From the September 2012 issue of Research Magazine • Subscribe!

August 23, 2012

We Have Not Been Saved

While Nouriel Roubini or Jeremy Grantham can be counted on to deliver prophecies of doom dressed up in the dismal prose of the economics profession, the original doomsayer—the prophet Jeremiah—expressed himself far more vividly, and his poetry speaks to our times:

“The harvest has passed, the summer has ended, but we have not been saved.”

As the final summer of President Obama’s first term concludes, I will venture to say that his economic policies have not saved us. And that is because slim pickings are the predictable result of a policy of vast government expansion, as the example of Europe has taught us.

The president has operated under the theory that massive spending will grease the economy, while tougher regulation will rein in economic malefactors. Instead, the spending seems to have signaled higher future taxation, which would reduce business profitability, and the regulatory boost has meant higher costs to business and tougher competition vis-à-vis established firms. 

The upshot of Obamanomics is well encapsulated by the president’s now infamous campaign gaffe: “If you’ve got a business, you didn’t build that. Somebody else made that happen.” The statement is partially true. We all owe a debt to a great many others who have participated in our success. However, if the economy is to thrive, we must congratulate and celebrate those like the appropriately named Steve Jobs who actually do make it happen.

Some readers may see in this editor’s letter a sinister Republican plot. But it is not. Official unemployment is 8.3%; the Labor Department’s broadest measure of joblessness, including discouraged workers, is 15%. That is failure.

But I agree with the president that the problems began under his predecessor. George W. Bush sponsored reckless and then unprecedented federal spending, such as his prescription drug plan.

As for the current Republican presidential hopeful, Mitt Romney has said he would turn around the economy private-equity-style. His credibility on this score is not enhanced by the fact that Obama’s signature big-government legislation is modeled after … RomneyCare.

What he has not done is forthrightly explain how he would rein in Wall Street whose privileged too-big-to-fail status has actually grown since the onset of our economic crisis; assets of the five biggest banks today account for 56% of GDP, from 43% in 2007. If Romney banged the table for a return to Glass-Steagall, voters might actually get the sense that there is a candidate who sincerely wants to steer our economic ship away from the nest-feathering power elites that have crowded out our economy. (Few perhaps recall that until a little over a decade ago, before Citigroup, the U.S. was actually known for the smallness of its banks.)

Before Jeremiah, there was Solomon. “Go to the ant, you sluggard,” the wise king said. “See its ways and grow wise. With no officer, guard or ruler, she prepares her food in the summer and stores her food from the harvest.”

If we but return to the once bipartisan assumption that it is the industriousness of the American people—and not any officers, guards or rulers (read: bureaucrats or Washington and Wall Street elites)—which undergirds our economic vitality, our future harvests may be fruitful once more.

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