President Obama ignores our real economic problems. He has actually made things worse. America’s borrowing ability is great but not unlimited, and the longer we postpone defusing the entitlement spending bomb, the harder it gets. This will ultimately blow up our economy.
Obama talked of ending partisan bickering, but never walked the walk. Our situation cries out for his leadership on a “grand bargain” – Democrats finally agreeing to major entitlement reform, along the lines of Simpson-Bowles, in exchange for Republicans accepting higher revenues. This at least would constitute a serious long-range economic plan, and a broad spectrum of responsible opinion would strongly support it. If Republicans refuse, Obama could attack them from high ground.
Instead he takes the low road: cheap shots like the Bain Capital ads, and small-beer feel-good proposals, while offering no comprehensive economic plan. It’s remarkably irresponsible; fiddling while Rome burns.
Obama’s campaign harping on fairness is simply a distraction. This isn’t our big economic problem. Nor is it that the rich don’t pay enough. Even raising their taxes as Obama wants would only be a drop in the bucket. We spend way more than taxes can ever sustain.*
Instead of quibbling about dividing up the pie (the perennial obsession of liberals), we need to make it bigger. Then more people can get bigger slices without reducing the slices of others. Such economic growth would also ease our debt problem.
Democrats act like all the economy needs is to be goosed back to normal humming, by government stimulus. But massive stimulus so far (repeated trillion dollar deficits) hasn’t done the trick. Obama’s economic proposals, all together, boil down to borrowing $1.2 trillion annually instead of $1.1 trillion. Could that really make the difference?
Of course not — because we have deep structural economic problems that government stimulus can temporarily mask but doesn’t cure. Industry grows increasingly high-tech and productive, and the good old blue collar jobs that have in consequence disappeared are not coming back. Highly skilled people thrive, but a majority of American workers lack a college degree, and a quarter or more don’t even finish high school. Hello: this is the chief cause of chronic unemployment (and of inequality, too).**
Stimulus can’t fix this, it’s a band-aid under which the infection festers. Borrowing ever more from China to finance deficits to prop up the economy makes a phony prosperity that only digs our debt hole deeper. Again, Obama is a man without a plan.
The Democrats’ whole economic mentality is reliance on the public sector; they never seem to grasp that wealth creation only ultimately comes from the private sector. Borrowing money, or printing it, to pump into the economy, or boosting government payrolls, does not add to national wealth. Only production of saleable goods and services does.
Thus Obama’s remark about the private (versus public) sector “doing fine” was no mere gaffe. Democrats consistently talk as though more government employment (and debt) can fix the economy. They are besotted with government and hate business; love “jobs” but hate “profits.” They don’t get that companies not making healthy profits can’t hire and keep workers. Same for their demagoguery about “shipping jobs overseas” – if businesses don’t stay competitive by keeping costs down, they can’t employ anybody.
Over-regulation doesn’t help. This may sound daft after 2008. But liberals always overrate government’s ability to do it right and underestimate downsides. It’s debatable whether 2002’s Sarbanes-Oxley law, to curb Enron-like abuses, does much good. But it does create massive red tape for businesses, particularly harmful for small ones, impeding their growth. The number of new companies going public annually has plummeted sharply since Sarbanes-Oxley. Dodd-Frank vastly compounds the problem.
Hate me for this: we’d be better off with zero regulation. Because the undoubted abuses would be more than compensated by greater business expansion, wealth and job creation, and enlarging the economic pie for everyone. (Just look here, at China.) The most effective regulatory regime is a free competitive market with no government protection. The Democrats’ regulation lust makes them the anti-growth party.
And they’re not the education party. They are the party of the teachers’ unions, avatars of the status quo, resistant to reform, and especially to competition. Again, America’s education level is no longer good enough – a key reason for economic underperformance.
This election will be close. Even if Obama squeaks through, Dems will not sweep back into the House of Representatives, and may well lose the Senate besides. To re-elect Obama would lock in four more years of partisan war, ensuring inaction on the nation’s real problems. After four years, they will be considerably worse, and harder yet for the political system to deal with.
Republicans (as I’ve blogged) do have their own meshugas. But on the direction of the economy, they’re still much nearer the right track than Obama and the Democrats. And at least if a single party controls both White House and Congress, they can’t evade accountability. They might, just conceivably, do something right.***
*And the messed up tax code itself is a major drag on the economy.
** See also David Brooks’s recent column about how affluent families do far more than lower income groups to prepare their children for success.
*** Romney could invoke a useful new guy’s wheeze: “When I got into office, I found our finances even worse than I thought . . . .”