Is The President Learning Economics By Trial-And-Error?

Is The President Learning Economics By Trial-And-Error?
By Austin Hill
11/7/2010

We could call it President Obama’s “mission accomplished” moment.

After less than two years in office, Barack Obama has successfully forced his way into the position of “de facto CEO” over huge chunks of the economy. Car companies, lending institutions, insurance companies and healthcare providers – he has spoken, and they are reacting.

Yet after having achieved his goal, the President seems unhappy. And the American people are most certainly unhappy with him.

Why?

During his campaign for the presidency and now nearly two years in the White House, Barack Obama’s disdain for America’s free market economy has been abundantly clear. As a candidate, Senator Obama traversed the country preaching his economic doctrines, and the recurrent themes from these messages were quite specific: A) our nation’s greatest enemies were American corporations (certainly not terrorists); B) American oil companies, pharmaceutical companies, insurance companies, companies that “shipped jobs overseas” – and the executives who earned too much money managing these companies - were the worst offenders; and C) victory over such “enemies” would not be achieved until he, himself, could control these various sectors of our economy.

Candidate Obama’s contempt for American business hit a fever pitch back in the summer of 2008, when he made the oil industry a focal point of his stump speeches. In August of that year, speaking to a stadium full of adoring supporters, he took shots at the entire industry, and then targeted one specific company.

Shaking his head in disgust and disbelief and with a disdainful chuckle in his voice, Mr. Obama said, in part:

“…You’ve got oil companies making record profits…no… no companies in history have made the kind of profits the oil companies are makin’ right now…They..they…….one company, Exxon Mobil, made eleven billion dollars…billion, with a “b” ….last quarter….they made eleven billion dollars the quarter before that…makin’ money hand-over-fist…makin’ out like bandits…”

Today, most of us would welcome the news of an American company earning “record profits” (wouldn’t most American workers like it if their employer could announce that kind of news?) And, fortunately, it seems that a majority of us still understand that “earning a profit” is not the equivalent of “makin’ out like bandits” (i.e. “stealing”).

But in 2008, candidate Obama portrayed successful American businesses as the cause of our faltering economy, and a fearful electorate, desperate for solutions and “change,” embraced him as their President. The spiteful rhetoric helped him win the White House – yet the President’s “spite” has transcended mere rhetoric and has become official Administration policy – and this is where the problem lies.

Days after taking office, on January 29th, 2009, the President was hit with the news that in the midst of the economic crash, some American corporations, even some that had received government “bailout” funds, had nonetheless posted profits and had paid bonuses to their executives. In response to the news, President Obama stated at a White House news conference that "there will be time for them to make profits, and there will be time for them to get bonuses…now is not that time. And that's a message that I intend to send directly to them…"

Those were extraordinary words, and at the time they probably helped him politically. Americans didn’t like the tax payer funded” bailouts” in the first place, and the thought that government funds helped bankroll somebody’s “bonus” was especially distasteful.

Yet in terms of economic ideas, Obama’s response was deeply troubling, and for multiple reasons. For one, the President seemed not to care that these corporations had contractual obligations to pay performance bonuses to their executives, and, legally speaking, the contracts had to be honored. Secondly, the President’s remarks implied that, so far as he was concerned, there are times when it is appropriate for American companies to not earn a profit, and times when it is appropriate for workers to not be compensated for their labor.

Since those early days, we’ve experienced repeated incidents of the President and his Administration running rough-shod over the individual rights and choices of private business. There was the self-serving government take-over of G.M., and the questionable “forced bankruptcy” of Chrysler. There have been the various ways in which the Administration has tried to “save” the real estate market, by forcing mortgage lenders to lower interest rates and forgive principal on existing loans, and forbidding home foreclosures.

And there is – of course – the “Obamacare” healthcare law. It imposes new mandates on employers to provide more healthcare to more employees, but also imposes a bevy of new non-healthcare related restrictions and requirements on businesses, and provides for the hiring legions of new IRS agents.

And the President seems baffled that American companies aren’t hiring again, despite the fact that many of them have begun to post solid profit. He seems unaware that his words and actions and policies have given businesses all the incentive they need to not invest, to not take risks, and to not “hire.”

Yes, President Obama has moved America closer to a government run, centrally controlled economic model, yet he seems surprised that his control of things has not produced “jobs.”

President Obama would do well to study the lesson of recent history, as well as economics.
____________________________________________________

To read another article by Austin Hill, click here.