You may remember Robert Reich -- he served as Secretary of Labor during Bill Clinton’s first term. Mr. Reich has fashioned himself as an economist since he left that lofty federal post, and he frequently leads the argument for positions on the left wing of the Democratic Party while attempting to present himself as a man of reason. He has once more pontificated the left-wing position on the problems of our stagnant economy and thereby shows how lost the left continues to be regarding a free-market economy.
Reich is certainly a smart man, a very educated man and a very accomplished man. Having said that, he could still very well have blind spots. Reich has taken the lead in arguing for another round of stimulus money. This position is without regard to the fact that half of the original funds have not been spent and that it appears Joe Biden will be spending the summer buying votes for Democrats throughout the country by toting how the stimulus money is creating jobs in local districts.
It is in the pages of The Huffington Post that Mr. Reich has returned to once again argue his case. He asserts that because of a combined lack of consumer and business spending, the only solution to continue growing the economy is for the government to spend more money it does not have and thereby eliminate any chance of a double dip recession. He makes the constructive argument for people who believe government is the answer on most if not all occasions.
For example, Mr. Reich could have read Arthur Laffer’s recent piece in the Wall Street Journal forecasting a double dip recession because of the significant tax increases coming in 2011 after the Bush tax cuts expire. Laffer stated that 2010 looks better because people are creating income this year to avoid the steep tax increases coming after the end of the year. He reflects on the mistake made in 1982 by the Reagan Administration (of which Laffer was a part) for postponing tax cuts until 1983. This caused people to forestall income-generating activity in 1982, deepening an existing recession until the tax cuts went into effect.
If Mr. Reich thinks reading the opinion page of the Wall Street Journal is too out there for his left-wing brain, he could alternatively read the pages of the New York Times with their recent article stating why loans to small businesses are not gaining momentum. He would come to realize that banks have no confidence that these businesses are strong enough to be creditworthy. More importantly, he would also learn that many small businesses are hesitant to take on any debt for expansion because of the uncertainty of taxes and other government regulation.