Reader Mark in Alabama (ChessExpert on FR) submitted this as a comment. I thought it should be passed along.
Here’s my scorecard:
FDR inherited a huge economic mess, and made things worse.
Reagan inherited a major economic mess, and made things much better.
George W. Bush inherited a minor recession, and made things better for several years. On his watch, with a Democratic Congress, the economy entered a recession.
Obama has inherited an economic mess. It is not as bad as what either FDR or Reagan inherited. However, he is driving the country in the wrong direction. For that reason, and for that reason alone, the economy will probably deteriorate much further. The correct approach is the one pursued by Reagan: reduce marginal tax rates and de-regulate the economy.
The major schools of economic thought (Keynesian, monetarist, and Austrian) give prominence to either fiscal policy, monetary policy, or both. I think they give insufficient attention to the macro-economic impact of over-regulation.
To tell a story, imagine that a million Joe-the-Plumbers decide not to start a businesses next year, or the year after, etc.. Most people don’t start businesses, and Joe is under no obligation to do so. The few who do are responsible for most of the job growth in this country. Let’s say that these people decide that it just isn’t worth the hassle and the risk. Instead, they do what most people do; they continue to work as employees. Meanwhile, large employers are retrenching. We could be entering a profoundly persistent recession, reminiscent of the depression.
This scenario reminds me of the Ayn Rand book, Atlas Shrugged. As I recall, her book included heroic captains of industry who set up shop in a remote area of the country to pursue their ambitions outside of society. It made for high contrast and high drama. I think the real response can have just as great an impact, even if it may lack the cinematic quality. People just don’t strive as they could.
Can the government pick up the slack? No. The government can make jobs, but not very productive ones. Here’s an old Soviet expression. The government pretends to pays us, and we pretend to work.
“In the great chessboard of human society, every piece has a principle of motion of its own, altogether different from that which the legislature might choose to impose upon it,” Adam Smith.
Every piece is every person. Each is volitional. 300 million Americans striving is a world apart from 300 million Americans waiting. One million entrepreneurs starting a business is very different from one million potential entrepreneurs who keep their head down and work their job.
Remember welfare reform? How many Americans moved off welfare onto payrolls? As a group, these people were far from our best and brightest. Even here the change helped lift the country.
A million Katrina victims fixing their problems is different from a million Katrina victims waiting for their FEMA check. I imagine that some are still putting up with a leaking roof and all the damage it causes. They do this rather than risk losing a FEMA check to which they feel they are entitled.
We’re not just talking about Joe the Plumber, Wendy the Welfare Queen, or Karl the Katrina Victim, even in great numbers. These are not the only kinds of people who can choose to go one way, or to go another.
Anyone with savings can choose stocks, choose bonds, or choose collectibles. This is a declining ranking of productivity. It is also an ascending ranking of safety given an activist government. Also, each saver can choose to invest in the US, or abroad.
The socialists simply do not grasp the importance of the Adam Smith quote above. They think they can spend a billion dollars here, and take a billion dollars there, and accomplish something positive. The very process of taking and giving convinces Americans that they are powerless as individuals. They might as well wait to see what happens next. If the government is going to subsidize failure, why work your but off to succeed?
America’s Joe-the-plumbers are more important to our economic well being than is Barack Hussein Obama.
by Mark in Alabama
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