President Obama insists he's a free-market guy. But you have to wonder whether he understands how a free economy really works. His policies and his words--especially what he said at his press conference this week--suggest his sense of what makes economies grow and how people are affected by government policies is surprisingly weak.
Some of what Obama says is just pablum and isn't supposed to be taken as serious economic thought. At least I hope not. Rather, it might be called economic morale-boosting. Nothing wrong with that, unless he actually believes what he's saying.
He said at his press conference, for example, that prosperity won't return unless we're all working together for a higher purpose than ourselves. Adam Smith, the guru of free markets, would disagree heartily with this, since he believed a strong economy grew out of individuals acting in their own behalf. But Obama talks as if he knows better. Pablum.
"Our economy only works if we recognize that we're all in this together, that we all have responsibilities to each other and to our country," he said at his press conference. Yes, we do have responsibilities to others and to our country, but are they the key to an economic recovery?
Smith didn't think so, nor does any free market economist I'm aware of. But the president seems to. He elaborated: "We'll recover from this recession, but it will take time, it will take patience, and it will take an understanding that, when we all work together, when each of us
looks beyond our own short-term interest to a wider set of obligations we have towards each other, that's when we succeed, that's when we prosper, and that's what we need right now."
That wasn't a snap answer to a surprise question. It was the closing thought in his opening statement, read by Obama from a prepared text on a large screen behind the press corps gathered at the White House. A nice thought, for sure, but hardly a time-tested recipe for economic growth.
Obama also seems misinformed about America's economic record in recent decades. Prosperity was "fleeting," he said, but "our strategy is to ensure that we do not return to an economic cycle of bubble and bust." Again, this was in his text.
If he's talking about the past quarter-century, most Americans would love to return to that era. From late 1982 well into 2007, we experienced one of the greatest economic booms in the history of the world, interrupted only by two shallow and brief recessions. Prosperity wasn't fleeting. It was practically non-stop--until the housing bust and credit crisis hit last year.
In his budget and public statements, Obama makes the argument that rising health care costs, along with dependency on carbon fuels and an inadequate education system, must be dealt with first--or the economy won't recover. His domestic agenda and rejuvenating the economic are "inseparable," he said. Sorry, but there's no empirical evidence for this.
During those prosperous decades, health care spending surged, bigger cars emitting more greenhouse gases were popular, and education reform made progress only in the past several years. So these were not major impediments to economic growth, nor are they now. Instead, Obama is seeking to exploit the slump to justify congressional passage of his non-economic agenda.
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