This election, Obama is the wiser economic choice … Even as our politicians disagree on a great deal, most experts can agree on the objectives of economic policy. The next president will not have succeeded in the economic area unless he accomplishes three things: 1. Reestablishing economic growth at a rate that makes real reductions in unemployment possible. 2. Placing the nation's finances on a stable foundation by putting in place measures to assure that U.S. sovereign debt is declining relative to America's wealth. 3. Renewing the economy's foundation in a way that can support steady growth in middle-class incomes over the next generation, along with work for all who want it. – Lawrence Summers/Reuters
Dominant Social Theme: Obama understands how government makes economy.
Free-Market Analysis: Lawrence Summers is offering up his usual recipe for a successful national economy. He seeks government involvement in all ways.
Nonetheless, from a perspective of dominant and sub-dominant social themes it is instructive to deconstruct Summers's arguments. They served the power elite well in the 20th century, though not so well in the 21st.
Who is Lawrence Summers? "He is the Charles W. Eliot University Professor at Harvard and former U.S. Treasury Secretary. He speaks and consults widely on economic and financial issues."
Given the level of success that Summers has achieved, the puerility of his thought is noteworthy. We can see that the three issues he highlights in his Reuters article are problems he expects Barack Obama's administration to grapple with, at least semi-successfully. Here's some more:
President Obama has recognized that the inadequacy of demand is the principal barrier to growth and has sought to bolster both public- and private-sector demand since becoming president.
Recent work by the IMF has confirmed the premise of his policies: namely, that at a time when short-term interest rates are at zero, fiscal policies are especially potent. The president has also respected the independence of the Federal Reserve as it has sought to respond creatively to the challenge of increasing demand even with short-term interest rates zeroed out.
And he has put the economy on track to nearly doubling exports over five years through a series of measures, such as increasing government support for exporters. He has made clear his commitment to taking advantage of current low interest rates to finance public investment and protect public-sector jobs, and to continue to promote US exports.
In contrast, Governor Romney supports immediate efforts to sharply reduce government spending even as economic slack remains and Congress—at the president's behest—has already legislated the most draconian domestic discretionary spending cuts in history.
Through some set of intellectual gymnastics, Mitt Romney concludes that a government purchasing a new weapon systems or the recipient of a tax cut buying luxury goods creates jobs, but spending on fixing schools and highways does not.
He also seems comfortable involving himself in monetary policy, favoring a reduction in the supply of credit relative to current Fed policy. And his insistence that he will name China a currency manipulator on his first day as president, even before his appointees have moved into their offices, surely increases uncertainty by making a trade war possible.
Where to start? Summers likes the idea of zero-percent interest rates. Presumably he doesn't have an aged mother or father with life insurance. Low interest rates are not just killing yields; they are destroying variable and whole-life instruments themselves.
Summers is pleased the president has supported "exporters," though he delicately skates over exactly what these exports are. We have a funny feeling many may be weapons-based.
The idea that Obama "respects the independence of the Fed" is also satisfying. Of course, this is the same Fed that may have printed and disseminated US$16 trillion in short-term loans in a very short period of time. Many of the loans may not have been repaid.
How on Earth did the US reach a place where a handful of men entirely dominate the money system and can print as much as they choose? These men fix the rate, price and volume of money – even though it is self-evident that price-fixing never works. Summers should know that elementary principle but it seems to elude him.
What bothers Summers is the idea that Romney wants to reduce government spending sharply. This actually is not true, as Romney is an ally of the trillion-dollar military-industrial complex that engorges itself on both tax dollars and debt.
But Summers doesn't seem to have met a problem government can't solve. Here he sums up the case for government action:
Governor Romney has not suggested even a partial approach to the budget that has enough detail for independent experts to fully evaluate … He has spoken of "closing loopholes" without naming any specific items. And he's done so in the face of repeated demonstrations that even the elimination of every tax benefit for those with income over $200 thousand would raise far less than the totality of his proposals would cost.
From the Lewis and Clark expedition to the land-grant colleges to the transcontinental railroad to the interstate highway system to the original research and development that led to the Internet, the federal government—with leadership from both political parties—has always sought to lay a foundation for future prosperity. President Obama has continued this tradition, recognizing that in an uncertain world some investments will work out better than others.
While audits have found many fewer problems with public investments than most expected over the last few years, much has been accomplished. Major efforts to measure and act on student achievement results are now in place in most states. Medical records are being systematically computerized. Domestic fossil fuels and renewable energy sources are meeting more and more of our energy needs. New financial protections are in place for consumers even as the capital reserves required of financial institutions have been substantially increased and student lending has been streamlined. These steps illustrate the kinds of progress that a second Obama administration would strive towards.
What world does Dr. Summers live in? The US is some US$200 trillion in debt (all in), is embroiled in about five undeclared wars, has poisoned people with depleted uranium throughout the Middle East, has created such wild booms and busts via central banking that the dollar reserve system has basically foundered, putting millions out of work and shutting down large swaths of the private sector.
Obama has been laboriously trying to restart the economic engine of prosperity using the same bankrupt tools that Summers proposes. The idea that Summers suggests all this in face of widespread knowledge of the failure of these policies – and of what is generally called the United States – only illustrates the bankruptcy of elite memes.
There's no "there" there anymore. Nothing but recycled nostrums that offer no conviction and less cohesion. With the advent of the Internet, the old dominant social themes are dying and every day via elitists like Summers we are shown there is nothing to put in their place.