Losing Our Place

Strangely enough, with all the rhetoric directed at which presidential candidate is better qualified to "save the middle class," few in the media have asked just what it actually takes to do so.  The short answer is economic growth.  Candidates Romney and Ryan get this, even if the president does not.  But how exactly does one conjure up growth?

The short answer, again, is that one produces goods and services that consumers prefer over those of others.  In a free market, the supply of goods increases, the quality improves, and the price goes down.  All consumers are better off, assuming they are able to compete in the marketplace.

This is the classic case for free markets articulated by Milton Friedman in his book and television series Free to Choose.  Friedman understood that competition is the lifeblood of every successful society, and especially so in an era of global competition.  If the Chinese can produce quality sweaters at lower cost than American businesses, consumers will be better off purchasing their sweaters from China.  If Americans can produce corn or timber more cheaply than the Chinese, the Chinese would be advised to purchase these goods from America.

There are many obstacles to free trade, but in the long run, a nation that produces goods and services of good quality at a low price will thrive.  Other nations will purchase its goods and make available competitively priced goods in return.  Living standards will rise for all who compete in the free market.

The problem is that President Obama does not share this view of markets.  In fact, he is implacably opposed to free-market capitalism altogether.  During the past four years, his administration has placed extraordinary obstacles in the way of competition.  He has nationalized the nation's health care system and imposed a government single-payer option on tens of millions of Americans, coming into effect after 2013.  He has forced large banks to operate under severe regulations and to plan business strategies according to Dodd-Frank rules that have not even been finalized.  He has forced national regulation on energy companies that historically have been regulated at the state level and that should continue to be regulated at that level.  He has driven private competition out of the student loan business.  He has taken over large segments of the automobile industry and mandated unprecedented regulations, including unrealistic CAFE standards, on all.  And on and on, dragging down one sector after another.

As a result of the president's assault on free markets, America has become less competitive.  According to the World Economic Forum (WEF), the U.S. has fallen during each of the last four years: from first in 2008-2009 all the way down to seventh in 2012-13.  At this rate, in another four years under Obama, the U.S. will drop to fourteenth, below Qatar and Taiwan.

The WEF report stresses that it is government that is responsible for this drop in competitiveness.  The report evaluates countries on a multiplicity of factors, but the fact that the U.S. scored 59th (out of 144 countries) in terms of government intrusiveness into the private sector is a major factor in our nation's economic decline.  On another criterion, the effectiveness of government "investment" of taxpayer funds, the U.S. now scores 76th.  And on macroeconomic stability, America ranks 111th.  On this measure, the U.S. under President Obama scores only marginally above Venezuela and Chad.

With numbers like this, in fact, it is astounding that America earns an overall ranking of seventh.  But soon it will not.  It is all but certain, given current anti-business policies, that overall competitiveness rankings will continue to fall.

Mitt Romney offers a clear and detailed five-point plan for making America more competitive.  His plan addresses energy independence, job training, free trade, deficit reduction, and promotion of small business.  By contrast, President Obama's scheme to "save the middle class" begins with the assertion that "we can't just cut our way to prosperity."  This sort of non sequitur is all too familiar coming out of the White House.  What does the president's refusal to cut spending have to do with saving the middle class?

Actually, it has a great deal to do with it, though not in the way Obama pretends.  Obama's annual $1-trillion deficits (used to fund "investments" like Solyndra, A123 Systems, the United Auto Workers bailout, and the like) have shifted capital from the private markets, thus slowing the economy and sabotaging job growth.  It is no accident that the economy, now four years into a "recovery," is growing at a mere 1.3%.

Obama's plan for saving the middle class turns out to be a scheme for driving it into greater dependence on government.  His "solution" is to keep 47 million Americans on food stamps and 23 million Americans out of work indefinitely.  Instead of moving aggressively to create jobs by lowering corporate taxes and cutting regulation, Obama has done nothing but threaten small business owners with more taxes on top of the 26% increase they face on Jan. 1, 2013.  That is not a prescription for competitiveness.

In fact, there is no mention of competitiveness at all in the president's plan for "an economy built to last," as he calls it.  Actually, the very notion of such an economy -- an economy that can somehow be planned by the state so as to be "sustainable" -- flies in the face of free-market thinking.  The very nature of free markets involves constant risk-taking and adaptation.  The economy is not "set in place" by government so as to be permanently "sustainable" -- Obama's perverse conception of how an economy operates.  In a free market, those who compete do so with the understanding that they may fail but also with the assurance that if they succeed, they will reap the rewards of their efforts.  Capitalism at least affords them the opportunity of success.  Obama would deny them even this while promising only food stamps and unemployment lines.

Within a centrally planned and state-run economy, the chance of success is zero.  For the producer, the state determines what profits, if any, one will be allowed to generate.  For the consumer, the state decides what goods and services one can buy, how much one can buy, and at what price.

Obama's conception of "an economy built to last" is revealing because it points to an economy regulated and controlled by the state.  Yes, it is possible that such an economy can "last."  It lasted for nearly 75 years in the old Soviet Union, in which GDP in 1950 totaled slightly more than one third that of the U.S. (estimates by Angus Maddison).  By 2003, the former Soviet Union's GDP had fallen to less than 18% that of the U.S., the result of another four decades of central planning and its aftermath.

The current policies of deficit spending, increased regulation, and centralized planning are not a recipe for saving the middle class.  They are the classic route to economic decline and serfdom.  The present malaise calls for a single-minded focus on restoring American competitiveness.  Sadly, the current administration ignores the problem and shows no sign of addressing it in the future.

Dr. Jeffrey Folks has published many books and articles on American culture, including his recent book Heartland of the Imagination (2011).

