Obama's Economics: Bad and Good
On Meet the Press last Sunday, President-elect Obama showed some of his fuzziest thinking and some of his clearest thinking on economics.
First the bad. In a discussion of the auto industry, interviewer Tom Brokaw said:
As soon as gas prices began to drop, consumers moved back to the larger cars once again, to SUVs and the big gas consumers.
Obama answered, “Right.”
I don’t know if that is correct, but it doesn’t matter for what follows because what Obama was saying was that people want those big cars when gasoline prices are low. Yet just a few minutes earlier, Obama had said, “If, if they want to survive, then they better start building a fuel-efficient car.” By “they” he meant the auto industry or, more correctly–and this is a distinction he refused to make–Chrysler, Ford, and General Motors. (Other parts of the U.S. auto industry–Toyota, Nissan, etc.–are doing much better.)
So which is it? Is it that they need to produce cars people want or do they need to produce high-fuel-economy cars? His own claim is that people want low-fuel-economy cars but he didn’t seem to be aware of the contradiction.
Second, the good, although even this is mixed with bad. In discussing housing, Obama stated, “So I think a moratorium on foreclosures remains an important tool, an important option.” If he meant using force to impose a moratorium, as he appeared to, that’s bad. But then he went on to say:
We don’t want what you just described, a moral hazard problem where you have incentive to act irresponsibly.
He actually used the term “moral hazard” correctly. Have you ever heard George W. Bush use that term?