"Barack Obama's economic proposals are wrong for the American economy," the statement concludes. "They defy both economic reason and economic experience."
Here is the full statement:
Barack Obama argues that his proposals to raise tax rates and halt international trade agreements would benefit the American economy. They would do nothing of the sort. Economic analysis and historical experience show that they would do the opposite. They would reduce economic growth and decrease the number of jobs in America. Moreover, with the credit crunch, the housing slump, and high energy prices weakening the U.S. economy, his proposals run a high risk of throwing the economy into a deep recession. It was exactly such misguided tax hikes and protectionism, enacted when the U.S. economy was weak in the early 1930s, that greatly increased the severity of the Great Depression.For a complete list of the 100 economists who signed the statement, visit www.johnmccain.com
We are very concerned with Barack Obama's opposition to trade agreements such as the pending one with Colombia, the new one with Central America, or the established one with Canada and Mexico. Exports from the United States to other countries create jobs for Americans. Imports make goods available to Americans at lower prices and are a particular benefit to families and individuals with low incomes. International trade is also a powerful source of strength in a weak economy. In the second quarter of this year, for example, increased international trade did far more to stimulate the U.S. economy than the federal government's "stimulus" package.
Ironically, rather than supporting international trade, Barack Obama is now proposing yet another so-called stimulus package, which would do very little to grow the economy. And his proposal to finance the package with higher taxes on oil would raise oil prices directly and by reducing exploration and production.
We are equally concerned with his proposals to increase tax rates on labor income and investment. His dividend and capital gains tax increases would reduce investment and cut into the savings of millions of Americans. His proposals to increase income and payroll tax rates would discourage the formation and expansion of small businesses and reduce employment and take-home pay, as would his mandates on firms to provide expensive health insurance.
After hearing such economic criticism of his proposals, Barack Obama has apparently suggested to some people that he might postpone his tax increases, perhaps to 2010. But it is a mistake to think that postponing such tax increases would prevent their harmful effect on the economy today. The prospect of such tax rate increases in 2010 is already a drag on the economy. Businesses considering whether to hire workers today and expand their operations have time horizons longer than a year or two, so the prospect of higher taxes starting in 2009 or 2010 reduces hiring and investment in 2008.
In sum, Barack Obama's economic proposals are wrong for the American economy. They defy both economic reason and economic experience.
3 comments:
Hello Mr. Phyrillas:
Just so you know, most of those economists on the list have a long-standing conservative posture.
Just because one is an economist, doesn't make that person an expert on the economy. Quite frankly, many of the models used to develop the market's wonderful derivatives were developed by professors, often economists who doubled as finance experts.
Derivative models are based on theory, and thus, are not exact. Nonetheless, those MBAs taught by these finance and economics professors went out into the world and believed that they would work perfectly.
Surprise!
When I was involved in the early days of derivatives (forward foreign exchange), I had to show my boss that even derivatives did not provide a perfect hedge. He was shocked, but I demonstrated the proof convincingly. Since then (30 years ago), I have been suspicious of derivatives. There was always underlying risk that needed to be understood.
When i went off to the Columbia Business School and showed my analysis of forwards to a finance professor, he too was shocked because he couldn't understand how such risk could exist. He accepted my analysis and began showing it to his students.
I suspect that we could get 100 economists who have liberal tendencies who would testify that McCain's policies would not work. Indeed, if we look at the Bush administration, we have a taste of what conservative economics can produce. Ugh!
Economics is not a science. It is an attempt to explain human behavior. Unfortunately, sociology, psychology, and politics will trump economic theory. Those who understand that will govern more wisely than those who single-mindedly hold onto the idea of perfectly free markets. There is so such thing. The powerful will usurp power without adequate regulation. Power is the venue of the other social sciences.
Best regards,
Michael Donovan
http://donovanforallentown.blogspot.com
Can Mr. Donovan explain the role of Fannie Mae and Freddy Mac in providing the "product" from which the derivatives were spun?
Greetings:
Here is good summary of the bubble and its demise:
http://topics.nytimes.com/top/news/business/series/the_reckoning/index.html
Fannie Mae and Freddy Mac were both involved in "pushing" (my word) the mortgage market, but they were not alone.
Home ownership has long been a plank for all political parties. At 55, I don't think I can never remember a time where owning a home was not stated as a political goal.
Many friends of mine have taken advantage of products offered through the American financial system designed to encourage the purchase of a home. It was not a bad system until the competition to enter the mortgage market intensified along with the banking revolution of the 80s.
I'll stand by my criticism of financial rocket scientists who thought they knew it all, but really were unwilling to see that there was no such thing as perfectly hedged risk.
Thanks for asking.
Michael Donovan
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