Candidates Mislead on Economics

In an earlier post today, I noted how important it is to check facts and assumptions anytime economic issues are involved, not only by the media but also from politicians. Now I read this from James Pethokoukis and his blog Capital Commerce, "Democratic Debate Spawns Weird Economics":

The Democratic presidential contenders went at it again last night in a debate (or "forum" if you prefer) sponsored by the AFL-CIO. For once, economic issues—especially trade—shared equal importance with the war in Iraq. Here are a few statements from the various candidates —including front-runners Hillary Clinton and Barack Obama—that struck me as kind of strange:

1) "You know, six and a half years ago, we had a balanced budget and a surplus; now we are in deep debt with a rising deficit, and it is absolutely true that George Bush has put it on the credit card, expecting our children and grandchildren to pay for it." -- Sen. Hillary Clinton. Hey, the last time I checked, the budget deficit for this year was forecast to be $207 billion, half of what it was in 2004. (The budget might actually be back in the black when the next president takes office.) And while Bush did inherit a balanced budget and surplus from Team Clinton, neither administration successfully fixed the $100 trillion unfunded liability problem with Social Security and Medicare.

2 ) "For every $1 billion we spend [on infrastructure], 40,000 jobs can be created in the United States of America." -- Sen. Christopher Dodd. I have no doubt that jobs can be created through government spending. But those billions must be taken from the private sector. Will those billions be used more wisely and efficiently and productively by federal bureaucrats than by private managers? If so, maybe the feds should guarantee a job for everyone who wants one. Using the Dodd formula, it would cost a mere $175 billion a year to employ all 7 million unemployed Americans.

3) "Well, look, people don't want a cheaper T-shirt if they're losing a job [from free trade] in the process." -- Sen. Barack Obama. Inexpensive T-shirts vs. outsourced jobs isn' t really the debate. According to research from the International Institute for Economics, Americans are $7,000 to $13,000 richer because of trade, and removing all trade barriers would permanently increase our wealth by $4,000 to $13,000 per household. And since the North American Free Trade Agreement took effect in 1994, America has added nearly 30 million net new jobs.

4) "What we need to do is say that from now on, America will adhere to all international labor standards in any trade agreement—no child labor, no slave labor, freedom of association, collective bargaining—that is critically important—making sure that no wage disparity exists." -- Gov. Bill Richardson. If what Richardson was saying is that American trade negotiators should demand foreign workers make the same as American workers or no trade deals, then what he is saying is no trade with India or China. Incomes in those countries are rising thanks to globalization, but there is a long way to go.

5)"It means that we are also not running up deficits and asking China to bail us out and finance them, because it's pretty hard to have a tough negotiation when the Chinese are our banker." -- Sen. Barack Obama. This is the myth that "China holds all the cards." Look, the Chinese government needs fast growth to hold down social unrest and justify the continued dominance of the Communist Party there. And the most likely cause of a slowdown there would be a slowdown here first. The last thing China wants to do is start dumping U.S. bonds and cause a recession here.

Perhaps I have been assigning too much blame to the media and not enough to pandering politicians. I am sure many of the Republician candidates will be as bad and when I get those misleading remarks I will pass those on as well. It is not by any means a one party problem.

Maybe Sen. Clinton doesn't know the deficit is very low at present, or Sen. Obama doesn't know know that counties buy our treasury bonds because of the strength of our economy not our weakness, or that Sen. Dodd's doesn't remember that government spending originates from the taxes paid by citizens not thin air? Or that Gov. Richardson thinks all wage disparities can be eliminated if the US says so, or Sen. Obama (again) sees no benefit in trade to the US consumer?

Is it possible that people can reach a point of being a US Senator or a state governor, let alone running for president, and either know almost nothing about basic economics or not telling the truth due to an obsessive desire to win elections?