The Left's Grip On The American Economy
President Obama went north to advise our Canadian friends on the dangers of tar-sands oil and global warming. Meanwhile, your loyal blogger is freezing his arse off in Cincinnati, where a bit of GW would be welcome right now.
I spoke earlier today to the Cincinnati Greater Chamber of Commerce. I give a lot of speeches to city economic development groups, which in most cities are run by the chambers. Thank God for the Chamber of Commerce. It is a bastion of free enterprise and free trade at a time when Washington has gone wobbly on both.
How bad are things in Washington right now? Worse than I thought. Yesterday I spoke to the National Association of Small Business Investment Companies at a meeting in Chicago. Following me to the podium was NASBIC's Washington lobbyist; he gave a rundown on how Washington works these days.
Are you sitting down? It goes like this: President Obama has delegated domestic policy (including economic concerns) to the House. This means Nancy Pelosi, with her Obama-endorsed power and large Democratic majority, is the most powerful House Speaker since Sam Rayburn.
Pelosi, who is not notably anti-capitalist herself, is a machine politician who holds grudges and brooks no dissent--think Tom DeLay with a face-lift or five. In exchange for extreme loyalty, Pelosi delegates wide authority to her House committee chairs. They, unfortunately, happen to be quite anti-capitalist:
-- David Obey, chairman of the House Appropriations Committee
-- Barney Frank, chairman of the House Financial Services Committee
-- Henry Waxman, chairman of the House Commerce and Energy Committee
-- Charlie Rangel, chairman of the House Ways and Means Committee
-- Nydia Vallázquez, chairman of the House Small Business Committee
-- Edward Markey, chairman of the House Energy Independence and Global Warming Committee. (Did you know there was a global warming committee? News to me.)
Chilling, isn't it?
Some of you got angry and canceled your RSS feeds when I attributed this week's market dive to the passage of the $787 billion stimulus plan, which I called Obeynomics. Some of you want to continue blaming Bush, Paulson, Cox and greedy bankers. That won't work. It has become clear we now have two distinct economic policy crackups: Bush's failure and now Obama's.
The blogger who calls himself "Locke Smith" establishes the link between Obama's screw-ups (distinct from Bush's) and plummeting stocks:
Why the vote of no confidence by equity markets in the massive spending package?
The answer can be found in the following excerpt from President Barack Obama's opening statement at his Feb. 9 press conference:
"It is absolutely true that we can't depend on government alone to create jobs or economic growth. That is and must be the role of the private sector. But at this particular moment, with the private sector so weakened by this recession, the federal government is the only entity left with the resources to jolt our economy back into life. It is only government that can break the vicious cycle where lost jobs lead to people spending less money, which leads to even more layoffs. And breaking that cycle is exactly what the plan that's moving through Congress is designed to do."
There are two fundamental flaws in the president's statement, and they are at the root of the problems with his economic policies. The first is simply this: Contrary to the president's statement, within the context of the spending bill, the federal government has no resources. The government is not drawing on accumulated savings or retained profits to fund its spending. It is not selling any of its vast land holdings to provide resources to fund increased transfer payments to individuals or corporations.
What the federal government does have is an extraordinarily good credit rating, which allows it to borrow trillions of dollars at extremely low interest rates. But, unlike a corporation, which garners the resources to retire that debt by satisfying customers, every dollar the government is spending now will be extracted from tax-paying businesses and workers when the loans come due. What the president fails to see is that for every dollar spent a dollar is being taken from the productive sector. And therefore, Federal spending, per se, offers no net economic stimulus. This bill--Keynesian demand side stimulus on steroids--follows the failed policies of the FDR administration, which prolonged the Depression in the 1930s, and the Japanese bout of deficit spending, which produced the lost decade of the 1990s, only more so.
The second flaw is the conceit that President Obama and his advisers can break the vicious (downward) cycle by spending other people's money. To the extent the federal money is spent on needed highways and bridges, or other items that serve the public at large and thereby reduces the barriers to doing business, there is at least the prospect of additional economic activity.
However, most of the money in this bill will be given to individuals and corporations in the form of tax rebates or transfer payments and will do nothing to reduce the barriers to commerce. Think of it as paying individuals or companies to dig holes and fill them up again, but skipping all of the make-work.
Should we be surprised? That's what America gets when the president delegates to Nancy Pelosi, who in turn lets David Obey, Barney Frank and Henry Waxman run the show.
Post your comments below. Are these left-wing House committee chairs the team America wants allocating its $787 billion stimulus package? Is this the team to "save" the U.S. economy? Is there a person on that committee chair list who actually respects free enterprise and private investment? Fire away.
blogs.forbes.com
I'd add this from Locke Smith's article:
Unlike voluntary exchanges, which have the promise of making both supplier and buyer better off, thereby increasing the wealth of the community, most of the spending mandated by this bill will be one-sided, involuntary exchanges, where the person actually paying the bill (future tax payer) is made worse off, even as those special interest groups favored with the Federal largesse are made better off. As a consequence, this bill will weaken the private sector even as it extends the heavy hand of government and protects the special interests who rely on taxpayer funding. And, that will prolong, not shorten, this cycle of economic weakness.
These are the reasons why this bill has made our society poorer, not richer as President Obama seems to believe. This week’s decline in the stock market is but the first write-down of the country’s wealth in recognition of this brutal fact.
Locke Smith is a seasoned observer of the political economy and can be reached at locke.smith@communityofliberty.org
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