. . . out with Keynes.
As I noted last week, President Obama's State of the Union address was a hodgepodge of ideas-some good, some bad, and some downright ugly. Let us start by giving credit where credit is due.
The most positive change in the rhetoric that is pouring from the White House since the Tea Party takeover of the House of Representatives is the acknowledgment that Keynesians do not hold the key to the mint. The speech marked the reluctant abandoning of the stimulus religion by a leader who seemed predestined to walk in the shoes of FDR. Just as surprisingly, the State of the Union offered a critique of the blind faith that more regulation is better for the consumer.
In a bid to regain the trust of the independent voters, the president was forced to take a stand for capitalism. He unashamedly praised the creative destruction of the market system. To the dismay of his more socialistic supporters, he boldly pronounced that the engine of economic progress is capital accumulation and innovation that comes from private entrepreneurial efforts. Deficit spending must end; policies that stimulate demand must be abandoned in favor of supply-side reforms such as removing the red tape around (and lowering the tax penalties against) the most productive members of society.
Watching Obama confess that the government is too big and it spends too much was one of the spookiest things I've seen recently on TV. The guy seemed possessed by the Spirit of a President Past as he made solemn promises to stand against pet projects (to veto all earmarks), to examine whether we really need all these bureaucratic agencies meddling in our lives from the cradle to the grave (his favorite example being "the Interior Department is in charge of salmon while they're in fresh water, but the Commerce Department handles them in when they're in saltwater"), to "fix" those parts of the healthcare bill that levy excessive burdens on small businesses, to create a website so we could monitor 24/7 how Uncle Sam spends our money, etc., etc. The president noted that, at a time when millions of families are forced to tighten their belts, the government should stop behaving like a greedy pig and must shrink itself back to a size where it can live within its means.
If only the State of the Union address had stopped there; I could have raised a toast to Milton Friedman and gone to bed with the warm feeling that I might have been right all these years and that the president was finally getting it.
Next week: The bad.