DANIEL AKINBOSEDE
<Contributor>
This piece is intended to serve as a contrarian perspective and partial rebuttal to the Op-ed entitled “The Death of Hope and Change.” In it, the writer characterised the political campaign of Mr. Obama as “hardly hopeful…[h]ardly impelling change”, “devoid of new ideas or a meaningful plan to restore economic prosperity” and based on “divisive rhetoric against those who have achieved success”. But the critique that I found to resonate the most is the assertion that it is “an economic policy inconsistent with Keynesian economics”.
The policy proposals of Mr. Obama, most notably the economic stimulus plan, are inarguably and innately epitomic of Keynesian principles. The subsequent dilution of these proposals in a futile attempt to appease recalcitrant Republicans (and in a hopeless effort to foster bipartisan relations in governing) is what critics refer as “un-Keynesian economics”. The President can hardly be held responsible for this misrepresentation.
Keynesian economic principles dictate that aggregate demand is the driver of economic activity. Building on the free market theory of Adam Smith, it follows that the more people seek the satisfaction of their wants and needs in the market place, the greater the number of producers and suppliers who seek to meet this demand. A recession is a period of declining demand, the result of which is a reduction to production and supply. This, in turn, brings about a reduction in the demand for the inputs required to facilitate production and supply (all of which are connected to labour either directly or indirectly). A persistent state of declining demand for labour means a decline in the resources available to workers to participate in the market as consumers, propelling a further reduction in supply.
To counteract this downward spiral, Keynesian economic principles propose increased government spending in times of economic recession. This can be done through public work projects, increased public sector hiring or direct transfer payments to consumers. When consumers have the means to purchase, they will do so. When the number of consumers grows, suppliers will seek to increase production levels by hiring more workers, thereby creating more consumers. An indisputable example of the effectiveness of Keynesian theory is the increased spending of the American government that halted the Great Depression. These actions helped create largest middle class on record, in addition to a prolonged period of national prosperity.
The economic stimulus called for by Mr. Obama proposes a reduction to the tax burden of middle and lower classes, among other provisions. The Republican party opposes the plan and has fought vehemently to have the policy enacted reduced in size and substance. Republicans have also called for a reduction of the upper tax bracket rates in addition to austerity measures, under the guise that the national deficit is in desperate need of abatement.
There are several problems with Republican reasoning on this score. Firstly, increasing the amount of disposable income available to the more affluent members of society is not stimulative. Any additional income the lower and middle classes receive will likely be directed towards increasing their consumption. Considering their basic necessaries of life have been met, this reasoning does not apply to upper income earners. Instead, they will likely save excess income; a behaviour which is not economically stimulative.
Secondly, as it pertains to the deficit, Keynesian principles suggest an economic recession is the perfect time for increased government expenditure. Interest rates are significantly lower in recessionary periods. The cost of borrowing therefore becomes negligible. Repayment and debt reduction à la austerity should be contemplated only in periods of pervasive economic prosperity.
Moving onto criticisms levelled at the campaign, characterising the message of Mr. Obama as qualitatively akin to a dearth in inspirational content is simply confounding.
If a political campaign is warfare, the victor will always be in the best position to adapt to changing dynamics. You can’t play soccer to win a football game. Where the goal is winning, it is necessary to beat one’s opponent at their own game.
Mr. Obama, by propounding the fact that Mr. Romney is a systematic prevaricator and an unapologetic opportunist, presented himself as the favourable alternative. Obama’s explicit message placed an emphasis on accessible and affordable methods by which the lower and middles classes could “get ahead”. But, just as importantly, implicit in Obama’s portrayal of Romney was the juxtaposition of their positions on various issues.
Though Mr. Romney’s campaign addressed prevalent socio-economic issues, it was often comedic in substance. Had his campaign been successful, the effect of his proposals would have resulted in an erosion of gender equity provisions, gay rights, social programs beneficial to lower class individuals, and would have created a greater societal wealth gap. The Republican campaign message overflowed with psychologically satisfying platitudes disguised as policy solutions. It burst with an inexhaustible supply of indecorous monikers that described Mr. Obama’s policies. Ultimately, it deliberately targeted a small, vulnerable group: the impoverished, unemployed and otherwise desperate electorate, preying on their susceptibility to be uninformed or misinformed.
The avaricious platform fuelling Mr. Romney’s campaign, well financed by a seemingly inexhaustible supply of ignoble billionaires, was soundly repudiated in the election. His message of ‘you can eat your cake and have it too’ thankfully proved too simplistic for a voting majority. You can make the argument for reducing tax rates across the board to increase the amount of each taxpayer’s disposable income. You can also make the argument for increasing government expenditure in view of strengthening social programs. You cannot, however, make the argument for both, especially not as the path to deficit elimination.