Transformative Change

by Herbert I. London
March 2, 2009 at 5:30 am

http://www.gatestoneinstitute.org/342/transformative-change

As a candidate, President Obama promised change, formidable change, a break with the past. Little did anyone appreciate how committed the president is to transformative change.

With the $787 billion bill now the law of the land, more money will be transferred from one group to another than any point in American history. The government will emerge as the central architect in the economy and the notion of limited government as the premise for this “new nation” has become history.

Newsweek editors claim “we are all socialists now.” Perhaps that is true for the majority in the Congress, but I doubt it is a view shared by the majority of Americans. Intuitively, most people realize that the expansion of government spending reduces the influence and size of the private sector. In fact, there is a tipping point at about 30 percent of government spending that drives private initiative downward. We are now at that point.

Moreover, without any analysis both houses of the Congress embraced the 1400 page legislative agenda “to avoid a catastrophe.” Yet, the much overused word “stimulus” turns out to be a euphemism for special interest allocations and pork barrel appropriations. The greed once attributed to Wall Street can now be found on K Street.

Most disturbing is that the final tab is not $787 billion as advertised. That is merely the first year’s tally. As the Congressional Budget Office noted, the real expense based on years two, three, and four - as newly created programs are sustained - is on the order of $3.2 trillion. Keep in mind that the nation’s annual GDP is $14.5 trillion.

The consequence of this act is to place on the next generation a financial burden so great that no one can be sure of how we will emerge from the indebtedness.

We are changing from a nation that relied on the ingenuity of its citizens and incentives that drive innovation, to a nation that relies on government to determine “winners” in the economy.

Yes, wealth is being spread around, as candidate Obama promised. But what he and his media courtiers do not seem to appreciate is that this legislative action could destroy the incentives for wealth creation. Socialism may distribute wealth according to its philosophical commitment to egalitarianism, but it does not know how to build the institutions that inspire wealth in the first place.

Abraham Lincoln noted that “you cannot make a weak man strong by making a strong man weak and you cannot make a poor man rich by making a rich man poor.” This lesson seems to have been lost on the Obama team. They see a stagnant and faltering economy and assume spending will solve the problem. It has not occurred to this president and his congressional acolytes that the solution may be worse than the problem.

Instead of corporate leaders making decisions for their companies, Congressman Barney Frank will determine how assets should be deployed in the economy. Instead of risk takers operating out of a local garage, entrepreneurial activity will be monitored by Senator Schumer. This is not merely a disgrace; it represents a dramatic fall in the fortunes of the nation.

Recognizing the tyranny that could result from big and intrusive government, President Gerald Ford once noted that “a government big enough to give you everything you want is strong enough to take everything you have.” It may seem exaggerated but the new president is dangerously close to taking everything away as government devours the private sector and America is transformed into a Marxist utopia.

Herbert London is president of Hudson Institute and professor emeritus of New York University. He is the author of Decade of Denial (Lanham, Maryland: Lexington Books, 2001) and America's Secular Challenge (Encounter Books).

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