Must read: In a new piece, Reagan economic adviser Martin Feldstein analyzes the depressing recent economic data – anemic GDP growth of just 1.8% in the first quarter of 2011 – and concludes that the Obama administration’s fiscal policies are to blame.
Which ones, specifically? Well, let’s see — all of them, it appears. Misguided spending. Taxes. And lack of a plan to address the debt.
“The administration’s most obvious failure was its misguided fiscal policies: the cash-for-clunkers subsidy for car buyers, the tax credit for first-time home buyers, and the $830 billion “stimulus” package. Cash-for-clunkers gave a temporary boost to motor-vehicle production but had no lasting impact on the economy. The home-buyer credit stimulated the demand for homes only temporarily. …
A third problem stems from the administration’s lack of an explicit plan to deal with future budget deficits and with the exploding national debt. This creates uncertainty about future tax increases and interest rates that impedes spending by households and investment by businesses. The national debt has jumped to 69% of GDP this year, from 40% in 2008. It is projected by the Congressional Budget Office to reach more than 85% by the end of the decade, and to keep rising after that.”
As a result of these challenges, Feldstein concludes that the “economy will continue to suffer until there is a coherent and favorable economic policy.”
