Does anybody remember, back in the depths of the recession of 1981-82, how President Ronald Reagan kept his chin up and exhorted American businesses to work hard and produce an economic recovery?
Reagan had a program of tax cuts, limited domestic spending, deregulation, and a strong defense aimed at overturning Soviet Communism. He argued in speech after speech that his domestic plan would produce higher economic growth and lower unemployment, and that prosperity would generate the resources to fund a strong national security.
Cynics proliferated. But Reagan stayed with it, praising free enterprise and entrepreneurs. And eventually, sunny skies replaced gloomy clouds. “Morning in America” appeared in 1983-84.
But here’s the key point: When Reagan praised our capitalist system and the businesses inside it, he provided a psychological lift to accompany his fiscal program. That was leadership.
Now contrast President Reagan’s performance with President Obama’s recent attack on business. Instead of exhorting entrepreneurship, Obama demonized it. Here’s the money quote: “If you’ve got a business, you didn’t build that. Somebody else made that happen.”
That’s a put down to business recovery, not an exhortation. Reagan praised entrepreneurs into recovery. Why must Obama trash them into recession?
Great innovators like Thomas Alva Edison, Henry Ford, and Andrew Carnegie didn’t rely on government. There was hardly any of it in those days. More recently, Steve Jobs, Bill Gates, and Larry Ellison used genius to put brand-new ideas into production.
And then you’ve got a whole smaller class of entrepreneurs: The electricians, bakers, clothing designers, and financial planners. They don’t depend on government. It’s always been a question of the American genius of entrepreneurship that makes the country run. And that’s optimism. It’s not name-calling or negativism. But it is the reliance on government under Obama that has undermined the morale of our economy.
This week I interviewed Tim Geithner. The treasury secretary said the problem with the economy is insufficient government spending. But I would argue that government spending is the problem.
A week earlier, I interviewed Alan Greenspan. I asked him about the impact of over $1 trillion in federal spending. He answered, “Well, actually, strangely as it may seem, the data are showing that it’s negative.” Greenspan said businesses — especially smaller businesses — are essentially on a capital strike. They see large-scale deficits and debt and assume that prohibitive tax rates cannot be far behind. Greenspan also said the U.S. government has borrowed so much money it has drained scarce capital from the private sector. Nobody wants to build long-term assets, like factories, buildings, and houses.
Obama does not understand that his government-centered model is doing vastly more harm than good. That’s why, three-and-a-half years in, he’s got slumping numbers on jobs, retail sales, manufacturing, and home sales, and a GDP rate that could be 1 percent or less. We may be on the front end of another recession without even going through a real recovery.