Lincoln * Institute

Ralph R. Reiland

Ralph R. Reiland

The B. Kenneth Simon Professor of Free Enterprise at Robert Morris University

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Reflections

Barack's Failed Euro-nomics

by Ralph R. Reiland
 

The top concern of voters this year is the economy, with 40 percent of respondents in a recent New York Times/CBS News poll rating the "economy and jobs" as their primary issue in the election and another 15 percent ranking the economic issues of "gas prices and energy policy" as their chief concern.

That combined total of 55 percent is more than double the 21 percent of respondents who ranked "terrorism and national security" as their chief concern.

The bad news for Republicans is that these surveyed voters said Barack Obama would be better than John McCain at handling the economy.

"Sixty-five percent of those surveyed said they were confident that Mr. Obama would make the right decisions on the economy, compared with 54 percent who expressed confidence that Mr. McCain would," reported the Times.

"Voters are more negative about the condition of the nation's economy is this election year than they have been at any time since 1992, when Bill Clinton unseated an incumbent president by running an 'it's the economy, stupid' campaign," reported the Times.

Moreover, nearly half of the poll's respondents said they expected Sen. McCain to continue the policies of President George Bush (while only 9 percent agreed that he should).

Obama, adding to the negativity about the economy in order to sell "change," regularly portrays the U.S. economy as in a state of near-collapse. "Economic disaster is already here," he declared at a recent campaign stop in Virginia.

In fact, the economy is not in a state of "disaster," and "change" in the wrong direction would only make things worse.

With high gas prices, for instance, the most likely consequence of Obama's calls for restrictions on drilling and higher taxes on oil companies would be less supply and even higher prices at the pump.

Keith Marsden provides a more accurate and less-politicized description of the current condition of the American economy than the picture Obama paints at his rallies.

On the global level, Marsden, a senior economist at the International Labor Organization, a former economic adviser at the World Bank and a fellow at the Centre for Policy Studies, reports that "U.S. output has expanded faster than in most advanced economies over the eight years of George Bush's presidency."

More precisely, the latest Eurostat report from the European Commission regarding the change in economic growth in the second quarter of 2008 compared to the first quarter shows that the U.S. economy was up by 0.5 percent while the Euro zone taken as a whole declined by 0.2 percent. "It marked the first time since the early 1990s that GDP has fallen overall in the 15 countries that use the euro," reported The Wall Street Journal.

Moving in the opposite direction of the increase in growth in the U.S. economy, the percentage change in the growth rates in the second quarter of this year in Italy, France, Germany and Japan were universally negative at, respectively, -0.3, -0.3, -0.5, and -0.6 percent.

On income, the World Development Indications 2008 report from the World Bank shows national income per capita in the U.S. to now be approximately a third higher than in England, Germany or Japan.

Obama, arguing that the distribution of U.S. incomes is increasingly "unfair," is calling for redistribution by way of higher taxes at the top and more government subsidies at the bottom. In fact, the latest World Bank figures "show that the richest 20 percent of U.S. households had a 45.8 percent share of total income, similar to the levels in the U.K. (44.0 percent) and Israel (44.9 percent)," reports Marsden, while in "65 other countries the richest quintile had a larger share than in the United States."

With jobs, the U.S. unemployment rate averaged 4.7 percent from 2001 to 2007. "This compares with a 5.2 percent average rate during President Clinton's terms in office," reports Marsden, "and is well below the euro zone average of 8.3 percent since 2000."

Obama, pursuing "social justice," is calling for a euro-style economic strategy of more taxes, more protectionism, more unionism, and more regulations -- the exact formula of community organizing that's produced slow economic growth and high unemployment throughout Europe.

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Ralph R. Reiland is an associate professor of economics at Robert Morris University in Pittsburgh.

Ralph R. Reiland

Phone: 412-884-4541

E-mail: rrreiland@aol.com