Robert Samuelson dissects the logic of the Obama economic plan and finds that the administration has things exactly backwards:

What Obama proposes is a “post-material economy.” He would de-emphasize the production of ever-more private goods and services, harnessing the economy to achieve broad social goals. In the process, he sets aside the standard logic of economic progress.

Since the dawn of the Industrial Age, this has been simple: produce more with less. (“Productivity,” in economic jargon.) Mass markets developed for clothes, cars, computers and much more because declining costs expanded production. Living standards rose. By contrast, the logic of the “post-material economy” is just the opposite: spend more and get less.

Consider global warming. The centerpiece of Obama’s agenda is a “cap-and-trade” program. This would be, in effect, a tax on fossil fuels (oil, coal, natural gas). The idea is to raise their prices so that households and businesses use less or switch to costlier “alternative” energy sources such as solar. In general, we would spend more on energy and get less of it.

The story for health care is similar, though the cause is different. We spend more and more for it (now 21 percent of personal consumption, says Brookings economist Gary Burtless) and get, it seems, less and less gain in improved health. This is largely the result of costly new technologies and the unintended consequence of open-ended insurance reimbursement that encourages unneeded tests, procedures and visits to doctors. Expanding health insurance might aggravate the problem. Many of today’s uninsured get health care free or don’t need much because they’re young (40 percent are between 18 and 34).

Together, health care and energy constitute about a quarter of the U.S. economy. If their costs increase, they will crowd out other spending. The president’s policies might, as he says, create high-paying “green” or medical jobs. But if so, they will destroy old jobs elsewhere.

Think about it. If you spend more for gasoline or electricity — or for health insurance premiums — then you spend less on other things, from meals out to home repair. Jobs in those sectors suffer. The prospect is that energy and health costs may rise without creating much gain in material benefits. That’s not economic “progress.”

It’s not just the grotesque size of the budget and its deficits; it’s the magical thinking behind it that creates menace. Samuelson: “Obama and his allies…left the impression that somehow magical technological breakthroughs will produce clean energy that is also cheap…We cannot build a productive economy on the foundations of health care and “green” energy. These programs would create burdens for many, benefits for some. Indeed, their weaknesses may feed on each other.”

This entry was posted on Tuesday, April 14th, 2009 at 4:00 am and is filed under business, Democrats, General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.