By Jason Hughey
In 2008, President Obama promised us “hope and change.” He proceeded to intervene in the economy in ways remarkably similar to past presidents. Now, in 2013, President Obama promises to move us “forward” with more drastic and flawed interventions.
To put it simply, by taking up the mantle of economic intervention, President Obama is playing with one hand tied behind this back. He fails to understand that no central planner has the ability to calculate the optimal level of economic efficiency for any sector of the economy. Consequently, when he promises to bring back jobs to the economy, fix our nation’s healthcare problem, or ensure that college is affordable for every student, he’s promising something that no single man can possibly provide.
It should be no surprise that over the past four years, the president’s grand promises of “hope and change” have consistently failed to deliver when they are presented as distortive economic interventions. No manner of flowery rhetoric can explain away the miserable failure of President Obama and the rest of the federal government over the past four years when it comes to solving our economic problems. Consider the facts:
Health insurance costs are higher. Before he was elected in 2008, Barack Obama promised that health insurance premiums for families would fall by $2,500. In reality, health insurance premiums have risen by roughly $2,600 according to the Kaiser Family Foundation. Obamacare has yet to be fully implemented, but basic economics tells us that government distortions of the price signal in healthcare will even further balloon costs for all Americans.
The labor market is still weak. When President Obama was sworn into office in 2009, the unemployment rate stood at 7.8%. The latest numbers from the Bureau of Labor Statistics show that unemployment is currently at 7.9%. Most importantly, the labor force participation has dropped from 65.7% to 63.6%. More than 5 million individuals have quit looking for work since 2009. Some would like to excuse this discomforting reality by pointing to the retirement of baby boomers. But, as James Sherk points out, retiring baby boomers only counts for 20% of the declining labor force. The other 80% is due to a sagging market for labor.
Keynesian stimulus has failed. The American Recovery and Reinvestment Act of 2009 was supposed to be a central pillar in restoring America’s economy. However, after adding over $800 billion to the nation’s credit card, we have seen practically no improvement in the economy. Instead, this policy has distorted market signals, subsidized unemployment, and created temporary “make-work” jobs that do nothing to treat the underlying problems with the economy. Much like FDR’s New Deal after the Great Depression, Obama’s economic stimulus is prolonging the after-effects of a market crash.
Dodd-Frank is strangling the banking sector. President Obama signed Dodd-Frank into law on July 21, 2010. Since then, the 2,000 page bill has spawned 9,000 pages of rules that are forcing small community banks out of business. The law has forced the number of banks that provide free checking to decline from 96% in 2009 to 34.6% in 2011. As consumers face declining wages, less purchasing power, and increased taxes, they also have to deal with fewer options for inexpensive banking.
In Obama’s inaugural address, we received strong hints that the president’s ideology has not changed. We will likely see more hints of this when he gives his State of the Union speech later this evening. He will likely pursue similar, ideologically-based, economic interventions in his second term in addition to expanding on past interventions. Instead of allowing markets to fix themselves after government distortions wreaked havoc on the economy prior to 2008, President Obama will continue to distort and drown out market actors.
If President Obama truly wants to move the country forward, he should repeal failed interventionist policies, cut taxes for all Americans, and allow free individuals to make their own economic decisions.