As Obama addresses economy, nation should take pragmatic path

By TJ Mayes
@ThomasMayesJr

President Obama returned to Knox College Wednesday afternoon, where in 2005 he first outlined his collectivist “we’re all in this together” economic vision. In his second Knox address, President Obama outlined his second-term economic agenda, which is consistent with that philosophy:

  • “Investments” in education, infrastructure, and a reinvograted manufacturing sector.
  • Strengthening the middle class and reducing poverty and income inequality.
  • Reducing partisan gridlock

The Left has long argued that the Recovery Act didn’t work as well as it should have because the government didn’t spend enough money. One suspects that the federal government could have spent $2 trillion and, if it didn’t work as well as they thought, the left would be proposing even further “investments.” Because that’s essentially what the president is proposing: more stimulus spending so we can invest in the future by improving education, infrastructure and manufacturing.

Seems sensible enough. Who wouldn’t want to educate more children or build better bridges? But, alas, sentimentality is not the foundation of sound public policy. Obama’s economic fallacy is rooted in a “Fatal Conceit”, which is explained by Steven Horowitz in a London School of Economics blog post:

Politicians and bureaucrats lack the knowledge to know which pieces fit with which pieces as they cannot know the nature of the idled resources and what consumers want. They are unable to know what is needed to create a sustainable recovery…Politicians who are structurally unable to know how best to allocate stimulus resources will inevitably distribute them to those persons and groups who will give them the most electoral support.

President Obama often boldly proclaims that “we can’t rebuild this economy from the top down.” This is true, but large government investments in the economy are an attempt to rebuild the economy from the top down. The best way to rebuild the economy is from the ground up, which requires a decentralization of decision-making power. Markets, when smartly regulated, disperse this power far more efficiently, and indeed fairly, than the central planning the president proposes.

The Obama agenda, on a whole host of issues including the environment, taxation and higher education, does appease the liberal elite base but tends to harm the very middle class citizens the president claims to represent. Skyrocketing college costs are an example of the unintended consequences that arise out of programs rooted in liberal theology.

President Obama is correct in that widening inequality and the cycle of poverty create social and economic problems that apply across the socioeconomic landscape, regardless of whether those problems are highly visible at the top. Republicans should acknowledge this, and seek to implement reforms using public-private partnerships, market-based incentives and, yes, smart government spending.

We are deeply divided, so both parties need to stop claiming a mandate. There is a shimmer of hope on this front, thanks in large part to the collaboration between the White House and Sen. John McCain (R-Ariz.) and Chuck Schumer (D-N.Y).

The debt ceiling remains the biggest danger to continued economic growth. Both parties have drawn their lines in the sand. Congressional Republicans have made it clear they will refuse to raise the debt ceiling. The White House position is clear:

We’ve made clear we’re not going to negotiate with Congress over its responsibility to pay the bills that it’s already racked up. We’re just not.

When Standard & Poor’s downgraded the U.S. credit rating in 2011 it cited “political brinkmanship” as the dispositive factor. The full faith and credit of the U.S. government should be not be held hostage to make an ideological point. In a twist of irony, the brinkmanship initiated by congressional Republicans weakens their argument in the larger philosophical debate.

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Posted by on July 24, 2013. Filed under Economy,Recent News,Top News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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