July 31, 2012
Obama's 1.5 Percent ProblemBy Christopher Chantrill
What is wrong with the economy? Something is wrong when the GDP expands by only 1.5 percent a year as it did in the second quarter.
The problem is that nobody knows. Everyone thinks they know, but F.A. Hayek long ago put that fatal conceit to rest, if only for conservatives.
Some people think the problem is the continuing mortgage meltdown. It is said that 30 percent of home mortgages are still under water. That's a problem because any economy runs on credit, in the strict sense of that word. People need to have faith that other people are solvent, and in Obama's America they don't. In addition, there is the minor problem that business startups have, since the days of the Hewlett Packard garage, overwhelming used home equity as startup capital. Now they can't.
Others think the problem is the federal budget deficit. To anyone not blinded by Lord Keynes, the idea of a trillion in capital getting sucked away from business expansion every year into the funding of entitlements doesn't sound like a recipe for quick economic expansion.
The other side of entitlement spending is the savings deficit. When the government provides against the vicissitudes of life then people themselves learn to provide less against the vicissitudes of life. They work less, save less, plan for the future less, and that ends up with a lower GDP.
Then there is the looming crisis of next year's tax cliff. Fewer people plan business expansions if the government take is going to increase.
There is the problem of regulation. It's not just ObamaCare and Dodd-Frank. The last decade has seen a succession of regulatory belches, including Sarbanes-Oxley and the green energy regulation resulting from the global warming scam.
And did I mention ObamaCare?
Finally there is the medium term problem with the federal debt. USFederalBudget.us shows the problem. If you crank up the average interest rate on the federal debt to 5 percent by 2017 the annual interest expense goes up from 2012's $224 billion to $1,066 billion.
So should anyone be surprised that the economy is only growing at 1.5 percent?
The president in an ad during the Olympic opening ceremony said that "I believe that the way you grow the economy is from the middle out. I believe in fighting for the middle class because if they're prospering all of us will prosper." What would that mean, Mr. President?
Fortunately, we here in Seattle got to find out, because Microsoft millionaire Suzan DelBene, candidate for Washington's open First District, ran a local ad soon after the president's and told us she's running "to deliver results for the middle class." She "will stand up to the Tea Party attacks on Social Security and Medicare," and she'll "fight to pass the Buffett Rule so millionaires will pay their fair share."
So that's how you grow the economy from the middle out! You promise to protect those middle-class entitlements from the Tea Party and the rich!
You'll be glad to know that, if elected, according to the Seattle Times, the 53 million dollar woman DelBene will "become the richest member of Washington's congressional delegation."
But don't the Democratic voters care about the fact that the money is about to run out, that the United States is facing default and ruin, and no fancy Buffett Rule is going to save them?
No, they don't. Think about it. If you are someone on a government pension, whether it is Social Security, Disability, or a nice state government pension, then you don't think about the economy, or debt, or default, or inflation, or financial repression. You just think about electing politicians to "save" your benefits.
Of course, there is another middle class out there, different from the "middle class" of Democratic campaign ads. It is the middle class that has seen its home equity shattered, the job market dry up, its savings shriveled, its gas prices doubled, and its student debt unmanageable.
The fact is that the Democrats are out of ideas. They are like Scarlett O'Hara: "I can't think about that right now. If I do, I'll go crazy. I'll think about that" after the election. They have their mad activists running around with radical ideas to solve "inequality," or battle "climate change" or impose a "regionalist agenda" on the suburbs. Meanwhile they are afraid to pass a budget and they don't have a clue about how to grow the economy.
In God and Gold, Walter Russell Mead makes the point that the power of the Anglosphere has always been based on a healthy economy. We will look back on the ruins of liberalism and remember how the liberals insisted on taking a healthy economy for granted, for years and years.
Then one year liberals took the economy for granted just once too often.
Christopher Chantrill is a frequent contributor to American Thinker. See his usgovernmentspending.com and also usgovernmentdebt.us. At americanmanifesto.org he is blogging and writing An American Manifesto: Life After Liberalism.
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