February 20, 2009
Ken Silverstein
EnergyBiz Insider
Editor-in-Chief
President Obama faces two wars and the worst recession since at least 1982. His prescription to remedy the nation's financial ills is now termed as Obamanomics -- the infusion of roughly a trillion dollars into the American economy and specifically into new transmission lines and green energy production.
But will such policies work and how do they differ from Reagan's legacy? The common thread running through both Obama and Reagan is that each displays the confidence and winning attitude that is necessary to unite the American people and to increase the level of resilience that it takes to let commerce flow. And while the two men have disparate political philosophies, Obama has incorporated some of Reagan's main tenets into his national economic plan and namely targeted tax cuts.
Obama, though, is clear about where he stands: The recession will deepen unless the national government's vast resources are redirected into public works projects. Ideally, the private sector -- with the right incentives from the federal government -- would step forth with the funds. But the risks are too high and the private capital is unavailable. By infusing currency, confidence will be restored and business will once again flourish.
"The question we ask today is not whether our government is too big or too small, but whether it works ... We're guided by what works, not by any ideology or special interests," Obama said in his Inaugural address.
President Reagan, too, relied on fiscal stimulus programs. But unlike the 1980s when such spending was targeted toward national defense, Obama will channel the funds into roads, bridges and national transmission systems -- the kind that will create a modernized network that can save energy, maximize energy production and improve reliability. And while Reagan said that "government is the problem and not the solution," Obama has said that government is necessary to create "opportunity."
Liberal thinking stresses that government intervention is the most pragmatic approach to easing national burdens during recessionary times. That contrast with that of conservatives, who say that the "invisible hand" of the free market will work its wonders if government just steps aside. For his part, Obama recognizes that free markets are powerful tools but says that today's problems are too expansive to be left to the devices of the capitalistic movement.
The fiscal stimulus is one component. Government intervention is the other. In the case of energy and the environment, the president says that the two can progress together. By asking industry to comply to new pollution and global warming rules, Obama says that it will lead to the development of powerful new technologies that will create the next generation of jobs and the ones to lift the nation back onto its feet -- in the same way that Internet and high tech movement empowered the economy in the late 1990s.
American Psyche
Obama has said that if his economic remedies fail that the nation will have a new president in four years. But he emphasizes that he arrived at the White House at a time of economic peril, and in a heap of red ink.
Not everyone is on board with the president. In fact, his economic stimulus package just signed into law passed largely on partisan grounds. Republicans argued that it will leave behind an insurmountable debt that will never be repaid while it also gives short shrift to the type of tax-cutting measures employed by Reagan. With the stimulus plan, the current year's budget deficit is projected to be $1.6 trillion, or three times that of the 2008 shortfall.
In an op-ed written in the Wall Street Journal, Peter Ferrara, who is director of entitlement and budget policy for the Institute for Policy Innovation, writes that Reagan implemented across-the-board tax rates to provide incentives for saving, investment and entrepreneurship while also reigning-in the government and unleashing the powers of deregulation so as to spur innovation and cut costs. The size of government was also trimmed, he says, noting that inflation went from 13 percent in 1980 to 3 percent in 1983 while unemployment fell from 10 percent in 1982 to about 5 percent in 1988.
"In today's world, that would especially mean removing the onerous restrictions on energy production -- allowing drilling offshore and onshore for oil and natural gas, revival of the nuclear power industry, and construction of more electric power plants," writes Ferrara. "The Obama administration's economic policies do not include any ... Reagan components. In fact, the stimulus plan is the greatest increase in government spending in the history of the planet."
But pain now permeates the American psyche. And while many Reagan-era economists like that of Ferrara espouse the "trickle down" strategies used in the 1980s, another diverse group of economists are now arguing for a powerful economic punch provided by the federal government. In any event, Obama is not the revolutionary leftist that his critics claim but rather a pragmatist who practices what he preaches -- to promote government policies that work and not ones founded on ideology.
To that end, the president has embraced the green economy and the desire to increase the production of renewable energy. That would increase the nation's self sufficiency while also helping to cleanse the air. The nation will then rally to the cause, creating more investment in modern technologies and vast new economic opportunities for all.
Obama favors free markets. But he reasons that such dynamics can be unfair and lead to widening economic disparities. That thinking combined with today's harsh recession have formed the centerpiece of what will eventually become his legacy: a fiscal stimulus plan and more government intervention. While not Reagan-like, the American people have spoken and will do so again in four years.
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