Tuesday, July 30, 2013

The problem with Obama

... is that "he does not understand rudimentary economics," writes Richard Epstein in an excellent article titled "Obama's Middle Class Malaise." Here are some excerpts, but read the whole thing for a concise and sober explanation of what ails the U.S. economy from a policy perspective:

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.
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.
[Obama] constantly thinks of his greatest regulatory failures as his great successes. No other president has “saved the auto industry,” albeit by a corrupt bankruptcy process, or “taken on a broken health care system,” only to introduce a set of unworkable mandates that are already falling apart, or “investing in new technologies,” which tries to pick winners and ends up with losers like Solyndra. The great advances in energy have come from private developments, most notably fracking, and not from the vagaries of wind and solar energy, which no one has yet figured out how to store for future use when needed.
So long as the President is trapped in his intellectual wonderland that puts redistribution first and regards deregulation and lower taxation as off limits, we as a nation will be trapped in the uneasy recovery that will continue to dog us no matter who is chosen to head the Federal Reserve.


McKibbinUSA said...

At this point, I am more terrified of big government Democrats and military-industrial Republicans than I am of Al-Qaeda...

Benjamin Cole said...

I agree with everything this author said...but how was Bush jr. any different?

Was it the radical expansion of ethanol, mandated at 10 percent of gasoline consumption?

The vast expansion of the USA security state? Or the decision to have the federal government run not just one country but three--the USA, plus Afghanistan, plus Iraq?

Or the huge bailout of Wall Street? The assumption of AIG debts?

Was it the continual rise on federal outlays, even in a growth economy, that happened under Bush jr.?

Reall, I can't see much of the difference in the GOP or the Dems.

I keep hoping for a viable third party.

steve said...

Bush turned into a liberal on 911 and from that point on the US has been on a tear of more government is better. going to be hard to reverse.

McKibbinUSA said...

The emerging alliance between big government Democrats and military-industrial Republicans is the horror story of our times -- anyone who is not yet joining the Libertarian party instead is arguably part of the problem with America -- those seeking refuge from the big government Democrats and military-industrial Republicans will want to consider joining the Libertarian party, the only party advocating at once for minimal government and maximum liberty -- more at: http://www.lp.org

Gloeschi said...

Can you imagine how much the stock market would be up if Mitten Romney ran the shop?
Thankfully, Obama wasn't able to destroy ALL the good deeds Bush did to the economy./sarc

randy said...


On the lighter side, I couldn't help but think of this after your comment.

John Prine - In Spite of Ourselves

In spite of ourselves, we'll end up a'sittin' on a rainbow
Against all odds, honey, we're the big door prize
We're gonna spite our noses, right off of our faces
There won't be nothin', but big old hearts, dancin' in our eyes

(if you care to hear... skip to about 1:30 to hear the song.)


Benjamin Cole said...

You know, maybe Obama is a mediocre president.

But the fact is, USA corporate profits are higher now, both in marginal and absolute terms, than ever before. A lot higher.

Corporate profits were great in the 1990s--but never topped $600 billion a year. Then came the Bush jr. days, and they got up to $1400 billion, almost in a needle like surge. But profits fell sharply in Bush jr's last days.

Okay, under bad Obama, corporate profits have topped $1800 billion annually. The profit margin is higher than ever too.These are all-time record profits. Great news, btw.

See some charts from Yardeni:


If there are "structural" problems in the USA economy, it sure is not showing in corporate profits.

If you say corporations are hoarding their profits as they are scared of Obama, well the profit spiking started under Bush jr. Were they hoarding their profits then too?

The fact is, corporations are making piles of money in the USA and that is good news, and they are making more than they ever did. I say great!

So there is nothing structural holding back the USA economy--by deduction, what is holding us back is a monetary noose around the economy's neck.

There is a lack of aggregate demand.

Benjamin Cole said...

Here's a funny one: Aluminum prices are...unchanged from levels in...1995!

What makes aluminum more or less important than copper or gold, or natural gas or oil?

I don't know.

You see, some metals are important and others are not.