Barone on Obama's new "New Deal"
Michael Barone has written a little primer on what an Obama Administration might do when it initiates a new "New Deal" that will spread the wealth around.
Barone points out correctly that the original New Deal spawned under FDR was not meant to grow the economy out of the depression but rather simply freeze the economy in place to keep it from getting any worse. The result was that even thought most of the rest of the developed world was coming out of the depression by 1936, US industrial production didn't even reach levels achieved in the 1920's until the late 30's.
Even then, we had double digit unemployment almost to the start of our involvement in World War II in December of 1941. It took the war and the massive increase in spending to actually bring us out of of the economic doldrums.
So what does Obama have in store for us?
Obama seems determined to follow policies better suited to freezing the economy in place than to promoting economic growth. Higher taxes on high earners, for one. He told Charlie Gibson he would raise capital gains taxes even if that reduced revenue: less wealth to spread around, but at least the rich wouldn't have it -- reminiscent of the Puritan sumptuary laws that prohibited the wearing of silk. Moves toward protectionism like Hoover's (Roosevelt had the good sense to promote free trade). National health insurance that threatens to lead to rationing and to stifle innovation. Promoting unionization by abolishing secret ballot union elections.
The impulse to social engineering is unmistakable. Government officials will allocate resources, redistribute income, and ration good and services. Use government stakes in banks, insurance companies and Detroit auto manufacturers to maintain the position of those already in place, at the cost of preventing the emergence of new enterprises that might have been spawned by the capital being allocated.
Social engineering of course is far easier when you are dealing with an economy that is frozen in place. It's harder when you have to deal with the creative destruction, the emergence of new firms and businesses, and the decline of old ones, which as Joseph Schumpeter taught is the inevitable consequence of economic growth.
Roosevelt in the 1930s had some extremely competent social engineers, like Harry Hopkins, Harold Ickes and Fiorello LaGuardia, who could enroll 750,000 people on welfare in three weeks and build an airport in less than a year. But even they could not spur the economic growth produced by utterly unknown and unconnected people, as Warren Buffett and Bill Gates were in 1970.
Remaking the US into a poorer, less competitive version of France is not my idea of "change we can believe in."