alaska to Wyoming had broadband it would be possible to have internet tv shows that would reach everyone. It will be a ‘game changer,’ like the original internet. This isn’t really an original obama idea, however. McCain is not only for this but he was also responsible for the switch to digital TV.
But if we’re just going to spend a lot of money on lots of small projects or prop up failed companies then this is just $ that will be taken away from the private sector.