Obama's Rescue Plan Is Doomed to Fail
- By Boris Kagarlitsky
- Jan. 22 2009 00:00
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President Barack Obama's plan to save the U.S. economy is so ambitious that it surpasses even Franklin D. Roosevelt's New Deal and Lyndon B. Johnson's Great Society. Obama's stimulus program offers an entirely new strategy for creating jobs and increasing production while at the same time addressing other longstanding issues, such as the environment, alternative energy sources and education.
The president promised to lower taxes and hand over a large part of the bailout funds to private corporations, leaving the government to manage health care, law enforcement, education and other public services.
In short, Obama's plan is exactly what the United States -- and the rest of the world -- needs right now. The only problem with it is that it will never work. Obama's proposal is an attempt to save the flawed U.S. system from itself without instituting any fundamental changes, and therefore his economic recovery program is doomed to fail.
Even a schoolchild can see the contradictions in the president's stimulus plan. Obama proposes huge increases in government spending while at the same time lowering taxes. Where is he going to find the money to fund his expanded version of the old New Deal? At some point, Obama will step into fiscal quicksand when it turns out that runaway inflation and an enormous national deficit have caused the U.S. government to default on its debt obligations, much like what happened in Russia in 1998 and Argentina in 2001.
Obama patiently explains to his listeners that only the government can solve the economic crisis, but in the same breath he promises to hand over a large part of the bailout funds to the private sector. However innovative Obama's plan might be, it will be based on the same flawed principles that led the United States and the world into this crisis in the first place. Losses are socialized and profits are privatized in a program where the government bears the expenses while favored companies pocket the profits.
It is commonly believed that the government is less efficient than the private sector, regardless of what country you are talking about. But in recent years, the private sector in the United States has been more corrupt and inefficient than even the worst of Soviet bureaucrats.
If Obama believes that only the government can pull the United States and the world out of the crisis, then he should place all of his bets in that camp. But his plan will be successful only if the public sector can make enough money to pay for the cost of the bailout without resorting to irresponsible borrowing, excessively high taxes and printing money.
The people and Congress should evaluate the results of Obama's programs with the same scrutiny that shareholders do in a publicly traded company. Unfortunately, Washington's ruling elite is unlikely to embrace this appeal for transparency and accountability.
If Obama wants to go down in history as having saved his country from the economic crisis, it will not be enough to simply spend enormous sums of money. It will be necessary to radically change the government's role in the economy by making it capable of not only spending money, but of making it too.
Boris Kagarlitsky is the director of the Institute of Globalization Studies.