It is easy in the hubbub of the VP announcement and the battle over Medicare to forget that the economy remains the number one concern for most voters. They have plenty to be concerned about, as the Associated Press reports: “The recession that ended three years ago this summer has been followed by the feeblest economic recovery since the Great Depression. Since World War II, 10 U.S. recessions have been followed by a recovery that lasted at least three years. An Associated Press analysis shows that by just about any measure, the one that began in June 2009 is the weakest.”
This has been Mitt Romney’s main argument: President Obama didn’t cause the recession, but he’s presided over the worst recovery in memory.
This is what economist Robert Barro calls an argument about “first principles.” He argues, specifically, that gambits like Solyndra and the GM bailout aren’t the way to go. They merely distort the marketplace for a brief period of time. (“If GM had disappeared, its former workers and other inputs would not have sat around doing nothing. Another company — be it Toyota, Honda or Ford — would likely have taken over its operations, expanding production in the U.S. As a matter of economic theory, the overall economy — though perhaps not parts of Michigan and Ohio — would have done better if the market had been allowed to reallocate GM’s labor and other inputs.”)
But without a grounding in free market economics, Obama declares GM to be a success (despite the $25 million cost to the taxpayer and evidence such as the $41 million loss that GM is floundering).
This can be extrapolated to a larger point:
What is feasible is to look at the overall impact of a set of policies. For example, a general increase in socialistic policies tends to lower economic growth. And, more specifically, the Obama administration’s weakening of individual incentives to work and produce by its sharp expansion of transfer payments can be reasonably viewed as retarding the U.S. economic recovery since the end of the recession in 2009.
With the addition of conservative thinker and budget expert Rep. Paul Ryan to the Republican presidential ticket, we can hope that the economic dialogue will become more serious. And perhaps this added substance will extend beyond the important issue of long-term fiscal reform to encompass the enduring but still crucial debate about socialism versus capitalism.
Obama however wants to repeat the GM experience he recently told voters. Surely he does. But this is not the way to rebuild a functioning free-market economy. Barro writes that “it was scary to hear President Obama’s recent assessment of the GM bailout, in which he declared it a success and vowed to apply this policy broadly to U.S. manufacturing. This promise of expanded socialism is, to paraphrase the great 20th-century economist and philosopher Friedrich Hayek, the Obama Road to Serfdom.”
Romney and Ryan have some powerful empirical data on hand that Obama’s approach doesn’t work. Given the level of regulation, the threat of higher taxes and the looming debt, it is surprising even more investors and businesses aren’t “sitting on the sidelines.” Romney and Ryan would do well to explain the choice in economic visions and make the case Obama’s doesn’t work. It didn’t, you know.