Tuesday, November 2, 2010

After the election debacle, Obama still has one stimulus option left - retirement - that would actually perk up the economy

His brand has been trashed and the future of his presidency erased. Now that Barack Obama no longer has any overriding reason to squander still more borrowed money on his principal benefactors, trade unions, in the far-fetched hope that this would stimulate the economy, he is in unique position to try a stimulus option that would almost certainly work.

He should announce forthwith that he will not stand for reelection in 2012.

In one fell swoop, Obama would remove the single biggest drag on the U.S. economy - the widespread expectation that he would remain in the White House for six more years, pursuing an anti-American agenda that pleases radical academics, social engineers, the perennially aggrieved, rent seekers and unionists, but angers and frightens almost everyone else.

For those new to the phrase, rent seeking has its roots in Adam Smith's attribution of incomes to profit, wages and rent. In current usage, rent-seeking is attributed to public officials who take bribes, lobbyists who attempt to sway legislation in their employer's favor and General Electric's support for cap-and-trade, which would reward its investments in green energy.

Rent-seeking also is a significant factor in campaign contributions, as witnessed recently by huge contributions to Democrat politicians by Wall Street firms after Democrats had repeatedly denounced Wall Street while writing legislation laughably described as reform. The rent seekers, in this example, were the politicians who threatened Wall Street with damaging restrictions, persuading Wall Street to fatten the politicians' campaign chests to avoid the calamity.

Rent seeking is now so prevalent in commerce and government that it could be said that the purpose of industry is no longer to build a better mousetrap, but rather to persuade government to require the mouse trap that the rent seeker already builds.

Because of uncertainty induced by the Obama administration, industry, businesses and investors have been sitting on big pools of investable cash. The Obama agenda not only makes a healthy return on capital unlikely, but jeopardizes the economic and societal system assembled so ingeniously by the founders in the late 18th Century. Investors, so to speak, are on strike. If the ominous portent of Obama's statist agenda and czars is removed, the strike is likely to end.

One of the central elements of the constitutional scheme, whose drafters were keenly aware of  Smith's seminal work, The Wealth of Nations, was the role of markets. Through political markets, called elections, citizens were to choose their governors. Through commercial markets, they would decide what gets produced, and in what quantities.

This system has served America well for more than 200 years, accomodating large changes in human tastes and preferences that damaged or destroyed businesses while allowing the overall economy to keep growing and nurturing new businesses. But Obama would have none of it. His stimulus plans threw money at high-speed rail, any mention of which gives liberals hot flashes, and green energy, which pleases social engineers and rent seekers, such as General Electric, which have bet the farm on government-mandated electrical generation by sunlight and wind.

The result: an uncoordinated but across-the-board refusal by customers, owners and investors to make big commitments of the kind that produce new jobs and a rising economy.

As in the 1930s, America's free enterprise system is so resilient that only stumbling, bumbling government can stop it. As it did in the 1930s, the federal government has done precisely that, creating a housing bubble by decreeing that mortgages are for everyone, and then treating the resulting collapse with potions that never work.

It isn't yet time for Obama to go, but he could partially atone for his blundering regime by promising to go in two years.

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