	15 Feb 2012 Never Trust Government Numbers President Obama said in his State of the Union speech, "We've already agreed to more than $2 trillion in … Read More.
	8 Feb 2012 Government Can't Make Us Happy In the Declaration of Independence, Thomas Jefferson called the pursuit of happiness an unalienable right. … Read More.
	1 Feb 2012 Policing the World With an election approaching and at least some Americans upset about irresponsible spending, the president … Read More.

Arrogant Conceit

Barack Obama wants to use the recession to remake the U.S. economy.

"Painful crisis also provides us with an opportunity to transform our economy to improve the lives of ordinary people," Obama said (http://tinyurl.com/67x8ec).

His designated chief of staff, Rahm Emanuel, is more direct: "You never want a serious crisis to go to waste" (http://tinyurl.com/5n8u58).

So they will "transform our economy." Obama's nearly trillion-dollar plan will not merely repair bridges, fill potholes and fix up schools; it will also impose a utopian vision based on the belief that an economy is a thing to be planned from above. But this is an arrogant conceit. No one can possibly know enough to redesign something as complex as "an economy," which really is people engaging in exchanges to achieve their goals. Planning it means planning them.

Obama and Emanuel want us to believe that their blueprint for reform will bring recovery from the recession. Yet we have recovered from past recessions without undertaking a radical social and economic transformation.

In fact, reform would impede recovery.

This is not the first time a president chose reform over recovery. Franklin Roosevelt did it with his New Deal, and the result was long years of depression and deprivation. Roosevelt's priorities were criticized not just by opponents of big government but by none other than John Maynard Keynes, the British economist whose theories rationalized big government. Before FDR had been in office a year, Keynes wrote him an open letter, which was printed in The New York Times:

"You are engaged on a double task, Recovery and Reform; — recovery from the slump and the passage of those business and social reforms which are long overdue. For the first, speed and quick results are essential. The second may be urgent, too; but haste will be injurious. ... [E]ven wise and necessary Reform may, in some respects, impede and complicate Recovery. For it will upset the confidence of the business world and weaken their existing motives to action. ... Now I am not clear, looking back over the last nine months, that the order of urgency between measures of Recovery and measures of Reform has been duly observed, or that the latter has not sometimes been mistaken for the former" (http://tinyurl.com/9f8hb4).

Note Keynes's concern.

Government interventions, such as the cartelizing of industry through the National Recovery Administration, "will upset the confidence of the business world and weaken their existing motives to action." In other words, investors will not take the risks necessary for recovery if their profits and freedom are subject to unpredictable government action. Economic historian Roberts Higgs calls this phenomenon "regime uncertainty" (http://tinyurl.com/6cjyqb).

Keynes's letter apparently had little influence on Roosevelt, who stuck to his plan. In his second inaugural address a few years later, FDR feared that signs of recovery had jeopardized his reform plans by removing the sense of emergency: "To hold to progress today, however, is more difficult. Dulled conscience, irresponsibility and ruthless self-interest already reappear. Such symptoms of prosperity may become portents of disaster! Prosperity already tests the persistence of our progressive purpose." (Emphasis added.) (http://tinyurl.com/6j7ra8)

What a shame. Free people enjoying their lives make it harder for the administration to forcibly impose its utopian vision on them.

Obama wants to act quickly. In the name of stimulating the economy, he plans to spend hundreds of billions of dollars the government does not have to convert the economy from carbon-based fuels to "green" alternatives. Even if that were a good idea — and it's definitely not (http://tinyurl.com/5mav4e) — it would not bring recovery. Any money the government spends must be taxed, borrowed or conjured out of thin air by the Federal Reserve, and that will reduce sound private investment. Obama has no real wealth to inject into the economy. He can only move around existing money while inflation robs us of purchasing power. Meanwhile, private investors who might have produced a better engine, battery, computer, cancer treatment or other wealth-creating and life-enhancing innovations hold back for fear that big government will undermine productive efforts.

The way to a lasting recovery is to greatly lighten the burdens of government. Then free Americans will save and invest.

Grand interventionist reforms go in precisely the wrong direction.

John Stossel is co-anchor of ABC News' "20/20" and the author of "Myth, Lies, and Downright Stupidity." To find out more about John Stossel and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

DISTRIBUTED BY CREATORS SYNDICATE, INC.

Comments

1 Comments | Post Comment

Dear Mr. Stossel,

I feel compelled to respond to a number of points you made in your “Arrogant Conceit” article, published December 24th, 2008.

First, I take issue with your argument against Obama's intervention in the economy, in which you compare his recovery effort to a planned economy. I believe that this is a spurious comparison. I agree with you that a completely planned economy would be a utopian imposition, in which planning the economy translates into planning people's lives. Yet this does not characterize the US' current economic system, which is, and has been, a mixed economy for almost a century (if not longer). Instead, you engage in black and white thinking, ignoring nuance. Moreover, in some ways, government intervention does not stifle freedom, but allows it. By freedom, I mean the ability to directly control one's future. An individual, by themselves, cannot build a school, a hospital, or a wind turbine, if they desire an education, health care, or a healthy environment for their children. Instead, the government is often required to provide these public goods that allow the individual the freedom to live as they choose.

Second, you write that, “Any money the government spends must be taxed, borrowed or conjured out of thin air by the Federal Reserve, and that will reduce sound private investment.” This is generally true, and most times would be a strong argument against government spending—which raises interest rates, thereby crowding out investment. Yet this argument is not applicable to present conditions. Interest rates are currently set by the Fed at 0%-.25%. In fact, it would appear that we are in the midst of a liquidity trap (an idea supported by both the liberal Paul Krugman and the conservative George Mankiw), in which fiscal policy is the only means of stimulating the economy, because monetary policy is no longer efficacious. Yet you write that Obama's efforts will impede recovery. Now you may be right about "regime uncertainty," a topic of which I am completely ignorant. Yet the points I have raised above are covered in any basic macroeconomics class. Your ignorance of them, or your willingness to ignore them, is (no offense), infuriating. To utilize a pubic forum for what appear to be no more than ideological talking points, while ignoring sound, non-partisan scholarship, I find to be truly “arrogant.”

As an example of an ideological talking point, you write, “The way to a lasting recovery is to greatly lighten the burdens of government. Then free Americans will save and invest.” Yet, if this were true, where were the savings throughout the Reagan and Bush Sr. years? How do you account for the fact that countries like China, with substantial government intervention, have individual savings rates of about 30% of household income?

States and markets each have strengths and weaknesses, and neither can solve all of our problems. Together, on the other hand, they compliment each other. It's time we moved beyond outmoded thinking based on a simplistic state/market dichotomy.

Sincerely,
Will Flagle
Golden, Colorado

Comment: #1
Posted by: Will Flagle
Thu Dec 25, 2008 1:01 PM