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To a lifelong politician like President Obama, the jobs-thing (as he might say) seems like the most important political issue today. Millions of people are out of work or under-employed, creating a very nasty political environment for a sitting president. His approval numbers are way down, and he knows people are unhappy about high unemployment. So it’s natural for him to keep talking about Jobs – by one tally, he mentions the word every 35 words in his public utterances – and even to give a major speech to a joint session of Congress, as he plans to do this coming Thursday. (I’ll keep my own count of how many times he says “jobs,” and the maximum reading registered on the Applause-o-meter whenever he does.)
But Jobs are not what Mr. Obama or his administration should be concentrating on. It’s the wrong point of emphasis. The Economy is the right thing. Jobs are important to working-people, of course, but they are the product, not the cause of a healthy economy. Mr. Obama and politicians like him think they can “create” jobs by dumping a lot of federal dollars onto “shovel-ready jobs,” “green jobs” and phony-baloney government jobs. They think this will jump-start the economy: more people will be working; the unemployment numbers will go down; and the Big O’s approval rating will go up. Voila! The problem will be sol-ved. An earlier generation of politicians (and economists) called this “priming the pump.”
The field where I spent my technical career abounded with various waggish sayings. One of them was – “For every complex problem, a solution exists that is simple, elegant, and entirely wrong…” I don’t know who said it first, but it is so true, particularly at the mega-economic level where politicians and economists (they are not synonymous!) toss billions of dollars around like Monopoly money.
The insane belief that we can borrow and spend our way into prosperity will cost Americans a lot of money and grief before it gets flushed out of our collective political mind. Unfortunately, I don’t see that happening any time soon. Spending billions to “put the country back to work” still gets boffo headlines, so we can look for it to continue. Besides, a sizable segment of the Democratic Party actually believes it. We've been trying it for 75 years, but it hasn't worked yet. The question is whether we can escape complete ruin before the spending orgy can be stopped.
So if things can’t be cured by concentrating on “Jobs,” what will the cure be for what ails us? Naturally, the cure will be a resurgent economy. That means a robust, growing private sector – not more government jobs or contrived “shovel-ready” jobs funded with borrowed government money. Mr. Obama seems to know this, as he has made remarks indicating as much. He keeps urging business to invest over $2 trillion they are known to be hoarding, and start hiring new employees – as though this is all that’s needed to get our economic train moving down the tracks again. But business has not budged an inch, leading some pundits and politicians to speculate that a racist dynamic must be at work – i.e., that business people are deliberately not expanding because they want a black president to fail.
I spent 40 years in the private-sector business world – starting when real racism still existed in some parts of the country – so I think I know something about what motivates business. Accordingly, I stake any small reputation I have gained for credibility and sound analysis on the absolute conviction that the “racism” charge is complete rubbish. It is (in my opinion) the stupidest, most ignorant excuse ever contrived to explain a politically bungled, stagnant economy. It betrays an appalling lack of understanding of what motivates business. Contrary to what some politicians seem to believe, that motivation is not good media-coverage, altruism, “social justice,” or racial solidarity of any kind. It is simply Money.
If there is a business executive anywhere in the country willing to forego expanded business and increased sales simply to “thwart” a bi-racial president, I have yet to meet him. Outside of KKK Enterprises (a made-up name), no business would dream of doing this. Even the Klan would not be dumb enough to curtail its business interests (if any) on such a basis.
I beg my readers’ forbearance here. I admit that the steady drumbeat of “racism! racism! racism!” to explain every failure of this incompetent gaggle of fools, varlets, brigands and poltroons has gotten under my skin. (But I’ll be real good from now on…)
If not racism, then what is the holdup with the economy? Why are we heading for a double-dip recession? And why does Mr. Obama seem powerless to get the engines restarted? I’m not an economist, but I can see five pretty obvious reasons (not a comprehensive list). I’ll discuss them briefly below.
Taxes. Mr. Obama and the Democrat-controlled 111th Congress spent us into a deep hole, causing the president to get fixated on the idea that taxes are too low and must be raised. (He might have been fixated on it earlier.) This gives businessmen the heebee-jeebies, since most of them know that (a) only a madman raises taxes in a recession, and (b) businesses will not sell more of their products when people have less money in their pockets to spend. In the lame-duck session of the 111th Congress, Mr. Obama nearly sprained his arm patting himself on the back for cleverly extending the Bush tax rates for only two years. (They will expire on December 31, 2012.) He evidently thought the politically-charged matter was settled for the rest of his term, not comprehending that those two years were very short-term to businessmen, who started planning immediately for higher taxes in two years. The uncertainty of current tax-politics is a prime factor in the economy’s stagnation. Until that uncertainty is removed, business is not likely to plan for much expansion, no matter how much Mr. Obama jumps up and down, sees racism lurking under every eyeshade, and calls for millionaires and billionaires to pay their “fair share.”
