Conservative Political Commentary

...usually with an attempt at historical and economic context

Wednesday, December 7, 2011

Some Comments on President Obama’s Economic Speech of December 6, 2011

President Theodore Roosevelt. Photo via Wikipedia
The president spoke in Osawatomie, Kansas on Tuesday, December 6, 2011, on his version of Theodore Roosevelt’s “New Nationalism,” essentially trying to make a case for a more socialistic approach to the economy, with the idea of government striving to make everything “fair” and supposedly advancing the middle class.

The comments cover a good deal less than the entire speech (video found here and here), but I believe they address the main ideas he expressed. The text is found at the Washington Post website. The president’s words are in bold, mine are not.


For many years, credit cards and home equity loans papered over the harsh realities of this new economy. But in 2008, the house of cards collapsed. We all know the story by now: Mortgages sold to people who couldn’t afford them, or sometimes even understand them. Banks and investors allowed to keep packaging the risk and selling it off. Huge bets – and huge bonuses – made with other people’s money on the line. Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn’t have the authority to look at all.

It was wrong. It combined the breathtaking greed of a few with irresponsibility across the system. And it plunged our economy and the world into a crisis from which we are still fighting to recover. It claimed the jobs, homes, and the basic security of millions – innocent, hard-working Americans who had met their responsibilities, but were still left holding the bag.

The president conveniently leaves out the fact that banks were under heavy pressure from the government to make these loans, and Fannie and Freddie purchased them. The Democrats in Congress, led by Barney Frank, would not permit the needed regulation of Fannie and Freddie, claiming that they were on sound footing. Financial companies issued extremely risky derivatives, which should have been stopped by government regulators but weren’t, and now, banks have it set up where derivatives take priority in bankruptcy, over the interests of investors. See Gary North’s informative article here.

Community agitators like ACORN (which previously employed Barack Obama)  increased pressure on banks to make the bad loans. The “breathtaking greed” was driven and incentivized by the government through purchase guarantees and “affordable housing” pressure. Banks shared blame as well, but it was primarily a government- and Federal Reserve-caused situation. The bailouts (under Bush’s administration) set the tone for further legislation handled in an “emergency” fashion, (Obamacare, cap and trade, etc.), with little to no debate and in the dark of night, with 1,000-plus-page bills which were not read and perhaps not yet entirely written when voted upon. This is the fault of government.

But this isn’t just another political debate. This is the defining issue of our time. This is a make or break moment for the middle class, and all those who are fighting to get into the middle class. At stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.

Obama is correct that the middle class is at stake. It is Obama’s policies that are destroying the middle class through ensuring massive unemployment and an economic environment that discourages business growth and hiring. His answer is higher taxes and more spending. More “stimulus,” when the stimulus to date is proven ineffective.

Now, in the midst of this debate, there are some who seem to be suffering from a kind of collective amnesia. After all that’s happened, after the worst economic crisis since the Great Depression, they want to return to the same practices that got us into this mess. In fact, they want to go back to the same policies that have stacked the deck against middle-class Americans for too many years. Their philosophy is simple: we are better off when everyone is left to fend for themselves and play by their own rules….

According to Obama, the government needs to make sure a good outcome is experienced by all who “work hard.” The task of government in the economy is punish fraud and abuse, and to provide an appropriate, rather than oppressive, tax and regulation environment. The Federal Reserve has harmed the economy through massive money printing and artificially low interest rates that discourage investment and saving. The government should not interfere with the free market, which they constantly do through corporate welfare and “crony capitalism” which is actually not capitalism but more like fascist corporatism.

They should stop all subsidies, bailouts, and special tax treatment, and trust the free market, in which companies and individuals pursue their own self interest without government interference.

Now, just as there was in Teddy Roosevelt’s time, there’s been a certain crowd in Washington for the last few decades who respond to this economic challenge with the same old tune. “The market will take care of everything,” they tell us. If only we cut more regulations and cut more taxes – especially for the wealthy – our economy will grow stronger. Sure, there will be winners and losers. But if the winners do really well, jobs and prosperity will eventually trickle down to everyone else. And even if prosperity doesn’t trickle down, they argue, that’s the price of liberty.

It’s a simple theory – one that speaks to our rugged individualism and healthy skepticism of too much government. It fits well on a bumper sticker. Here’s the problem: It doesn’t work. It’s never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible post-war boom of the 50s and 60s. And it didn’t work when we tried it during the last decade.

It’s called free market capitalism and it does work and will work whenever it’s allowed to operate. The reason the Great Depression got so bad and lasted so long is that government tried to fix it. There was a depression in 1920 that started out as bad as the one in the 1930’s, but lasted less than two years, because neither the government nor the Fed did anything to interfere. They didn’t enshrine the mistakes as they did in the 1930’s and in the 2008 collapse. The government should have simply let the recession run its course, and by now, bad debt would be liquidated and we’d be back to normal growth. But no, politics trumps all. See Tom Woods's eye-opening video on the 1920 depression here.

When Obama says “It’s not political,” he would be more accurate in saying, “It’s not just political, it’s very, very political.” He is the servant of the unions, the radical environmentalists, and the socialist left.

This speech, delivered in the form of populist rhetoric, is an attempt to make the case for socialism. Theodore Roosevelt was something of a “Progressive,” as some liberals like to be called today, but people don’t generally understand that Progressivism is the belief that economic, social and cultural decisions that people traditionally make for themselves, should instead be made by a group of elite “experts,” acting for all. Thus we got big government, big bureaucracy, less freedom, and even eugenics. Now we have abortion, and may soon have more government-rationed health care and government-rationed or mandated who-knows-what.

Remember that in those years, in 2001 and 2003, Congress passed two of the most expensive tax cuts for the wealthy in history, and what did they get us? The slowest job growth in half a century. Massive deficits that have made it much harder to pay for the investments that built this country and provided the basic security that helped millions of Americans reach and stay in the middle class – things like education and infrastructure; science and technology; Medicare and Social Security.

Actually, we had strong job growth, compared to today. The deficits came mainly from wars that started after 9/11/2001 and continue today. And Bush’s worst deficits pale in comparison to those racked up under the Obama Administration.

Obama wants more “investment,” i.e. government spending, in education and infrastructure. But if the economy could just be allowed to recover, these issues would be taken care of without massive borrowing and endless debt.

We simply cannot return to this brand of your-on-your-own (sic.) economics if we’re serious about rebuilding the middle class in this country. We know that it doesn’t result in a strong economy. It results in an economy that invests too little in its people and its future. It doesn’t result in a prosperity that trickles down. It results in a prosperity that’s enjoyed by fewer and fewer of our citizens....

According to Obama, we need government in control to make sure the incomes and outcomes are what they should be. But experience has shown that government is hardly qualified to run anything outside its actual constitutional responsibilities. They are poorly qualified to give guidance on running business or the economy, when their own business and their own finances are out of control. It’s the private sector that needs to be able to invest, not the government. But politicians put many roadblocks in the way: bans on energy development and oppressive EPA regulations, just to name two.

America can’t afford four more years of Obama. That should be the focus of the GOP message. A few more years down the current path and we’ll be worse off than Greece.

Wealth and income inequality is not the problem. It’s simply a convenient propaganda component to stir up class envy, which, I repeat, is the very life blood of liberalism, and class warfare is its process.

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