Saturday, August 15, 2009

In defense of President Obama and government

This is a "Guest Opinion" submission to the Salem Statesman Journal; we'll see if they print it, and how many words they allow - I'm not sure if they've ever given me more than 200 words in the past. (Correction - letters to the editor are 200 words, I believe they have given me 400 words for an opinion. However, I'm wondering if we'll see any "Opinions" giving the other side on this issue).

Since the Statesman Journal recently gave around 400 words to Allan Erickson's attack on government in general and the Obama administration in particular, I hope they will give equal time to an opposing viewpoint.

I believe there is a role for government in our society, particularly in times of crisis such as the economic meltdown of the past year. If both the Bush and Obama administration had taken a laissez-faire approach during this time we would now be experiencing social chaos with homeless shelters overflowing and millions of people in bread lines. As Paul Krugman said, thanks to big government we have avoided a second Great Depression. If you read Krugman's column in the NY Times you will be familiar with the logic behind deficit spending by the government when private spending has dried up. This is exactly the situation now, the lack of available credit is having a powerful deflationary effect. Increasing unemployment is causing even people who are good credit-risks to lose their houses, driving the housing market further down and adding to the risk of bank failures. If unchecked, this continues a downward spiral of wages, business profits, and tax revenues.

The idea behind government stimulus spending in times like these is to stop the downward trend and create economic activity artificially until it can start happening unaided again. It has the added benefit of avoiding the social dislocation created by massive unemployment and homelessness. Even a "fake" job can keep someone in their house and put food on the table.

So President Bush took action to save the financial part of the economy and President Obama continued this and also passed the stimulus bill to save the every-day working part of the economy.

There is one problem with all this: you can only save an economy if there is something there to save. Unfortunately no one seems to have figured out that having 70 percent of our economy depend on consumerism won't work when the consumers can't borrow money anymore. This idea was ridiculous in the first place, but it worked for about 20 years. The stimulus spending has provided temporary relief, but when the economy does not respond (because this kind of economy can't exist anymore) we will be in trouble unless we have used our spending to transition to something else.

We should give President Obama credit for keeping things from getting a lot worse, but we should demand that he provide leadership for a new kind of economy that makes sense and provides for our needs.

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