On Obama’s words of wisdom

On Tuesday President Obama spoke to Congress about the state of the economy. In this speech, he justified his economic stimulus plan and explained why America needs it. There are a few comments I have about the content and delivery of the speech that I would like to discuss.

Overall, I was impressed with Obama’s tone and delivery of the speech. He did not shy away from telling us what we needed to hear, but neither did he say anything that would make Wall Street panic again (or at least it didn’t sound like it). I did find the incessant applause breaks annoying, though. A few times I found them quite reminiscent of those during speeches given by fascist leaders, particularly because of the fact that they were scripted. (I am not calling Obama a fascist—I am just making a comparison.) Though Obama does need to “sell” his plan to us, are theatrics really necessary? Besides, the applause breaks give Obama’s opponents a chance to snub him by not clapping at the appropriate moments (which many did). Beyond that, though, I have no complaints about the delivery of the speech—as always, Obama is an erudite orator.

Throughout the speech, Obama had outlined where his plan’s money was going and why. I found most of his explanations satisfactory. But after the speech, I had a startling thought: Who the heck is paying for all this? And when? At one point in the speech, he states that “we cannot leave the deficit my administration inherited for future generations.” Fine, fine. But then he goes on to say, “families making under $250,000 a year will receive a tax rebate and no tax increase.” He went on to talk about other tax cuts included in his plan. But if he is not raising taxes, who is going to pay for this? Yes, Obama is raising taxes on the rich, but surely this will not pay off $800 billion + the existing deficit + however much Gietner’s absurd plan is going to cost. Though I am a supporter of fiat money, Obama must “play by the rules” and pay back any debt he creates. So, is he going to leave some of this debt for future generations anyway? Or does he have something else in mind?

In general, I do agree with Obama’s stance that we must avoid the “politicians’ fallacy” (known as the Thatcherite fallacy in the UK) when dealing with the recession. For those unfamiliar with this logic error, the proof looks something like this:

1) We must do something.

2) This is something.

3) Therefore, we must do this.

Instead, Obama has always stated that we cannot afford to make a mistake here. Though action is necessary, it must be the right kind of action. With any luck we will eventually reap the benefits of this stimulus plan, which the President has put so much faith in. 

Tomorrow I will return to what I was discussing yesterday: Applied Monetary Management.