The Economy, Continued

George W. Bush handed off a bad economy to Barack Obama. I believe we can all agree on this. However, after that, the perception of economic reality between conservatives and liberals diverges. For example, Bush took the wrong step--after cutting taxes during the '01-03 recession--of attempting a massive government bailout/intrusion into the economy. The '08-'09 recession has been the result of a collapse in home prices, credit, and some of the financial and industrial concerns that depended on the credit markets. The bail-outs under Bush and Obama, administered by the Secretary of the Treasury, have not worked. Credit remains tight, more mortgages are failing, and credit remains tight. Enter Barack Obama.

It is time to stop blaming George W. Bush for the economy. This economy has been Obama's for a month now. Gone is the soaring rhetoric of "hope" and "change." Now we are treated to grim reality, "It's going to get worse before it gets better," and more excuses for the government to intrude into the private sector.

A jolt of government spending on private-sector products and services could temporarily juice the economy, though John Maynard Keynes himself said that incentives were necessary to encourage businesses to invest and expand. Those incentives generally include tax cuts and reductions in regulations. The Obama stimulus plan has not done this. It has focused on government spending on government-focused activities that increase the federal bureaucracy but does not increase private-sector productivity, which has always been more dynamic and profitable than government activity. It has increased taxes on the people with the most money, who would be the ones paying the most taxes and investing in the most profitable businesses. He has proposed a massive new dose of federal spending that the nation cannot afford, foreign investors do not want to subsidize (or want concessions to support), and which could inflate the currency in the long run.

Furthermore, President Obama and his party in Congress have attached regulations and strings to their version of the bailout money. President Obama has criticized CEOs for flying in private jets or going on business travel to expensive places, potentially damaging businesses and jobs in those industries. The more the government interferes, the less businesses are likely to take risks, for fear of being targeted or criticized for their attempts at success.

Obama has preached about a new "era of responsibility," but the government bailing out businesses and individuals who made bad decisions guarantees more irresponsibility in the future because somewhere, somehow, people believe that the government will always bail them out if they screw up. Indeed, the bigger the screwup (billions of dollars lost), the more likely it is that a company will get a bailout!

Obama wants more Americans working, but extending unemployment benefits or upping the benefits is an incentive to stay home and let the government take care of you. And so forth.

In short, I believe President Obama's policies and public statements are making the economy worse, not better. I want my country to be rich. Heck, I want to be rich! I want my 401(k) back. I've been told I need to "give Obama a break." At what point can the voters make him accept responsibility? When the Dow doubles down a couple more times? When unemployment hits 10%? 15%? 25%, as it did under Roosevelt? At what point can we stop blaming Bush? And saying things like "Well, Bush did X worse" is not helpful, nor is it a terribly effective defense of Obama. Bush is not president anymore, Obama is, and I want him to know what he is going to do that will be good for the economy.

I want the president to cut taxes. I want him to ease up on the private sector. I want him to stop telling businesses that it's not appropriate to travel to Las Vegas or Orlando for conventions. I want him to stop criticizing anyone able to afford a private plane. I don't want him to spend more in one year than most of the most expensive years-long projects in American history. If he's going to spend taxpayer money, let it be for basic infrastructure, basic research and development (including space exploration), quality academic and trade education, and temporary relief of economic hardship. If he really wanted to kick up the economy, he could cut the number of the federal regulations (and the bureaucracy responsible for increasing their number), bypass bailing out banks and other companies, and send every taxpayer $10,000. We would probably still come out ahead...plus, he'd stimulate consumer spending like nothing anyone has ever seen! I could get behind a program like that.

Heck, if he did all that, I might vote for him in '12!

Hmmmm

So today's Dow Jones Industrial Average closed up 936 points. Far be it for me to look a gift horse in the mouth (that's an 11 percent gain and a bit of a load off my 401(k)), but I'm forced to wonder why there is this sudden exuberance. Has the Dow Jones decided that national and international socializing of the banking business is an inherently good thing? Are they in fact saying, "Oh, goody! Our cheese has been saved! Uncle Sugar and his cousins are going to bail us out!"?

The news media is now reminding us that we are in a mixed economy, and that government action is helping to prevent another Great Depression. That doesn't mean it's right, just that it is so. What sorts of lessons is this situation teaching future big businesses, bankers, and other capitalists? It's teaching that if individuals and companies are part of a sufficiently large segment of the economy, and that segment suddenly faces unexpected or near-catastrophic losses, the government will bail them out. In which case, it will be okay to continue giving executives golden parachutes because, again, the tab will be picked up by Uncle Sam. If you have any doubt about why the non-executive voters are p.o.ed about the bailout, this would be why.

Here's the subtle temptation of socialism: if you're the one receiving the benefits--bailouts, direct cash payouts, or government subsidies--you have a vested interest in continuing to vote for public officials who will perpetuate the system of patronage--which is exactly the point. We make people at all levels of the citizenry dependent on government.

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In the interests of full disclosure: I received a government loan to allow me to attend graduate school. Note, however, that I am paying off that loan and that I am doing so ahead of schedule. Odds are, if I were to default on said loan, I would not get a bailout of any kind. Mind you, I would have preferred to obtain my "credentials" as a technical writer without getting another degree, but the economy has become such that only the diploma will ensure employment. That requires a different fix from the current student loan program. And yet one must also ask how much government intervention in the educational system has caused students to start out their lives deeply in debt, and whether the price tag is worth it. Having attended a state school, I suppose I got off lucky. I'd be paying off my grad school debts well into my 40s if I'd attended some sort of Ivy League school.

Do I consider my federally funded loan to be socialism? Probably. Have I benefitted from it? Undoubtedly. Would I have preferred another method of funding my schooling? Yes. As Milton Friedman puts it,

[G]overnment has assumed the financial costs of providing the education. In doing so, it has paid not only for the minimum amount of education required of all but also for additional education at higher levels available to youngsters but not required of them--as for example in State and municipal colleges and universities. Both steps can be justified by the "neighborhood effect" discussed above--the payment of the costs as the only feasible means of enforcing the required minimum; and the financing of additional education, on the grounds that other people benefit from the education of those of greater ability and interest since this is a way of providing better social and political leadership. Government subsidy of only certain kinds of education can be justified on these grounds.

The late Mr. Friedman, being a good free-market guy, must provide some consolation for my conservative conscience. And still, I might hope that education--the process and the funding--might eventually become more privatized. Is a college education a "right?" That can be argued, though it's amazing how few people do. The whole thing would undoubtedly cost less if government weren't as involved (consider our health care system as a similar example) or if there wasn't an expectation of, or demand for, a college degree in order to obtain jobs in particular lines of work.

There are lots of problems out there; I just wonder if the two characters running for President are concentrating on the right ones.