Regulations. This topic crosses the eyes of the man on the street. I hear people say, “It’s what government does. So what?” Yes, government does this, but under Mr. Obama the “dismal science” has been greatly expanded. Little attention is paid to the cost added to business’s expenses by those regulations, and no government accountability is required or expected. Fortunately, various think-tanks and business organizations track the extent of regulations and their estimated cost to business. One such group is The Competitive Enterprise Institute, which has authored a report called “The 10,000 Commandments.” Its findings show that federal regulations now impose an annual cost of $1.2 trillion on American business. Not well-understood by the average citizen is the fact that this staggering sum is passed on directly to consumers in the form of higher prices. Typically, businesses do not swallow these costs. No doubt some regulations – like those mandating pollution controls and worker-safety – serve a useful public purpose. But there is always the question of cost-benefits and reasonable bounds. Congress needs to exercise proper oversight on these matters. Until it starts doing so in a serious way, federal regulations will remain a serious (and growing) drag on the economy.
Energy. Many economists maintain that releasing the oil industry to drill for and retrieve known sources of oil and natural gas would energize the American economy more than any other single thing the president could do. They argue that this release would cause the world price of oil to crash, thereby energizing business via the billions of consumer dollars freed up to buy commodities other than gasoline. More than that, thousands (perhaps hundreds of thousands) of jobs would be brought on-line in the oil and natural gas industry. These would be real, productive, tax-paying jobs – not chimerical jobs “created” with borrowed federal dollars. They would be a net gain to the economy, not a net drag. Experienced politicos say the president cannot be re-elected with oil (and gas) prices where they are. As he shows no inclination to budge on opening the energy spigot, we’ll see if the political experts are right.
Federal Spending. The debt-ceiling crisis of early August produced much media-coverage – most of it “full of sound and fury, signifying nothing.” Politicians and reporters made much of the Congress’s and the president’s “heroic” efforts to slash $2 or $3 trillion from the budget, while blithely skipping round the fact that these cuts were projected to occur over 10 years. During that same span of time, however, federal expenditures were projected at some $40 trillion, putting the cuts in perspective as a very minor effect. Unless both Congress and the president get serious about cutting at least $1 trillion from this year’s federal expenditures, our debt picture – including our S & P rating – will not materially change, except to slide down farther. Americans will eventually feel the pinch of this in their financial dealings. Politicians keep vowing not to cut a dime from our commitment to the young, the old, the lame, the halt and the blind, etc., etc. They are kicking the can down the road, but sooner or later the Piper must be paid. Something will finally have to give – either a total commitment to higher taxes and socialism, or all out for free markets, lower taxes and a resurgent economy. There won’t be any Mr. In-between.
The Blame Game. Verily, Mr. Obama’s “Bush did it” shtick is getting a little old. It’s at the point where ordinary people, not just late-night comedians, are cracking wise about it. (“I heard that Obama blamed George W. for the Virginia earthquake and Hurricane Irene…”) The thing is beyond silly now. OK, the stock market crashed and the bad-mortgage-loan bubble burst just before the 2008 election. The economy was in free-fall when Mr. Obama swept into office. We get it. You don’t turn a mess like that around in a few months. Did George Bush cause all that? Well, it was certainly on his watch, so he gets the blame, but a president needs help to make things go ker-splat like that. Another branch of government called the Congress might have had a little to do with the sub-prime mortgage crisis. As I recall, that’s the same Congress that the estimable Mr. Obama sat in before he was elevated. Nearly three years into his term, Mr. Obama is losing what little credibility he had by striking his country-boy posture and saying, “Why shucks, things were a lot worse than we thought they were…” The job is his now, and at some point he needs to man-up and accept the fact that he really didn’t know much about economics coming in. In the street lingo he is famous for invoking, he screwed up. George W. wasn’t blameless, but he’s long-gone. And right about now he’s looking pretty good to a lot of people.
Action on one or two of these items would make a big difference in the economy. Three of them would cause a boom; five would transform the country from despair to real hope and dynamism. I don’t look for that to happen, though. The kind of “hope and change” Mr. Obama evidently had in mind was for you to hope you can get work and to put change in your pocket. The big speech might excite Big Media, and his mention of “jobs” might reach new heights of frequency, but it won’t do a thing to get the country moving.