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Marching Off the Cliff

The Obamacrats misunderstand the economy.

Sep 13, 2010, Vol. 15, No. 48 • By MATTHEW CONTINETTI
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President Obama sure did cover a lot of ground last week in his address to the nation announcing the end of combat operations in Iraq. At times the speech resembled one of those late-night, beer-fueled freshman dorm bull sessions, where you start off discussing Led Zeppelin and end up ten hours later debating the ontological principle.

Marching Off the Cliff

In between appropriate references to the Iraqi people, the Afghan surge, al Qaeda, George W. Bush, and the sacrifice and heroism of the American soldier, the president mentioned such unrelated topics as the deficit, economic turmoil, energy policy, unemployment, innovation, education, and the “billions of young people” across the globe who “want to move beyond the shackles of poverty and conflict.” By the time Obama started talking about “our manufacturing base,” we were scratching our heads, wondering why the commander in chief was devoting so much time in an 18-minute war speech to the financial crisis. And as with those college-era drunken colloquies, the major aftereffect of Obama’s talk was a bad headache.

Look closer at Obama’s text, however, and the rhetorical thread intended to connect geopolitics and the U.S. economy becomes clear. The president did not argue that foreign policy is a function of domestic politics. Nor did he exactly make the case that a booming economy is a necessary condition for American primacy. What Obama said was that the nation ought to approach the recession the same way it approaches a war. “As we wind down the war in Iraq,” the president said, “we must tackle those challenges at home with as much energy, and grit, and sense of common purpose as our men and women in uniform who have served abroad.” Indeed, the president continued, the American people share a collective responsibility to honor our veterans by “coming together” to restore economic growth.

Now, the president’s attempt to invoke a patriotic sense of national community is well within the boundaries of American political discourse. But it’s also a pretty lousy way to understand the economy. Fighting a recession is not the same thing as fighting a war. The U.S. military is a hierarchical organization in which orders are dispersed through a top-down command structure. Every soldier has an assignment, with every assignment comes orders, and if a soldier does not follow his orders, he’s in a lot of trouble.

The economy is different. It is not a closed system like an armored cavalry regiment, where everything (and everyone) has a place. The economy is open and dynamic, the agglomeration of billions of individual consumers and producers and investors. An army belongs to a particular nation, but today’s economy is global: The high price of Japanese money lowers the cost of German exports, which depresses American manufacturing, which increases demand for Chinese imports, and so on. An army has officers who process and analyze the available information, then plot strategy accordingly. It is impossible to do this in an economy. There is too much information for a single mind, or a group of minds, to comprehend. And there is no way to know for sure which strategies work and which do not—or whether a strategy had any effect in the first place. An army fights and destroys an enemy. But who is the economic enemy and how does one “defeat” them? When Obama said “our troops are the steel in our ship of state,” he rightly implied that he, as commander in chief, is the ship’s pilot. But the economy is not a ship. The economy has no captain.

The equivalence between recession and war is what’s gotten Obama and the Democrats into so much trouble. Liberals like the president and the congressional leadership honestly believe that they can command the economy to recover. By pushing and pulling the correct monetary and fiscal policy levers, the Democrats say, government can manipulate aggregate demand and bring back jobs. By redistributing wealth and regulating the insurance market, the Democrats promise, Americans can achieve universal health care while reducing health spending. By delegating authority to unelected bodies and issuing hundreds of new rules, the Democrats believe, regulators can eliminate credit bubbles and financial crises.

But it’s not that simple. The economy and society are too complex. Expert knowledge is too limited. The science of economics is too primitive. Ordinary human beings do not respond like soldiers to government’s commands. Nor should they respond to government this way.

The real puzzle is that, despite all of the political and economic setbacks they have encountered over the last year and a half, for some reason the president and his party cling to their mistaken belief that the economy is an army. There is still time to embrace a different course, and last week’s report that the administration is considering a payroll tax holiday is an encouraging sign. For now, though, the Democrats just keep on marching. Right off the cliff.

 


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