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Deconstructing Barack Obama, Part II

August 8, 2013 in Economics

By Daniel J. Mitchell

Daniel J. Mitchell

Yesterday, Part I of this series looked at what motivates Barack Obama. We reviewed a Kevin Williamson column that made a strong case that Obama is an ends-justifies-the-means statist.

Today, we’re going to look at the President’s approach to economic policy and we’ll focus on an article by my former debating partner, the great Richard Epstein.

And since Epstein and Obama were colleagues at the University of Chicago Law School, he has some insight into the President’s mind.

In a nutshell, Professor Epstein says “Obama’s Middle Class Malaise” is the predictable result of bad policy. And the bad policy exists because the President has no clue about economic policy.

…the president is using the bully pulpit to argue for redistributive, pro-regulatory, pro-union policies that he claims will serve the middle class. …The President, who has never worked a day in the private sector, has no systematic view of the way in which businesses operate or economies grow. He never starts a discussion by asking how the basic laws of supply and demand operate, and shows no faith that markets are the best mechanism for bringing these two forces into equilibrium. Because he does not understand rudimentary economics, he relies on anecdotes to make his argument.

I’m not sure whether I fully agree. I suspect Obama doesn’t understand anything about economics, but it’s possible that he does understand, but simply doesn’t care.

Epstein then makes an elementary point about the harmful impact of government intervention.

Unfortunately, our President rules out deregulation or lower taxes as a way to unleash productive forces in the country. Indeed, he is unable to grasp the simple point that the only engine of economic prosperity is an active market in which all parties benefit from voluntary exchange. Both taxes and regulation disrupt those exchanges, causing fewer exchanges to take place—and those which do occur have generated smaller gains than they should. The two-fold attraction of markets is that they foster better incentives for production as they lower administrative costs. Their comparative flexibility means that they have a capacity for self-correction that is lacking in a top-down regulatory framework that limits wages, prices, and the other conditions of voluntary exchange.

I particularly like his point about self-correction. I frequently explain in speeches that markets are filled with mistakes, but that at least there’s a big incentive to learn from those mistakes. With government, by contrast, mistakes get …read more

Source: OP-EDS

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