America's radical agenda will fail says tax expert

Current Events (C:*CURRENT)
Friday July 10 2009 - Street Wire

by Jim Matkin

At a Fraser Institute presentation on Thursday, Jason Clemens assessed the first six months of President Barack Obama. As the Director of research for a San Francisco think tank, the Pacific Research Institute for Public Policy, Mr. Clemens has specialized in fiscal policy. Previously, he worked with the Fraser Institute for 10 years researching tax and labour policy. He is a Canadian "policy wonk" with a prodigious publication record of over 250 research papers to his credit. While he sees "all bad" under President Barack Obama he also sees "exciting opportunity" emerging from the U.S. fiscal crisis for Canada, particularly with the "train wreck" unfolding in California. He does not think the U.S. is about to hit the deficit wall, but he said California is in such bad shape it could well go under any day.

A radical presidency

Judging the new President begins with the question, is he a radical or a moderate and Mr. Clemens is resolute that President Obama's "expansive vision" of the role of government makes him a radical.

A number of times in his presentation Mr. Clemens contrasted the fiscal successes of President Clinton, also a Democrat, who governed as a moderate and centrist. Mr. Clinton's track record was "exemplary on fiscal and domestic policy" observed the California policy expert and indeed he claims President Clinton was clearly the very best of all of the U.S. presidents over the past 40 years, including President's Ronald Reagan and John F. Kennedy. The unhappy presidency of George Bush came in for particular condemnation as a complete repudiation of the Republican values of a "smaller and smarter government." While Pres. Obama has included centrist thinkers in his executive, such as Larry Summers and Paul Volker, he is not "sprinting to the middle" as he claims.

Mr. Clemens bolsters his indictment of presidential radicalism with the opinion of Dan Henninger in a Wall Street Journal editorial entitled, "A Radical Presidency." He asserts the Obama presidency is going to be a radical presidency with an attempt to change "the relationship between the people and their government."

Reforming everything

He also quoted and endorsed the opinion of David S. Broder of the Washington Post who says, "The size of the gambles that President Obama is taking everyday is simply staggering." He is overhauling the environment, energy, health care, education and industrial policy." There are 10 major foreign policy initiatives underway now and at least 15 major domestic policy reforms in the works. The overload has required a modus operandi of initiating the broad principles of legislation he wants such as health care and education reform and then leave the details to Congress. The House is more left-wing than the President, but not so the Democratic-controlled Senate with its Blue Dog Democrats, and this will be the Achilles heel of many radical reforms proposed by the new President. Much ado was made of achieving the magic filibuster-proof 60 supporters in the Senate, with the recent addition of two more Democrats, but Mr. Clemens says Senator Ted Kennedy is too ill to vote.

Deficit unsustainable

The debt and deficit are unsustainable. Even President Obama now calls the current deficit spending unsustainable and warned of "skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries." Fortunately recent the U.S. saving rate has jumped up to more than 6% which means some new debt can be financed internally. "We can't keep on just borrowing from China," said the President, inferring that higher taxes are coming.

Inflation scare

There is a real potential of returning to the sky high inflation rates of the seventies says Mr. Clemens "maybe not 15%," but he believes the Federal Reserve has become politicized and will be even worse if Larry Summers takes over. During questions Jock Finlayson, a director of the Bank of Canada, stated the U.S. deficit mess described well in the presentation is likely only to be overcome if the U.S. monetizes the debt through inflation. Mr. Clemens agreed and pointed to the views of Allan Meltzer from Carnegie Mellon, "The coming inflation is going to make the 1970s look like a picnic." The California expert viewed the "implosion of the Republican Party" as a handicap to fight for deficit control through a smaller, smarter and less costly government. The complexity of the checks and balances disperses power so it is difficult to achieve the kind of deficit reducing consensus managed by former Canadian Prime Minister Jean Chretien and Paul Martin says this researcher.

Some examples of current "dumb" government spending according to Mr. Clemens are paying $105,000 to firefighters working part-time or granting blueberry inspectors $50,000 per year for meeting infrequently. The economic solution is straight forward - we must follow the mantra of "a smaller and smarter government" which is not going to happen under the leadership of the new great communicator and radical, President Barack Obanma.

Canada's opportunity

While admitting that Canada will be side-swipped by the U.S. financial mess, nevertheless there is a golden opportunity unfolding for us from the crisis. Californians are fed up with their botched affairs and a mass exodus is underway says Mr. Clemens. High tech companies moving out of California to Utah, Idaho and Arizona in the U.S for example, could be persuaded to consider Canada and Vancouver in particular as an attractive alternative.

� 2009 Canjex Publishing Ltd.