In his 1988 book “The Fatal Conceit,” Nobel Prize-winning economist Friedrich Hayek wrote, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” Despite the always-wonderful intentions and best-laid plans of administrations from FDR’s to Obama’s, the failed notion that presidents can “fix” the economy remains a bedrock canon of American politics.
What Hayek wrote about eloquently and at length three decades ago can be summed up in one phrase: It is not the job of the government to run the economy, and attempts to do so will inevitably fail.
Actually, Hayek’s demonstrably sound philosophy can be stated even more succinctly: “It’s common sense, stupid.”
There is no better example of this important lesson than President Barack Obama and his administration.
At the beginning of his term 32 months ago (seems like 64), Obama and the Democrat-controlled Congress passed the American Recovery and Reinvestment Act, a nearly $800 billion bundle of taxpayers’ money claimed to be essential to pull the economy out of the shadow of the 2008 financial crisis. The administration foolishly claimed this “stimulus” would keep unemployment under 8 percent. Unemployment is now more than 9%; but hey, what’s a few percentage points among friends?
Last night, in a textbook example of the old adage, “If at first you don’t succeed, try, try again,” Obama again proposed spending hundreds of billions of our dollars to “create jobs” and get the economy back on track.
What the Congress and the American people heard were a bunch of warmed-over ideas, such as an extension of a temporary payroll tax cut, employer tax credits and infrastructure spending programs. In other words, throwing more federal money at the economy in an effort to “prime the pump.” The problem is, the pump is clogged almost beyond repair by decades of earlier, failed Keynesian economic blunders.
Obama said during his speech that “our recovery will be driven not by Washington, but by our businesses and our workers.” But, his actions belie his soothing rhetoric. Nearly every action his administration has taken has been to tighten — not loosen — the grip Washington holds on the economy through these interventionist policies.
As a former “community organizer” and short-time United States senator, Obama obviously has little interest in — and even less knowledge of — history. Were it otherwise, he might understand the sense of déjà vu with which true students of history and economics greeted his latest plan. Think the Great Depression.
During the Great Depression, Franklin D. Roosevelt, like his 21st-century acolyte Barack Obama, proposed an avalanche of new regulations on business, pushed for higher taxes and strengthened labor unions. Despite these interventionist measures, unemployment remained high, economic growth was painfully slowed; and as a result the Great Depression lasted much longer than it should have.
Recession hit again in 1937, leaving FDR’s advisors puzzled. During a meeting with two members of Congress, then-Treasury Secretary Henry Morgenthau said of their efforts, “[W]e have tried spending money. We are spending more than we have ever spent before and it does not work … say after eight years of this administration we have just as much unemployment as when we started … And an enormous debt to boot!” At least give Morgenthau credit for recognizing disaster; even if he and his master refused to acknowledge they were the cause.
Today, we are repeating history. Economic cure-alls — packaged for a desperate populace in the form of federal spending programs — are again preventing the economy from growing and disincentivizing employers from hiring.
Unfortunately, this administration keeps pushing us closer and closer to the economic cliff, rather than pulling us back — something that can be accomplished only by taking steps Obama and his economic and political advisers cannot bring themselves to support: affirmatively lowering taxes that hinder investment, reducing regulatory burdens on business large and small, and cutting — not increasing — federal make-work programs.
Let’s hope there are enough Republicans in the Congress who will not be cowed by the Obama administration’s blustering about compromise and the need to “get the job done.” The Congress needs to stand tall and put the kibosh on this latest federal folly. Otherwise, we may be in for truly desperate economic fallout from Obamanomics.
Bob Barr represented Georgia’s Seventh District in the U.S. House of Representatives from 1995 to 2003. He provides regular commentary to Daily Caller readers.