Is It Obama’s Economy?

On his first day back in town, fresh off his sixth vacation of 2010, President Obama met with his economic team to discuss his failed Summer of Recovery.  From the Rose Garden, the President held a press conference to assure us:

“My economic team is hard at work in identifying additional measures that could make a difference in both promoting growth and hiring in the short term, and increasing our economy’s competitiveness in the long term — steps like extending the tax cuts for the middle class that are set to expire this year; redoubling our investment in clean energy and R&D; rebuilding more of our infrastructure for the future; further tax cuts to encourage businesses to put their capital to work creating jobs here in the United States.”   He noted, “Small businesses accounted for more than 60 percent of the job losses in America.  That’s why we’ve passed eight different tax cuts for small businesses and worked to expand credit for them.”

He goes on:  ”But we have to do more.  And there’s currently a jobs bill before Congress that would do two big things for small business owners:  cut more taxes and make available more loans.  It would help them get the credit they need, and eliminate capital gains taxes on key investments so they have more incentive to invest right now.  And it would accelerate $55 billion of tax relief to encourage American businesses, small and large, to expand their investments over the next 14 months.”

This was the second time this month the President evoked this “Jobs Bill,” the first being before his vacation.  In fact, the President found it prescient enough to address the economy in the middle of his Oval Office speech signaling the end of the Iraq War last week:

“Our most urgent task is to restore our economy, and put the millions of Americans who have lost their jobs back to work.  To strengthen our middle class, we must give all our children the education they deserve, and all our workers the skills that they need to compete in a global economy.  We must jumpstart industries that create jobs, and end our dependence on foreign oil.  We must unleash the innovation that allows new products to roll off our assembly lines, and nurture the ideas that spring from our entrepreneurs.  This will be difficult.  But in the days to come, it must be our central mission as a people, and my central responsibility as President.”

Whose Responsibility?

As a central planner, President Obama honestly believes the private sector is incapable of producing favorable economic outcomes on its own.  He believes government must assist the economy for the economy to survive.  In the Keynesian tradition, Obama, while pushing his Stimulus in February 2009, said,”This is not something that we’re just doing to grow government.  We’re doing this because this is what the best minds tell us needs to be done.”  President Obama hubristically believes his Administration are indeed those “best minds,” the “ones we’ve been waiting for” to save us from this economic malaise.  They are astonished – astonished! – their efforts have not produced better performance in the American economy.

Now Obama has launched an eleventh hour effort to ‘save’ the economy.  But it is his for the saving?

At the heart of our current national crisis is this Administration’s inverted understanding of the public-private relationship; he believes government exists to keep businesses employed, when, in fact, government exists due to employed businesses.  To quote Marco Rubio, “Politicians do not create jobs.”  Bailouts and stimuli only delay the inevitable. Evolution occurs in the market, with birth and death within industries; otherwise, we would still be driving Model T’s.

Put simply, try as he might, there are no specific spending actions Obama can take to grow the economy; not a Stimulus, or a Jobs Bill, or a Benefits Package, if it lacks a specific Return on Investment.  This is basic to business investing.  This Administration, however, with no experience in business whatsoever, understands none of this.  They typically view the economy through the lens of academia, and more specifically, through the eyes of Harvard.  I don’t know what they’re teaching there, but it’s not supply-and-demand.

This Administration does not realize government intervention in the marketplace warps normal economic forces with regulations, price ceilings and floors, minimum wages, and taxes.  They must be very careful when tinkering around the edges, or they will kill this American experiment, as wasteful spending adds to our debt and increases the possibility of sovereign default.