Strangely enough, with all the rhetoric directed at which presidential candidate is better qualified to "save the middle class," few in the media have asked just what it actually takes to do so.  The short answer is economic growth.  Candidates Romney and Ryan get this, even if the president does not.  But how exactly does one conjure up growth?

The short answer, again, is that one produces goods and services that consumers prefer over those of others.  In a free market, the supply of goods increases, the quality improves, and the price goes down.  All consumers are better off, assuming they are able to compete in the marketplace.

This is the classic case for free markets articulated by Milton Friedman in his book and television series Free to Choose.  Friedman understood that competition is the lifeblood of every successful society, and especially so in an era of global competition.  If the Chinese can produce quality sweaters at lower cost than American businesses, consumers will be better off purchasing their sweaters from China.  If Americans can produce corn or timber more cheaply than the Chinese, the Chinese would be advised to purchase these goods from America.

There are many obstacles to free trade, but in the long run, a nation that produces goods and services of good quality at a low price will thrive.  Other nations will purchase its goods and make available competitively priced goods in return.  Living standards will rise for all who compete in the free market.

The problem is that President Obama does not share this view of markets.  In fact, he is implacably opposed to free-market capitalism altogether.  During the past four years, his administration has placed extraordinary obstacles in the way of competition.  He has nationalized the nation's health care system and imposed a government single-payer option on tens of millions of Americans, coming into effect after 2013.  He has forced large banks to operate under severe regulations and to plan business strategies according to Dodd-Frank rules that have not even been finalized.  He has forced national regulation on energy companies that historically have been regulated at the state level and that should continue to be regulated at that level.  He has driven private competition out of the student loan business.  He has taken over large segments of the automobile industry and mandated unprecedented regulations, including unrealistic CAFE standards, on all.  And on and on, dragging down one sector after another.

As a result of the president's assault on free markets, America has become less competitive.  According to the World Economic Forum (WEF), the U.S. has fallen during each of the last four years: from first in 2008-2009 all the way down to seventh in 2012-13.  At this rate, in another four years under Obama, the U.S. will drop to fourteenth, below Qatar and Taiwan.

The WEF report stresses that it is government that is responsible for this drop in competitiveness.  The report evaluates countries on a multiplicity of factors, but the fact that the U.S. scored 59th (out of 144 countries) in terms of government intrusiveness into the private sector is a major factor in our nation's economic decline.  On another criterion, the effectiveness of government "investment" of taxpayer funds, the U.S. now scores 76th.  And on macroeconomic stability, America ranks 111th.  On this measure, the U.S. under President Obama scores only marginally above Venezuela and Chad.

With numbers like this, in fact, it is astounding that America earns an overall ranking of seventh.  But soon it will not.  It is all but certain, given current anti-business policies, that overall competitiveness rankings will continue to fall.

Mitt Romney offers a clear and detailed five-point plan for making America more competitive.  His plan addresses energy independence, job training, free trade, deficit reduction, and promotion of small business.  By contrast, President Obama's scheme to "save the middle class" begins with the assertion that "we can't just cut our way to prosperity."  This sort of non sequitur is all too familiar coming out of the White House.  What does the president's refusal to cut spending have to do with saving the middle class?

Actually, it has a great deal to do with it, though not in the way Obama pretends.  Obama's annual $1-trillion deficits (used to fund "investments" like Solyndra, A123 Systems, the United Auto Workers bailout, and the like) have shifted capital from the private markets, thus slowing the economy and sabotaging job growth.  It is no accident that the economy, now four years into a "recovery," is growing at a mere 1.3%.

Obama's plan for saving the middle class turns out to be a scheme for driving it into greater dependence on government.  His "solution" is to keep 47 million Americans on food stamps and 23 million Americans out of work indefinitely.  Instead of moving aggressively to create jobs by lowering corporate taxes and cutting regulation, Obama has done nothing but threaten small business owners with more taxes on top of the 26% increase they face on Jan. 1, 2013.  That is not a prescription for competitiveness.

In fact, there is no mention of competitiveness at all in the president's plan for "an economy built to last," as he calls it.  Actually, the very notion of such an economy -- an economy that can somehow be planned by the state so as to be "sustainable" -- flies in the face of free-market thinking.  The very nature of free markets involves constant risk-taking and adaptation.  The economy is not "set in place" by government so as to be permanently "sustainable" -- Obama's perverse conception of how an economy operates.  In a free market, those who compete do so with the understanding that they may fail but also with the assurance that if they succeed, they will reap the rewards of their efforts.  Capitalism at least affords them the opportunity of success.  Obama would deny them even this while promising only food stamps and unemployment lines.

Within a centrally planned and state-run economy, the chance of success is zero.  For the producer, the state determines what profits, if any, one will be allowed to generate.  For the consumer, the state decides what goods and services one can buy, how much one can buy, and at what price.

Obama's conception of "an economy built to last" is revealing because it points to an economy regulated and controlled by the state.  Yes, it is possible that such an economy can "last."  It lasted for nearly 75 years in the old Soviet Union, in which GDP in 1950 totaled slightly more than one third that of the U.S. (estimates by Angus Maddison).  By 2003, the former Soviet Union's GDP had fallen to less than 18% that of the U.S., the result of another four decades of central planning and its aftermath.

The current policies of deficit spending, increased regulation, and centralized planning are not a recipe for saving the middle class.  They are the classic route to economic decline and serfdom.  The present malaise calls for a single-minded focus on restoring American competitiveness.  Sadly, the current administration ignores the problem and shows no sign of addressing it in the future.

Dr. Jeffrey Folks has published many books and articles on American culture, including his recent book Heartland of the Imagination (2011).

RECENT VIDEOS