RHINEBECK, New York – Poor Mr. Obama.
In an apologia in The Economist, the president reveals that he has learned nothing during his time in the White House.
More importantly, he has forgotten nothing…
Making Flimflam Float
Almost anyone who went to college in the 1960s or after is bound to have some dopey ideas.
Typically, when you get out into the real world and keep your eyes open, you learn how things really work.
But if you spend your whole life in academia or government after you graduate, the learning process comes to a halt. You are dumb forever.
Learning happens as thoughts and actions are tested in the real world. You try something. Then you try something else. Some things work. Some don’t.
But when you are cut off from the real world by fake money, fake deals, fake knowledge, fake statistics, and fake public service… all you learn is how to make the flimflam float.
In President Obama’s version of history, the last eight years have been a Golden Age for America. Here’s what happened in his alternate universe:
…a more durable, growing economy; [15 million] new private-sector jobs since early 2010; rising wages, falling poverty, and the beginnings of a reversal in inequality; [20 million] more Americans with health insurance, while health-care costs grow at the slowest rate in 50 years; annual deficits cut by nearly three-quarters; and declining carbon emissions…
Huh?
That’s not what we saw happening… We were there, too. And we saw the whole world economy slowing down, even as central banks pumped in trillions of new, fake cash into the system. We saw more and more men in America with fewer and fewer real, “breadwinner” jobs. We saw the top 5% making wage gains… and the rest either stagnant or falling behind. We saw medical care costs rising at their fastest rate in decades.
Quack Devices
But everybody can have their own flimflam facts. Theories are different. They should be the same for everyone.
Alas, the president clings to his naïve college ideas like a high-school sports star to his letterman jacket.
As for capitalism, this is all he remembers:
…capitalism has been the greatest driver of prosperity and opportunity the world has ever known.
But then he reveals that he has no more idea what capitalism is than he did on the day he got to Harvard.
Economists have long recognized that markets, left to their own devices, can fail. This can happen through the tendency towards monopoly and rent-seeking… the failure of businesses to take into account the impact of their decisions on others through pollution, [and] the ways in which disparities of information can leave consumers vulnerable to dangerous products or overly expensive health insurance.
More fundamentally, a capitalism shaped by the few and unaccountable to the many is a threat to all. Economies are more successful when we close the gap between rich and poor and growth is broadly based. A world in which 1% of humanity controls as much wealth as the other 99% will never be stable… Without trust, capitalism and markets cannot continue to deliver the gains they have delivered in the past centuries.
The president is already sliding off the road…
The “few” never “shape” capitalism; instead, capitalism is just what you get when millions of people are free to give and take, without anyone telling them what to do.
It takes its own shape – a natural shape, like a natural language. Nobody shapes it; everybody does.
Then, Mr. Obama runs into a ditch, mistaking effects for causes.
Rather than fix the engine, he suggests a number of quack devices to make the wheels appear to turn:
…fully restoring faith in an economy where hardworking Americans can get ahead requires addressing four major structural challenges: boosting productivity growth, combating rising inequality, ensuring that everyone who wants a job can get one and building a resilient economy that’s primed for future growth.
Fiscal Rocket Ride
Productivity growth?
Hey, the government should spend more money on infrastructure. Damn the debt; full speed ahead!
Inequality?
Raise the minimum wage. Raise taxes on the rich.
What? You say that it will just take money from people who know how to make it and give it to people who only know how to spend it? And it will make it harder for young people to get jobs?
That’s an easy fix, too – more money on education, more child care, more wage insurance.
And the economy? How do we get that going?
El Jefe comments:
With today’s low interest rates, fiscal policy must play a bigger role in combating future downturns; monetary policy should not bear the full burden of stabilising our economy.
We’ve been expecting that. No matter who wins the White House next week, we will almost surely face a recession… and most likely another major financial crisis.
The last crisis, in 2008, was caused by too much debt in the mortgage sector. Now, there’s even more debt.
But where did it come from? Isn’t it time to raise the hood?
The motor for every one of the ills Mr. Obama sees is the same – the feds themselves. Their fake money – along with the multitude of rules and regulations they’ve imposed on the American people – have done their mischief. And now, with the Fed’s key lending rate near zero for the last eight years, the economy has been misled… distorted… and enfeebled. U.S. corporations alone have increased their debt load by 100% since the crisis began.
Finally, the president is right about something. Not that the feds should increase spending and deficits. But they surely will.
With debt levels already so high… and interest rates already so low… the feds will have no choice. In the next crisis, they will have to put some of that fiscal rocket fuel in the tank.
Fasten your seat belt. Hold on to your hat. It’s going to be one helluva ride!
Regards,
Bill
P.S. Thanks to the many readers who pointed to the obvious factual error in yesterday’s Diary [see today’s mailbag]. The promise of “life, liberty, and the pursuit of happiness” is not found in the Constitution. It is in the Declaration of Independence, where it is described as an “inalienable right,” which, of course, it is not.
Category: Economics