We’re All Austrians Now

The 800-pound gorilla in the room are the Bush Tax Cuts; will Obama allow them to expire, or will he extend them?  The answer is complicated; that depends on Congress, and by pushing a $55 billion assistance bill, Obama will want to extend tax relief for some, but not all.  Who will qualify for this tax relief?  That all depends on those writing the legislative language; Senator Baucus, father of the Health Care Bill, recently pointed out that duty now rests with staffers.  Lefties hate the low capital gains tax rate, and are chomping at the bit to tax investments at the same rate as earnings.  President Obama’s comments signals the Administration will push for an increase on both “in further detail in the days and weeks to come.”  Likely, the tax cuts and hikes will be added into another spending bill, being mulled about right now.

Additionally, multiple stimuli, by all measures, have repeatedly failed.  So why is Obama now stumping for $50 billion in infrastructure spending, when $48 billion of the Stimulus Bill was allocated for infrastructure spending only one year ago?

A great article in the Wall Street Journal yesterday entitled “The Obama Economy” lays out how poorly Stimuli efforts have fared, stimulating little more than government itself, and states “the effort itself is a tacit admission his earlier proposals have flopped.”  Out on the road, Obama promotes class warfare, and confusion, by simultaneously declaring yesterday he believes “a rising tide lifts all boats,” and, on Labor Day, “anyone who thinks we can move this economy forward with a few doing well at the top, hoping it’ll trickle down to working folks running faster and faster just to keep up – they just haven’t studied history.”  It seems Labor Day has not only been hijacked from the private sector by the Labor Unions, but by Big Government as well.

This all comes at a time when the market is paralyzed with uncertainty; the private sector is watching and waiting for the next shoe to fall.  They are waiting to hire and invest, based on tax laws.  Insomuch, the Administration cannot create jobs, but it can surely destroy them.

There is good news; Federal Reserve chairman Ben Bernanke, at a meeting with central bankers in Jackson Hole, WY, admitted more “fiscal stimulus… can drive recovery only temporarily,” and the Fed misread the mortgage market; remember, Bernanke initially endorsed Keynesian fiscal drivers, set rates low, printed tons of money, and was thusly named TIME‘s 2009 “Person of the Year.”  Perhaps Bernanke has been baptized by fire and is adaopting a more Austrian, free market view of economic control, but I don’t expect laissez-faire from the Fed any time soon.  I do expect Bernanke to following the meteoric descent of TIME‘s 2008 “Person of the Year” as people become aware of the Fed’s enabling of backdoor loans (discussed in my post “Two Card Monte.”)

The bottom line is, both monetary and policy Stimuli are increasing our national debt.  Raising taxes to pay for these efforts are killing the American economy.  Our manufacturing processes have quickened with technology, or have moved overseas.  The gross effects of these fundamental changes has been a total loss of manufacturing capabilities and employment within the United States.  Raising taxes, binge spending, and cutting the interest rate further at this point in our history may just do us in.

One More Thing

Lastly, let me address this little sound bite about the small business bill from the President:  ”Unfortunately, this bill has been languishing in the Senate for months, held up by a partisan minority that won’t even allow it to go to a vote.  This bill is fully paid for.  It will not add to the deficit.  And there is no reason to block it besides pure partisan politics.”

This is simply idiotic.  I thought the bill cost $55 billion?  Oh, it will pay for itself, and you should believe that, because the White House economic team said so… except for Peter Orszag and Christina Romer, who both quit the Administration last month due to the inaccuracies of the Administration’s economic projections and the mounting debt they caused.  Also, President Obama wants you to believe Republicans are holding up legislation in the Senate… the way they held up the Stimulus Bill and the Health Care Bill, right?  Remember, the Minority has no power right now.  If Obama wanted to pass the bill, he only has to sell it to his Lefty buddies in the Senate.

So, what’s the hold up?  Democrats know if they pass this bill right before election, they’ll lose even more seats in Congress, namely in the Senate.  So I say, do it.  I double-dog dare you.  It is, once again, “A Time for Choosing.”

“You and I have a rendezvous with destiny.  We’ll preserve for our children this, the last best hope of man on earth, or we’ll sentence them to take the last step into a thousand years of darkness.”
~ Ronald Reagan, 1964