TJP

Once again, it appears that President Obama is channeling the Republican narrative; he now wants to reduce government because the GOP believes it is the appropriate policy. However, less government jobs would decrease business profits and cause government and private jobs to disappear.

The GOP narrative of big government as the problem is deceptive. Government spending is a source of profits for private industry. And, many of the GOP candidates benefited from government spending.

Contrary to GOP claims, the more government spending the greater is private profits. Government pays private contractors for a myriad of products and services, enabling income for millions of private, as well as government, workers.

The problem with President Obama and the Democrats is that they allow the Republicans to control the political narrative. And, because they fail to respond with valid counter-arguments, the deceptive narratives become rooted in the public’s mind.

Improving the economy is not about cutting government; rather it is about facilitating local investment through the process of lending and borrowing, and minimizing foreign trade deficit through efficiency gains.

Government deficits during recessions sustain profits and surpluses in expansionary periods restrain profits.

President Obama and the Democrats should recognize by now that economic expansion is everywhere a monetary phenomenon. Furthermore, that the 2008 recession, like all recessions, is an income problem often caused by mismanagement of the money supply.

Thus, shrinking the government, particularly in a slow growth period, will adversely affect aggregate demand and employment. 

If, however, his proposal is a strategic move against an obstructionist Congress who will be reluctant to cede power to the executive, then it is a good political move.

Nonetheless, Mr. Obama’s focus should be on the Federal Reserve; history will attest that the economic crash of 2008 was due to the Federal Reserve draining bank reserves, during the period when crude oil prices were rising.

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