by Ray Keating
As we watch the
carnage of the 2016 presidential election process, it pays to keep in mind that
policy matters, and that so-called smart people frequently make bad economic
policy decisions. The following column, which originally ran in Long Island
Business News in November 2008, debunked the idea served up by many at the time
that Barack Obama was just too smart to actually carry through on the policies
he supported during the campaign. We, unfortunately, have learned that Obama
actually meant what he said, as I argued at the time…
Politics and elections do not repeal the laws of economics.
This fact of life tends to irritate many politicians. On the
campaign trail, they pander for votes, and put forth the idea that government
can do just about anything. It can tax, regulate, and spend with impunity.
Of course, it’s a complete myth that fundamental economics
can be repealed by political rhetoric or legislation. And that is the harsh
reality that confronts President-elect Barack Obama and his fellow Democrats
who will have larger majorities in both the U.S. House of Representatives and
the Senate come January.
During his time in the U.S. Senate and on the presidential
campaign trail, Obama had very little use for sound economics. For example, he
put forth an agenda featuring higher taxes on successful entrepreneurs and
investors, as well as on energy companies. Obama also revealed protectionist
leanings on the trade front. And he exhibited few qualms about embracing more
government spending or an activist regulatory agenda.
Economics 101 tells us that all of this would mean higher
costs for businesses and consumers, and bad news for an already-reeling
economy.
But in the days leading up to and following the election,
assorted experts and talking heads on television have assured everyone not to
worry. After all, as we have been told over and over again, Obama is a smart
fellow, and he will surround himself with other smart people.
The point, or hope, seems to be that Obama and his aides are
just too intelligent to actually try to put his campaign agenda into law. After
all, these smart people are not going to do anything that would jeopardize
Obama getting re-elected in four years.
There are two major problems with this line of reasoning.
First, history is rich with so-called smart people who made
– to put it less than delicately – dumb decisions. That list includes a variety
of U.S. presidents. Let’s recall that Herbert Hoover was very smart. In fact,
so were Richard Nixon and Jimmy Carter. Yet, these smarty-pants made some of
the worst economic policy decisions in our nation’s history; decisions that
rattled the nation and the globe. Hoover and Carter also wanted to be
reelected, but were booted out of office by big numbers.
Second, the unsavory implication is that Obama did not
really believe all of those things he declared and proposed during the
campaign. It was just what had to be said to get the Democratic nomination, and
then to win the White House.
I don’t believe that. I take the president-elect at his
word. If you look at Obama’s short voting record in the Senate and his campaign
proposals, they reveal a consistent liberal philosophy that favors bigger
government, more regulation, and higher taxes, along with skepticism of free
trade.
In the real political world, smart people make bad decisions
all of the time. Political ideology, poll watching and/or simple emotion often
overwhelm or blind elected officials to sound economic thinking.
Where then is the hope for the economy? Well, at least on
the policy front, there isn’t a heck of a lot. We’re in a bad economy right
now, and most of the policy proposals offered by President-elect Obama will, at
best, do nothing to help, or at worst, make matters worse.
One hope is that President-elect Obama and his staff will
quickly learn through on-the-job training what policies make for sound
economics, and which ones do not.
But our best hope comes from the private sector – from the
innovative entrepreneurs, the risk-taking investors, the courageous small
business owners, and their hard-working employees. These are the people who
will have to find ways to survive and thrive in what is likely to be an
increasingly hostile policy climate. Through their ingenuity, they must find
avenues around governmental obstacles in order to move ahead, in order to grow
the economy, in order to create new jobs. Unfortunately, this already difficult
task looks like it will only grow harder in the immediate future.
______________
Mr. Keating is an
economist and novelist who writes on a wide range of topics. His Pastor Stephen
Grant novels have received considerable acclaim, including The River: A Pastor
Stephen Grant Novel being a finalist for KFUO radio’s Book of the Year 2014,
and Murderer’s Row: A Pastor Stephen Grant Novel winning for Book of the Year
2015.
The Pastor Stephen
Grant Novels are available at Amazon…
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