This is a great column from one of the great columnists in America you've never heard of.
Caroline Baum is one of the few economics columnists who make the "dismal science" interesting to read. Today she takes apart Barack Obama's nonsensical and contradictory views on how to create jobs and grow the economy - what she calls Obama's "inside-out economics."
No. 1. Because Obama speaks with such authority, it often takes several repetitions before I realize that what he's saying is total nonsense. For example, he wants to spend $50 billion on infrastructure to create jobs. But the 1,700-mile Keystone XL pipeline, which would carry oil from Canada's tar sands to refineries on the Gulf of Mexico, would "create about 50 full-time jobs," he said at a speech last week at an Amazon.com Inc. fulfillment center in Chattanooga, Tennessee.
The State Department did say that the project's effect on permanent job creation would be negligible. In the interim, however, the pipeline would create, directly or indirectly, as many as 42,000 jobs. That includes subcontractors, suppliers of materials and equipment, and hospitality services (food, clothing, lodging) in addition to 3,900 construction jobs. The same kind of jobs the White House used to promote its $831 billion fiscal stimulus in 2009, explaining that one person's spending is another person's income.
What's the difference between the job-creating potential of Obama's proposed infrastructure investment and that of the pipeline? One is public, the other is private. If that's the distinction, he needs to explain it or drop the fiction that hiring to rebuild roads and bridges has a different impact on employment, wages and spending than hiring to build a pipeline.
No. 2. Another Obama favorite is his contention that the way to "grow the economy" is from "the middle class out." What exactly does that mean?
"Obama is saying we need an economy where people are paid enough to buy things," said Robert Litan, director of research at Bloomberg Government, which is part of Bloomberg LP. "It's Henry Ford economics: Ford made cars, and he paid his workers enough so they could afford to buy them."
He also paid his workers enough to prevent them from quitting. The idea behind what economists call "efficiency wages" is to pay employees enough to keep them happy, encourage them to work hard, and save the company the expense of hiring and training replacements.
"Obama would like all employers to pay efficiency wages, but he doesn't have an executive order to do that," Litan said.
If Obama really wants to "grow the economy," to borrow that horrific phrase, he needs to understand the dynamic. It's individuals with ideas -- entrepreneurship and innovation --that raise our standard of living. And not just that of the innovators themselves, who get rich off their creative genius. All of us benefit. Productivity growth comes from new technologies -- everything from the steam engine to electricity to the telephone to digitalized bits of information -- that allow us to produce more with less, reducing costs and raising real incomes.
Obama may not understand how economies advance and prosper -- and he could never admit it if he did -- but the path of wealth creation is top down, not inside out. It's not about class; it's how an economy works.
It is beyond the president's experience and education to think like an employer or an entrepreneur. Hence, he has no conception of the value of labor, the need for innovation from creative geniuses, and especially how real people live and work. It is a foreign language to him which is why his policies are so bereft of real solutions to what ails us.
Read Baum's entire piece.