Friday, August 3, 2012

Obama's Economic Failure

The jobless numbers today were better than expected (UPDATE- the jobless numbers released in September illustrate the President's ongoing economic failure). However, they were still exceptionally poor. The economy continues to suffer from an 8 .2/.3% unemployment rate. As the BLS statistics show, far too many Americans are currently disengaged from the employment figures because they have effectively given up looking for work. The job situation in America is very unpleasant. It cannot be denied that President Obama inherited an extraordinarily difficult economic environment. BUT.. Obama has been President for 3.5 years now. As Harry Truman stated with regards to responsibility of the President - 'The buck stops here'. Obama's economic policy has been a profound and continuing failure. I believe there are three core reasons for this.

1) The President does not accept basic capitalist economic theory. This can be seen in health care - Obama has increased demand dramatically without producing a correlative increase in supply. I have suggested ways Republicans (who have been pathetic on this issue) could offer a better alternative. Obama's economic mindset can also be seen in his comfortable attacks on corporations - happily comparing them to the bogey man rather than as job creators. This President has an inherent suspicion of capitalism - his attacks on Bain Capital providing the most troubling example. This point has recently become more clear with Obama's observation that successful business owners owe government for their success. For the President, success is inextricably linked with government. As a correlative point, government should therefore at least in the President's eyes, play a fundamental, active role in society. I believe that this mindset is fundamentally flawed. It is true that government facilitates economic growth by providing roads, schools and law/order etc. However, at the core of business success (as with any success) is the hard work of individuals, the willingness to take risks that others won't and the creativity that comes from the individual with an idea. Ultimately, the President believes that Washington DC is better than individual investors at allocating capital. (See 3).

2) The President is seemingly incapable of being honest about the need to reform and resolve America's tax code/debt crisis. Until America's tax policy is permanently reformed, there will be a continuing fog that prohibits individuals and businesses from making long term decisions about how and where they should allocate their money (their "scare resources"). Instead of offering a tax reform plan that would lower rates and increase revenue by removing deductions, Obama instead calls for higher rates and a continued tax system characterized by insane complexity and numerous loopholes. To date, Obama's only  remotely serious tax reform proposal offered reduced corporate rates in return for a winners and losers system in which Washington would allocate its own loopholes to favored industries. In essence, it just re-dressed the same problem. On the issue of debt, until America is able to produce a long term plan for reduced spending, foreign and domestic investors will remain timid and interest payments will continue to soar. On debt, Obama rewarded John Boehner's bold  summer 2011 willingness to find a deal with games. Now, as he runs for re-election, the 2008 candidate for honesty, hope and change peddles the old democratic lie that raising taxes on the rich can alone pay to erase the debt crisis. These failures represent a collapse of leadership and the unsurpassed hypocrisy of Obama's 2008 election narrative.

3) The President believes that the government is best placed make decisions about allocating capital. See Solyndra for how this works out. I used to believe that criticisms of the President were silly when they typified him as a socialist. Now I think they are somewhat justified. I believe that the President's ideology is closely bounded to a liberal mindset that mistrusts capitalist instinct and believes that the government should exist as an active positive constraint against this instinct. I'm not an ultra capitalist, but I do believe that capitalism is a large part of what has made America strong. Government must regulate and punish (SEC and DoJ for example) where capitalism runs amok, but as a general rule, I believe that the less government interference, the better. I believe this is an especially prescient point with regards to Unions. Unions are the President's favorite special interest. Even though they destroy state budgetsreduce employment opportunities, drive up living costs and restrict the free movement of workers. And damage economic productivity.

The above issues are real and considerable obstacles to building a better economic future for America. In my opinion, Mitt Romney would be a far better President than the incumbent.

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