Richard Epstein:
This past week in Galesburg, Illinois, President Obama gave his first speech on his plans to reinvigorate a still stalled economy at Knox College. The speech itself received little press coverage—so little, in fact, that the Sunday New York Times ran a puff-piece on it to build interest in his next speech—on a similar topic—scheduled for Tuesday, July 30 in Chattanooga, Tennessee. In these speeches, the president is using the bully pulpit to argue for redistributive, pro-regulatory, pro-union policies that he claims will serve the middle class.
Illustration by Barbara Kelley But his all-too familiar remarks are likely to continue to fall on deaf ears, as the public imagination turns its attention to real events, including the Securities and Exchange Commission’s indictment of SAC Capital Advisors and the public fight over who will assume the chairmanship of the Federal Reserve at Ben Bernanke leaves. Will the President choose the oft-impolitic Lawrence Summers, who is suspicious of the stimulus, or the cautious Janet Yellen, who supports it?
Farewell to Supply and Demand
The President’s speech at Knox College needs some close deconstruction because it sheds harsh light on a problem that has dogged his domestic policy agenda from the beginning: intellectual rigidity. The President, who has never worked a day in the private sector, has no systematic view of the way in which businesses operate or economies grow. He never starts a discussion by asking how the basic laws of supply and demand operate, and shows no faith that markets are the best mechanism for bringing these two forces into equilibrium.
Because he does not understand rudimentary economics, he relies on anecdotes to make his argument. He notes, for example, that the Maytag plant that used to be in Galesburg is no longer in operation—it closed in 2004—but he never asks what set of forces made it untenable for the business to continue to operate there. He never mentions that Maytag’s relocation of its manufacturing operations to Mexico may have had something to do with a strong union presence or the dreadful economic climate in Illinois.
Unfortunately, our President rules out deregulation or lower taxes as a way to unleash productive forces in the country. Indeed, he is unable to grasp the simple point that the only engine of economic prosperity is an active market in which all parties benefit from voluntary exchange. Both taxes and regulation disrupt those exchanges, causing fewer exchanges to take place—and those which do occur have generated smaller gains than they should. The two-fold attraction of markets is that they foster better incentives for production as they lower administrative costs. Their comparative flexibility means that they have a capacity for self-correction that is lacking in a top-down regulatory framework that limits wages, prices, and the other conditions of voluntary exchange.
Deconstructing Obama
Instead of suggesting policies to reduce the impact of government on production, Obama reverts into a lament for the lost middle class. He notes that our economic engine has, over time, “began to stall”:
The networks and other parts of Obama’s press will no doubt be touting the new LOWER unemployment %.
One network TV news actually said, “lowest unemployment numbers since the Bush years”.
BUT the fact is over 1/2 of the jobs created for this report were PART-TIME!
The unemployment number only went down because so many people QUIT LOOKING FOR WORK.
Also, what kind of jobs were created?
Nearly all the 161,000 jobs were added in the service industry – on the goods-producing side we only added 4000 jobs!
Literally, we are all serving burgers to one another.
But, the media will say, let’s ignore all that and – looky here! – Obama is helping the economy recover!
Except that he’s not.
Remember that old graph Obama had created?
Here’s how it will be without the Stimulus.
Here’s how it will be if you give me $1 trillion for ”shovel-ready jobs (the stimulus.
One guy is still publishing that chart:
http://www.aei-ideas.org/2013/08/wheres-that-5-unemployment-rate-obama-promised-by-now/
I read the entire article and sadly the author is expressing the anti labor establishment Republican viewpoint throughout his piece. NAFTA is the reason that Maytag and may other companies moved the factories to Mexico. Why? because their competitors slobbered after and lobbied for the idea of lower wages, and less regulation which results in higher profit margins and the ability to undercut the competition. Now, I’m not saying that getting rid of unions wasn’t part of the “benefit” sought by the executives of these corporations. But blaming the moving of manufacturing overseas only on the unions is disingenuous BS. Maytag and many other manufactures had little choice but to also relocate to Mexico (and later with more “free trade agreements” to other cheap labor countries,) to stay competitive.
Establishment Republicans only care about profit for themselves and their big money backers. These are the same political hacks and profiteers who are pushing for illegal immigrant Amnesty. Their goal is to keep wages depressed and turn America into a form of capitalist-feudalism. They have no consideration for America’s working class. Many Republicans and businessmen used to support a mutually beneficial relationship between management and labor. Business owners who kept a team effort atmosphere and made sure that if the company profited, some of the profits were shared with raises and bonuses for the workers, and as a result their labor forces took pride in their work. The global free-trade multinational corporatist of today are akin with the robber barons of yesteryear.
Conservative Republicans and good hearted businessmen can win back the support of labor, and kick out the “Progressive” establishment failures that are currently in control of the GOP. Statesmen are needed and industrial leaders who want to restore the “American Dream.” These patriotic American movers and shakers need to get together and work on ideas to create a “back to business plan” that will bring back mutually beneficial capitalism of labor friendly business, to reform our education system to what was once the envy of the world, and overall to get America back on track.
Homeownership at 18-Year Low in Stagnant Obama Economy
@Ditto: Good point.
Obama took a ”crisis” and, instead of helping the middle class with their need to straighten out their loans, decided to aid people who were too poor to buy a home successfully.
In 2009, Obama started the Home Affordable Modification Program.
But what happened?
1. we taxpayers ”spent” $4.4 BILLION, basically a transfer of wealth from middle class to poor.
2. 1.2 million home ”owners” took part, but 306,000 re-defaulted on their taxpayer-subsidized Obama mortgages, at an additional cost to taxpayers of $815 million.
3. each year since Obama’s program started MORE homeowners are defaulting.
4. the default rate is now at 46%.
http://townhall.com/tipsheet/kevinglass/2013/07/28/www.sigtarp.gov/Quarterly%20Reports/July_24_2013_Report_to_Congress.pdf
Ditto
there is nothing good to say now about the UNIONS,
THEY HAVE BECOME TOO POLITICAL ON THE DOLE OF THEIR MEMBERS
which are silenced because of their adherence to them, a force adherence,
which they could be better of without,
we know the members do not respect the one who pay their salary
but the workers only listen to their UNION BOSSES AND THEY ARE SET UP LIKE A PYRAMID,
WHERE NO ONE IS NEVER BLAME TO BE THE CROOK BECAUSE OF THE CODE OF SILENCE WITHIN,
AND IF THEIR DEMANDS ARE NOT MET THEY ARE READY TO BREAK THE MACHINES,
NO THERE ARE NO GROUND FOR RESPECT SINCE THEY DID EVERYTHING POSSIBLE TO GET THEIR MAN BACK IN THE SEAT,knowing the problems for the people he has brought, AND AT ANY COST OF INTIMIDATION POSSIBLE,
@ilovebeeswarzone:
Sorry Bees but I can’t agree. While what you say may be true for Union leadership and some union members, it simply is not true for all union members. There are union members with integrity who take pride in their job, do their job well, and who are not “socialists” or “Democratic activists.” They don’t like it that Union leadership supports candidates for office that they do not. Some are “card carrying” Republicans who work in states where you have to be a union member to work in a unionized shop.
Ditto
I agree, I did not go after the members who are not thugs,
I went after the other, and I hate to see the union boss create a scenario by using the employees of the business they work for, and make them become haters of their real boss who pay them,
it’s degrading the workers who are following the orders of the UNIONS,
BECAUSE THEY ARE SCARE,
OF THE THUGS