Saturday, October 06, 2012

Obama Proves The Futility Of Managed Economies

You may have heard that the second quarter Gross Domestic Product was very weak. What you may not have heard was that the revised data was even worse. The original 1.7% estimate was corrected downward, way down, to 1.3%.

This follows a pattern that honest observers of this administration have come to expect. For example, every Thursday the Labor Department reports new claims for unemployment. And for the last 3 ½ years, the news media have reported the data as “unexpectedly” weak. What they report less reliably is that a few days later that same Labor Department releases revised figures. And they’re always worse.

Now if those assessments represented honest efforts in the first place, then there should be an equal chance that the revised data would be higher or lower. But the fact that they’re always worse strongly suggests that the original estimate was fudged to place Obama in a better light.

In fact, the inability of this administration to accurately collect and report data has been one its hallmarks.

One particularly instructive economic data point this administration supplied was its prediction for what we should expect from its 2009 economic stimulus plan. Obama predicted that, without his precisely calibrated program, today’s unemployment rate would still be hovering at an unacceptable 6%. But enactment of his plan would bring unemployment to 5.6%.

How’d that work out? Last month’s unemployment rate was 8.1%. And that was the initial, unrevised estimate. And that number neglects the fact that, if not for the fact that millions of Americans have given up looking for work, the number would be 11%. If you add in all the people who are “marginally attached” to the workforce in temporary jobs, the number is closer to 17%. Include the underemployed and we’re approaching 20%.

Naturally, Obama blames George Bush for handing him an economy that was worse than he imagined. But even in claiming that the buck stopped there, Obama gave the game away when it comes to centrally planned economies. You can never know enough.

Reagan succeeded because he wrenched control of the economy away from Washington and returned it to the marketplace. Bill Clinton enjoyed a few fat years because an unanticipated technology boom escaped government’s talons.

Centrally planned economies simply don’t work. Even the brightest minds cannot flawlessly manage anything as complex as an economy. And none of those minds work for this administration.

Central planners wreck economies.

The long gone Soviet Union unintentionally made a parody of central planning with its five year plans. The Soviets had more data on their economy than anyone can ever collect about a capitalist economy, and they exercised control Obama only dreams of.

And even with all the data and all the control, the Soviets always failed to achieve their goals. Their failures were so predictable that they became fodder for stand up comedians.

For all the fairy tales that the Democrats and the leftist media have spun to explain the 2008 economic meltdown, the simple fact remains that at its roots, the financial system failed because it buckled under the weight of several decades’ worth of federal government interference in the housing market. It was not the free market, but a centrally planned market, that collapsed.

Centralized planning in this country has added complications that make it even less effective than a Soviet five year plan. One problem is that whatever party is in charge will inevitably adjust its economic machinations in ways that reward loyal constituencies and campaign donors. Secondly, just about the only tools available to the central planner are subsidies, regulations and taxes. The central planner will subsidize what it wishes to succeed and tax what it wishes to snuff out. Ronald Reagan explained it succinctly: “If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.”

Using taxes, regulations and subsidies to steer an economy is like performing brain surgery with a mallet and a chisel. Collateral damage is unavoidable.

Centralized planners are also too insulated from the consequences of their policies. It’s all an abstraction to them. In an interview with CBS’s Steve Croft, Obama confessed that he bore responsibility for about “ten percent” of all the misery that America has suffered during his term.

My, how far we’ve come. During his term as president, Harry Truman manned up and declared “the buck stops here.” Only a dime stops at Obama’s desk.

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