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Obama's Piece In 'The Economist' Gets Everything Wrong

PRESIDENT OBAMA HAS written an open letter of several thousand words to The Economist about capitalism, immigration, the economy and the economic areas on which his successor should focus. The whole thing encapsulates the wrongheaded and ob

PRESIDENT OBAMA HAS written an “open letter” of several thousand words to The Economist about capitalism, immigration, the economy and the economic areas on which his successor should focus.

The whole thing encapsulates the wrongheaded and obstinately held thinking that has brought the U.S. and the world economies to a near halt. The duration of the stagnation–and the feeling that there really is no end in sight–is breeding increasingly ugly politics.

The essay also has its share of Obama’s trademark disingenuousness that has fanned the political divisiveness that he so piously denounces. For instance, he declares that “capitalism has been the greatest driver of prosperity and opportunity the world has ever known.” Yet as President of the U.S., the bastion of free enterprise, he has successfully pursued a socialist agenda that has Karl Marx applauding from the grave.

Smart socialists years ago recognized that government doesn’t need to seize “the means of production” to control the economy. Instituting sweeping and intrusive rules and regulations that make the survival of whole industries and companies dependent on the whims of government bureaucrats is sufficient. Finance is the lifeblood of an economy, yet banks have been subjugated by the Dodd-Frank Act. Regulators are also using that legislation to try to rope in insurance companies, mutual funds and any other entities that deal in finance to garner more control for Washington. The Federal Reserve has engaged in a regime of credit allocation that has led to the credit malnutrition of small and new businesses. With no authority it has given itself a bond portfolio totaling some $4.2 trillion.

 

We also see what the horrific so-called Affordable Care Act is doing to health care, which encompasses almost 20% of the economy. Fossil fuels have been under relentless bureaucratic attack. Colleges and universities jump to attention whenever a Washington agency sends a mere “advisory” letter; such letters have been used to gut due process regarding all sorts of alleged offenses, the result of which stifles free speech and promotes thought control. For-profit educational institutions have been targeted for extinction. The IRS continues to suppress groups deemed hostile to Big Government. Obama never misses an opportunity to advance his goal of federal control of local law enforcement. Even the Internet–the most dynamic force in modern time precisely because it’s been free from government control–is being brought to heel with 1930s-style FCC regulation. And on and on it goes.

Is it any wonder that for the first time in memory the creation of new businesses lags the closing of existing ones? Or that the economic recovery from the sharp 2008–09 downturn has been the worst in U.S. history?

Despite the most serious and unrelenting attempt in our history to give the economy a socialist overhaul, the President’s wordy missive states that “the economy is not an abstraction. It cannot simply be redesigned wholesale and put back together again without real consequences for real people.” Yes, and you can keep your doctor, too.

Regardless, Obama’s real feelings about free markets come through: “Economists have long recognized that markets, left to their own devices, can fail. This can happen through the tendency toward monopoly and rent-seeking. … More fundamentally, a capitalism shaped by the few and unaccountable to the many is a threat to all.”

Free markets don’t fail. Bad government policies fail. Every major economic disaster has at its source government error. A global trade war triggered by the U.S. Smoot-Hawley Tariff, followed by enormous tax increases, gave us the Great Depression. Our destruction of the gold standard gave the U.S. the horrific inflation of the 1970s. The deliberate weakening of the dollar in the early part of the last decade and other regulatory mistakes begat the housing and commodities bubbles that led to the 2008–09 crisis. Barack Obama and the Federal Reserve’s nonstop antigrowth policies have stifled economic life since 2009.

Obama rolls out an old trope from the 1960s about the alleged crisis of rising expectations. “Just as the child in a slum can see the skyscraper nearby, technology allows anyone with a smartphone to see how the most privileged live. Expectations rise faster than governments can deliver and a pervasive sense of injustice undermines peoples’ faith in the system.”

 

Governments don’t create wealth–people do. If governments don’t stand in the way, free markets always turn scarcity into abundance and luxuries into commodities. Take the smartphone Obama mentions. Thirty years ago the original cellphone–with only a voice feature–cost $3,995. Today a feature-rich mobile device costs less than a twentieth of that.

After patting himself on the back for mythical economic successes, Obama asks the question, “So where does my successor go from here?”

His answer is to prescribe more of the same–just as doctors of old, when their patients became more ill, prescribed more bleeding. More taxes; more government spending (which Obama now calls “fiscal expansion”); more regulation (which Obama euphemistically labels as “better oversight for a range of institutions and markets”), including mandatory paid leave for parents and guaranteed sick days; more subsidies; more unemployment insurance; more government-funded job training; a higher minimum wage (which, as states and cities that have already instituted this are discovering, ends up killing jobs for the least skilled); and stronger and bigger unions (ignoring how they helped undermine such legacy industries as steel and autos).

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