Economist Scott Grannis writes in his excellent blog, The Calafia Beach Pundit, Coach Obama still doesn’t understand the game.


If he learned anything in the past two years, it was that the public doesn’t like the concept of stimulus spending, and it doesn’t like a lot of new government programs. Solution? Call the stimulus spending something else, and don’t say it’s government that is taking over healthcare, energy research, high-speed rail and education, just say it’s all about investments that will make our economy stronger. That may sound great to other liberals, but to those working in the trenches it’s just more spending, more regulations, and more suffocating government presence. Competitiveness comes from the bottom up, not from the top down: from entrepreneurs, inventors, risk-takers, and just about anyone who is willing to work and wants to improve his standard of living. Policymakers’ ability to influence things is limited to setting the ground rules that in turn maximize the private sector’s growth incentives. The chances are slim that Coach Obama can direct tens and hundreds of billions of dollars to the companies and industries that are going to revolutionize the future; there are millions of people at work all over the world trying to do this already, and there is no shortage of capital ready and willing to finance economically viable projects.

If Obama really understood the economy, he would have showed much more interest in cutting spending. Proposing to freeze discretionary spending while also proposing to spend a whole lot on “investments” is not going to avoid the fiscal train wreck we are headed for, and it’s not going to help the economy. Federal spending has increased hugely under his watch, and is scheduled to absorb an unprecedented amount of the economy’s resources in the future. This is sapping the economy’s strength by allowing inefficient government programs and bureaucrats to waste the economy’s scarce resources. Cutting spending now is the best way to strengthen the economy, since it returns money to the private sector where all true growth originates. Cutting spending also reduces expected future tax burdens, which in turn encourages more investment and work effort.