The Wall Street Journal describes President Obama’s economic strategy:
Keep borrowing more than $1 trillion a year and keep the Fed printing money at historic levels, in return for mediocre growth and stagnant incomes. The alternative is to stop punishing the employers, investors and workers who are the real source of growth. The Romney plan to cut tax rates, reform the tax code, restrain spending and repeal ObamaCare would be a good start.
Mr. Obama will spend the next 10 days trying to persuade voters that 1.7% growth is the best we can do. If he’s re-elected, he’s probably right.
This description is accurate regarding what Obama has done. It is inaccurate to the extent that it implies he will continue to do it in the future with the same results.
The Law of Diminishing Returns is routinely applied by economists. It is a law that economics itself is not exempt from. The well that Mr. Obama has been dipping into to produce and rationalize these anemic results is nearly dry. He doesn’t have the option of continuing this charade much longer. To get the same abysmal results from the same improper policies will require much greater stimulus next year. That means an acceleration in stimulus with little hope of changing the course of the economy.
Markets have had enough of such fraud. One can only hope that voters have also. Continuation of Obama’s policies will cause severe inflation followed by an economic and financial collapse. What cannot go on forever will not. The ending, whatever it turns out to be, will not be painless. Attempts to defer or avoid the ending have succeeded only in worsening the coming correction.
Political change is necessary in order to get economic change. Political change is necessary but not sufficient. Romney presumably will bring better economic policies. The issues are whether they will be correct and whether there is enough time to undo the damage of the last decade, particularly the last four years.