Friday, February 13, 2009
IN MY OPINION (Column)
Seniors, Be Prepared for a New Economy
By TED RUHIG
Today’s NEW economics prove to be nothing but OLD STYLE economic thinking from the Great Depression. Back then, the new idea was identified by the name of the economist who came up with the thinking that the government should borrow when the economy slows to keep people employed because private sector investment wouldn’t be enough. This approach was called Keynesian, after the innovative English economist, philosopher and statesman, John Maynard Keynes, who fashioned the response to the economic crisis of the 1930s.
Today, as the debate rages over how to kick-start the faltering economy, few days pass without Keynes’ name being invoked in newspapers. The Christian Science Monitor suggests that Obama is invoking Keynesian economics as key to saving the world from a new Great Depression. It points out that “rusty Keynesian tools - larger budget deficits, tax cuts, accelerated spending programs and other ‘economic stimuli’ - have been brought back into use the world over to cut off the slide into depression.”
Another editorial, not wanting to put all of Obama’s economic plans into the Keynesian basket, describes Obama’s economics as “Obama’s Kitchen Sink Economics.” However, Obama’s economic policies are characterized - Keynesian, supply side, monetary. What he is trying to do is what will work, even with the kitchen sink thrown in.
Despite the reemergence of Keynes as a policy rock star, voices arguing against a Keynesian response to the financial crisis remain poignant. Over 200 university economists recently inserted a full page ad in the New York Times disputing Obama’s approach to economic policies. Leading the ad is a direct quote from Obama: “There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy.” Obama made this observation on January 9th.
The ad, sponsored by the economic professors, concludes bluntly that “lowered tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.” This is the OPPOSITE of Keynesian economics.
The Wall Street Journal warns that inflation has quickly disappeared as a concern around the world. It’s likely to reawaken once growth perks up. That leaves a big potential for the resurgence of inflation to once again trouble the world. President Obama judges that the greater risk comes from the potential of a depression, rather than the risk of inflation.
Obama’s economic czar is Larry Summers. Time magazine reports that his job is to convince skeptical senators that shelling out nearly $1 trillion of federal money over two years isn’t an exercise in traditional pork barrel spending but a vital step needed to save jobs and invest in the future.
President Obama has stated that the nation’s long-term economic recovery cannot be attained unless the government finally gains control over its most costly entitlement programs. He noted during his campaign that overhauling Social Security and Medicare would be “a central part” of his administration’s efforts to contain federal spending.
A recent article in Time magazine observes that “when Obama unveils his annual budget in late February or March ...[he] is going to describe the kinds of approaches he wants to take to the entitlement problems that have been ignored for a long time.”
Quoting Obama at a recent interview: “We expect that discussion around entitlements will be a part, a central part of [budgetary] plans ... And I would expect that by February in line with the announcement of at least a rough budget outline we will have more to say about how we’re going to approach entitlement spending.”
The Republicans say that they favor entitlement reform. They say that they will work for passage of a reform budget if both parties share the risk. White House officials are talking to lawmakers about setting up a process to tackle the issues within a matter of months and plan to hold a “fiscal responsibility summit” soon.
Revamping entitlement programs is a stunningly ambitious undertaking. It seems clear that President Obama plans to take substantial action to save these programs.
Obama told the Washington Post: “This, by the way, is where there are going to be very difficult choices and issues of sacrifice and responsibility and duty. You have to have a president who is willing to spend some political capital on this. And I intend to spend some.”
Seniors better beware, for some of these sacrifices might include delaying retirement, stretching benefits and lifting the cap on taxable earnings.
I hope that all advocacy groups, political parties and all those who benefit from these programs will have open minds as debate on these matters occurs. Let’s not jump to conclusions and oppose proposals before they have been fully presented and thoroughly vetted. Instead, seniors, be prepared and let the discussion commence!
— Capitol News Service