President Obama, Abdicating Leadership

Posted by Jeff Carter
on February 14th, 2011

Without getting wonky about the billions and trillions in the budget numbers, I’d prefer to make a couple of other points.

First, Obama via this budget has abdicated leadership. He might as well resign and go play golf with Hosni Murbarak. For every one dollar of decreased spending, there are eight dollars of increased taxes. Obama has proven to be a classic tax and spend Democrat. The only thing he has in common with Ronald Reagan is they shared the same address. Secondly, the budget assumes that we will be at full force in Iraq and Afghanistan for the next ten years. But, we already knew that Obama is looking to draw down troop levels very soon. When the actual cost data from troops on the ground compared with the projected force tilt in favor of the troops on the ground, Obama calls this a “savings”. Obamanomics is a smoke screen. This budget dramatically ramps up spending. Not only that, it ramps up spending on the wrong types of things.

Logic like that is so disingenuous it is startling.

Both parties are guilty of selling budgets to the American people like that. Here is hoping that the new freshmen in Congress enforce some discipline and the House releases a budget that is square with Americans.

Presidents are elected to lead. Obama would rather point fingers and criticize. He is talented at that. He leads like he has a paper bag over his head. Totally out of touch with reality. In the case of the budget, Obama is expecting House Republicans to take the lead so he can yammer on about how they are hurting everyone.

The major point that I would like to make is that both parties use static budgeting to project their figures. This means that if a tax generates x amount of income, raising or lowering the tax by 10% generates +/- .1x. That is playing fast and loose with the truth. Everyone knows that if you lower or raise taxes, behavior changes. It’s what happens at the margins that is critical to the numbers. It is high time that budget projections use dynamic analysis, and show the math behind their projections. Then economists can argue about the math behind the projections. The way things are done today, wonks speak and American’s heads drown in meaningless figures.

America will have to bide its time until 2012 to have a chance to elect someone with fresh initiative. Obama’s entire term has been spent putting in place tired old Democratic ideas that originated in the 1950′s. Problem is, on some issues we can’t afford to wait.

For a different take on this, you must read Chicago Boyz. Lexington Green outlines this as a strategy. Great and provocative piece.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.