The continuing failure of Obamanomics
One of the first lessons of political spin is, whenever possible, to release damaging information on a late Friday afternoon before a holiday weekend. The theory: no one is paying attention anyway.
Applying this lesson well, the White House quietly published a report before the July 4th weekend by the White House Council of Economic Advisors — a group of three economists chosen by President Obama — that laid out the dismal effect of the stimulus on job creation: $666 billion spent to create only 2.4 million jobs, for an astronomical total of $278,000 per job.
The news did not get any better the following Friday when the jobs report for June shocked everyone by showing rising unemployment — the latest in a continuing string of bad data on the dreadful state of the U.S. economy. The real unemployment rate — which includes discouraged and part-time workers who desire full-time employment — now sits at 16.2%.
Nearly three years of Obamanomics and the results are not pretty: record deficits, catastrophic debt levels, rising inflation, high gas prices, no jobs.
Why all this pain? The answers for the Obama malaise are many, but three explanations predominate:
First, government cannot “fix” the economy. It is the conceit of all centralized planners that the mere implementation of their plans will alleviate the problem to be solved. History, however, has shown self-regard of this sort to be unfounded.
The failed war on poverty, the billions spent on education for inferior results, the collapse of Fannie Mae and Freddie Mac, the price controls of the 1970s — all attest that the best laid plans of the best and brightest minds play out much differently in the real world than they do on paper.
Experience is the best teacher, and the perennial failure of these big government programs brings to mind Milton Friedman’s warning: “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.”
Similarly, throwing money at the unemployment problem in the form of a bloated stimulus does not lead to meaningful job creation. Business creates jobs, not government. President Obama’s pro-government, anti-business vision doomed his agenda from the start. The proof is in the results.
Second, debt matters. For far too long, America’s political leaders — Democrat and Republican — have pretended that dealing with the country’s debt was an issue that could be pushed down the road to another day. With the additional $4 trillion in debt accumulated since President Obama took office, that day is here.
This bipartisan failure to make tough spending cuts has imperiled trust in the American economy, once thought to be the safest in the world. Combined with the steady rise of capitalism in other parts of the globe, the decreasing faith that the United States has the financial capability to meet its future obligations has led to significant capital flight as investors seek safer havens for their money.
To restore investor confidence, spending must be constrained. Economics is about making choices in a world of scarcity. Any leader unwilling to honestly deal with the realities of the debt crisis is unfit for office. Delay only worsens the eventual pain. The time for action is now.
Third, uncertainty depresses business investment. A little-reported fact is that corporate America presently sits on huge reserves of cash. In times past, businesses would already have jump-started an economic recovery by putting such cash to use in the form of labor and capital investment.
Today, however, corporate money remains on the sidelines because of the lingering uncertainty of the Obama administration’s plans — the continual threats of higher taxes, cap-and-trade, card check, job-killing environmental and energy rules, vague financial regulations, and biggest of all, the implementation of Obamacare.
In high school civics, we learn about the three branches of government: legislative, executive, and judicial. This conception of the federal government has long been inadequate. In reality, there exists a fourth branch of government: the administrative state.
The administrative state — alphabet agencies such as the EPA, the SEC, the NLRB, the IRS, and the like — develops and enacts the myriad of federal regulations that control much of American life. Two things to know about these agencies: (a) they possess wide discretion to do what they want, and (b) they are now managed by regulators hostile to the policies that foster economic growth.
An Obama victory in 2012 will only embolden these anti-business bureaucrats to carry out their political agendas without fear of electoral consequences. The business community knows this.
One of the biggest drags on the economy, therefore, is the terror that President Obama will be re-elected. To create more jobs, the President needs to lose his. Everything starts at the top.
[Lance McMillian is a Fayette County resident and law professor at Atlanta’s John Marshall Law School.]