Wednesday, November 25, 2009
Paul Kedrosky has a curious graph from a JP Morgan research report that purports to show the private-sector experience of cabinet secretaries, by administration, since Theodore Roosevelt.
It is not obvious from the graph that one can relate the quality of an administration's cabinet to experience outside of government, but perhaps the graph does explain why the Obama administration does not seem to understand the impact of uncertainty on economic growth. It piles on the stimulus, but does not comprehend that we will not get sustainable growth until the federal government removes or resolves the massive regulatory and legislative uncertainty that hangs over a huge proportion of the economy like a sword of Damocles. Who in their right mind would decide to make a big new investment before the administration has clarified the threatened new regulation of health care (17% of GDP), financial services (9% of GDP) and energy (8% of GDP), not to mention the staggering but still unclear increases in business and individual taxes? Everybody outside of government knows that legislative, regulatory, and taxation risks are now the biggest obstacles to economic growth. The question is whether anybody inside government understands that.
MORE: Great minds think alike. The editors of the Wall Street Journal were thinking the same thing this morning. After noting that the stimulus has not delivered anything like the advertised results, the editors drop a dime on regulatory uncertainty (emphasis added):
The panicked Democrats' biggest problem is that Congress and the President have erected the biggest overhang of economic policy uncertainty that anyone can remember.
One big difference between Washington and private markets is that politicians think everything they do is free-standing. Markets, however, combine all the potential costs of Washington's policies and then decide whether to invest, or not. Consider what private decision-makers see in their future:
A 2,074-page, trillion-dollar health-care bill to redesign 17% of the U.S. economy. A carbon tax—cap and trade—that remains an Obama priority ahead of the Copenhagen climate summit next month. A falling dollar and gyrating commodity prices, with no idea where those prices will go next.
Democratic liberals are talking about an income tax surcharge to pay for any commitment in Afghanistan. Card check, to expand unionization of the private economy, remains a priority. Domestic discretionary spending in fiscal 2010 is set to rise at 12.1%, with inflation near zero.
Nurturing a fragile economic recovery into a durable expansion requires policies that restore public confidence and reassure investors, risk-takers and employers. The Democratic agenda is doing precisely the opposite, which is how you get subpar growth and fewer new jobs.
How could I not agree? However, intellectual honesty compels me to observe that to some degree the difference between left and right on economic policy comes down to this: Democrats believe that the economy can only recover if workers and consumers gain confidence (so that they spend money to create aggregate demand), and Republicans believe that the confidence of executives, directors, and investors is essential to unleash new investment and capacity expansion (which is necessary to capitalize on aggregate demand). Certainly both are necessary to restart an economy that has been sucking wind for two years. Economic stimulus to generate aggregate demand would be a lot more effective if there were not nearly so much uncertainty in law, regulation, and tax. The "progressive agenda" has sabotaged the stimulus, sad to say, and the economy will continue to move slowly until the government relieves the pressure on the people who actually make business decisions.
Obama is right on target. His objective is to destroy the middle class in America. Obama doesn't care whether an agency is run well as long as the agency head is loyal.
I'd also like to see a comparison of the agency heads with Senate confirmations vs. the comparable tsars.
This article dovetails with an article on The American Thinker entitled The Lawyers Party, highlighting the lack of business experience in the Democrat powers that be. It is no wonder business is in such a bad state, it has no representation, either in government or the media.
Good administrators and leaders surround themselves with people that they know and trust.
Since Obama has never held a real job, doesn't trust anyone and has never had to produce anything...or run anything other than his mouth...does this graph surprise anyone???
You nailed it, JPMcT. I have a question for all the lefties and Dems who dismiss Palin as a lightweight: In his adult career, what did Obama accomplish?
What did he lead?
What did he change?
What did he cause to happen?
The answer to all four questions is nothing, nada, zilch, zip, bupkis.