The Economic Future Is Dismal

Monty Pelerin / EconomicNoise.com

Americans by nature are optimistic, can-do people. They have never been restricted by caste, class or birth. They are free to pursue their dreams and destiny. To the extent they are willing to commit and sacrifice, they have always been able to improve their lot. That is changing.

Hard work, innovation and creativity are pre-requisites for success. Penniless immigrants have become rich. Even current day entrepreneurs like Bill Gates, Steve Jobs, Rush Limbaugh, Michael Dell and hosts of others became incredibly successful and wealthy without the benefit of a college degree (some believe that to be an important factor in their success).

To become wealthy in the US, you had to serve other people. Dreamers and doers produced new technologies and better ways to satisfy others’ needs. In doing so, they improved themselves and the country. New products and industries created employment and more satisfying lives for millions. Contrary to what you are being told, they did build that! Entrepreneurs created jobs, products growth and wealth. Government does not and never has. This observation holds everywhere in the world. Governments can only destroy jobs and wealth and hinder the development of new products. And that is the stage that government has reached.

The American economy and its standard of living became the envy of the world as a result of free markets and free men. As personal freedoms diminished, so too did America’s dynamism. The decline was slow but relentless, until recently. President Obama, with a flawed vision of how the world works, has seriously clamped down on markets and men. The private sector is an enemy to him. He said as much to Joe the Plumber. People earn too much (never mind that government employment is more highly compensated than private).

In Obama’s mind inequality of wealth is a sign of unfairness and exploitation. Its existence must be remedied via some form of redistribution. The world in his mind is a zero-sum game. If you have more it means someone else necessarily has less. You gained only by someone else losing. With such a lack of understanding, it is easy to see why productive people are targeted. To lift others up, the private sector must be punished. Wealth must be transferred to the less fortunate.

This false belief drives the Obama economic policy. His failed ideology believes that equality is a good thing and that government is the vehicle to solve the ills of society. Business is evil and is responsible for the problems in society.

Free market economics is contrary to everything that Obama stands for. It understands human nature and the peaceful coordination brought about by free men and free markets. These conditions are the foundation for success and wealth, not just for the 1% but for all members of society. The so-called poor in America are wealthier than most of the population of the world. Most foreigners have been kept poor by governmental policies similar to what Obama is now imposing on this country.

It is not in the nature of free enterprise to give up. Yet it is also not in their nature to absorb pain and loss for long. Obama’s re-election and the continuation of his policies means the economy will not improve. Economic actors know that he has bigger and worse plans ahead. They will not commit to growing their businesses in a world where the whims of Washington are predictably against business and arbitrary decisions can destroy them. There can be no economic recovery without business confidence. Absent this, there will be no commitment to investing in new plant and equipment or hiring additional workers. Brian Hamilton in The Washington Times explains succinctly why business will not expand:

It would be like deciding to add another floor to a house that is known to be structurally unsound.

No matter what the government does at the macro-economic level (fiscal or monetary stimulus), business owners and other economic actors are not going to deliberately inflict pain and possibly ruin on themselves. The fear of the future has paralyzed the present. That includes consumers, business owners and investors.

The so-called “fiscal cliff” that is coming is not a real issue. Anyone who has room temperature IQ knows that Congress and the President will, after the proper amount of kabuki dancing, increase the line on our credit card by some massive amount once again. This charade does not freeze economic activity (although it hardly inspires confidence in the dolts in Washington).

Economic recovery will not take place. The anticipated massive increase in taxes is the primary reason. These come in the form of the repeal of the Bush tax cuts, the imposition of the ObamaCare tax increases and the knowledge that deficits to the moon will have to be paid for. Regulatory uncertainty increases the unwillingness to act. No one knows what lies ahead, although most agree it will not be good.

No amount of governmental macroeconomics can offset the real micro-economic considerations. Decisions are made by individuals and no amount of aggregate manipulation can change that.

There can be no recovery for at least four years unless the Obama economic policy is dealt a frontal lobotomy. The Administration will likely make matters worse. The continuing recession that we have been in will continue unless some catalyst triggers economic collapse. A collapse is not a recovery, although it may be required for one to actually commence.

http://www.economicnoise.com/2012/11/21/the-economic-future-is-dismal/