Commanding the economy

Matthew Continetti does a very good job of diagnosing what's wrong with the Obama administration's approach to the economy:

The economy is not a ship. The economy has no captain. The equivalence between recession and war is what’s gotten Obama and the Democrats into so much trouble. Liberals like the president and the congressional leadership honestly believe that they can command the economy to recover. By pushing and pulling the correct monetary and fiscal policy levers, the Democrats say, government can manipulate aggregate demand and bring back jobs.

By redistributing wealth and regulating the insurance market, the Democrats promise, Americans can achieve universal health care while reducing health spending. By delegating authority to unelected bodies and issuing hundreds of new rules, the Democrats believe, regulators can eliminate credit bubbles and financial crises.

But it’s not that simple. The economy and society are too complex. Expert knowledge is too limited. The science of economics is too primitive. Ordinary human beings do not respond like soldiers to government’s commands. Nor should they respond to government this way.

It's a criticism that I have basically made myself. The White House seems to believe that the economy is some kind of machine that it can fine tune, rather than the vastly complicated entity it is. Continetti concludes:

The real puzzle is that, despite all of the political and economic setbacks they have encountered over the last year and a half, for some reason the president and his party cling to their mistaken belief that the economy is an army. There is still time to embrace a different course, and last week’s report that the administration is considering a payroll tax holiday is an encouraging sign. For now, though, the Democrats just keep on marching. Right off the cliff.

This is exactly right. It is maddening that despite the failures of its current approach on the economy that the Obama administration refuses to entertain any alternatives. It's faith-based economics, unmoored from reality.

This is further brought home with the latest news on the administration's efforts to right the economy. After the now apparent failure of last year's stimulus package -- a piece of legislation whose most ballyhooed components were infrastructure spending and tax credits -- the administration now appears set to announce, what else, more infrastructure spending and tax credits:

New York Times: President Obama on Monday is to call for as much as $50 billion in government spending to start up a long-term public works plan emphasizing transportation projects – roads, rail and airport runways – over the next six years.

Washington Post: Under mounting pressure to intensify his focus on the economy ahead of the midterm elections, President Obama will call for a $100 billion business tax credit this week, using a speech in Cleveland on Wednesday to launch what administration officials said was a new policy push.

The business proposal - what one aide called a key part of a limited economic package -- would increase and permanently extend research and development tax credits for businesses, rewarding companies that develop new technologies domestically and preserve American jobs.

It's perhaps useful to remember Einstein's quip that "The definition of insanity is doing the same thing over and over again and expecting different results."

Update: Related thoughts from Dan Mitchell. Also see this Washington Post article on the impact of Obama administration policies on small businesses.