Yesterday President Obama delivered a much-heralded (by himself and his minions) speech on the economy.
It was a transparent attempt to change the Washington topic from, as he put it, “phony scandals”.
Phony scandals? Let’s see. Could he have been referring to the White House-ordered IRS audits of the Administration’s political opponents, precisely the same kind of abuse that helped win Richard Nixon one of his three articles of impeachment? Or the secret seizing of the phone records of Associated Press journalists, a “massive and unprecedented intrusion,” as AP’s CEO put it, on freedom of the press? Or Justice Department attorneys, acting almost certainly with the knowledge of Attorney General Eric Holder, lying to a court to obtain a warrant against Fox News reporter James Rosen? Or, oh, yes, failing to send a rescue mission for besieged U.S. ambassador to Libya Christopher Stevens and his party, and lying about it for months?
Are those the “phony scandals” to which the President was referring? It does raise the question, if abuse of power and dereliction of duty are “phony scandals,” what scandals would be real?
But actually, it was not the patently premeditated political ploy that was truly interesting about the speech. It was the, hold onto your chair now, economics and what those economics said, not just about the administration, but about the president.
Like so many of Mr. Obama’s economic pronouncements, this speech presented a list of contradictions.
The president congratulated himself and his administration on making banks safer. But then he pledged to lower mortgage lending standards even further (the Administration’s push in this direction has been going on for months), the very policy that was the predicate for the financial crisis and onset of the Great Recession.
He took credit for the oil and gas boom. But earlier this year he announced that the Administration would reinterpret an old federal statute in a way that would allow it to squash fracking (http://tinyurl.com/llnwy77) – and the Keystone pipeline that would carry Canadian oil to U.S. refineries is still not approved.
He boasted of increasing U.S. exports. But then he pledged, as he has before, to seek tax law changes that would strongly encourage (effectively compel?) American companies to close down their foreign factories. This would be a direct violation of global trade agreements, sure to set off rounds of retaliation that would jeopardize all those exports.
He bemoaned the disappearance of the middle class (ignoring recent scholarship that talk of a rising spread in American standards of living is wrong:http://www.econtalk.org/archives/2012/04/burkhauser_on_t.html). But then he pledged more of the kinds of taxes and regulations that would squash the new business creation and expansion that future middle class jobs depend on.
Of course, he has said most of this before. The speech was close to a replay of his 2012 State of the Union speech (http://tinyurl.com/l53cx7x). Then, as now, the president ignored a simple but inconvenient truth. That the nation’s current hard times are the product of the very kinds of policies on which he has spent five years doubling down: the federal government picking of winners and losers. In the late 1990s and through the collapse, the government’s big winner was housing. Using Fannie Mae and Freddie Mac, Barney Frank famously “rolled the dice.” The whole world lost and Barack Obama learned nothing.
Reading yesterday’s remarks, it struck me that in economics Mr. Obama is a man of the middle past. He keeps referring to America of the 1950s. It was then that we had a middle class, he says. He clearly wants to cling to what he imagines to have been that world.
But America has always had a middle class. In the mid-19th century it was based on agriculture – not just farmers but the entire economy of the small American town. By the mid-20th century, it was rooted in manufacturing, not only factory work but in the busy towns and cities surrounding the factories. By the mid-21st century, the American middle class will have another foundation, if we do not block the streams of exploration and innovation that will allow us to a prosper amidst the change.
This was the biggest flaw in yesterday’s speech – indeed, the biggest flaw in the Administration’s entire approach to economics. The president’s hour-long talk was entirely clueless about the creative power of free peoples – and that it is not in greater government control but in greater liberty that the American middle class, which is to say, all of us, will find our security and our future.