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Right Turn
Posted at 12:00 PM ET, 07/16/2012

Memo to Romney: It’s the economic ignorance

The counterpunch of the day from the Romney camp is about crony capitalism:

Mitt Romney is stressing the fairness issue, contrasting the plight of the middle class with President Obama’s donors who got cash for clunkers of green energy companies. But that may not be the strongest argument to frame from Solyndra and other instances of unfairness (e.g. Obamacare waivers).

The problem with crony capitalism is not simply that it is form of corruption. The real issue is that it doesn’t work, and in the case of Obama exemplifies his fundamental lack of understanding about how wealth and jobs are created.

Hundreds of billions in stimulus spending for “shovel ready” jobs and tens of billions on green energy companies were wasted. Solyndra and other companies went bust. The shovel-ready jobs weren’t there and the Keynesian multiplier proved to be a mirage.

Meanwhile, evidence mounts that the private sector is anything but ”fine.” The Wall Street Journal reports:

U.S. retail sales fell for the third consecutive month in June, the latest sign of a slowing economy.
Retail and food service sales decreased 0.5% last month to a seasonally adjusted $401.52 billion, the Commerce Department reported Monday. That is the first time since 2008 that retail sales have fallen three months in a row.
Economists surveyed by Dow Jones Newswires had forecast a 0.2% rise.
Retail sales are an important component of consumer spending, which makes up about 70% of demand in the U.S. economy. Early this year, household spending helped the recovery.
But consumers now appear more cautious as unemployment remains high, house prices low and the global economy uncertain.

In other words, the idea that wealth, growth and consumer confidence can be stoked and sustained by government spending is wrong. This isn’t a conservative or libertarian view; it is a truism based on empirical evidence.

Economist Doug Holtz-Eakin tells me that “I think it’s premature to expect actual employment declines in, for example, the July jobs report. But the retail sales data today were another sign of deceleration in overall growth. Any real bad news out of Europe or at home — like the Democrats using the fiscal cliff as a political tactic — would be enough to knock it negative.”

Does anyone outside the administration and its liberal media chorus really believe that the problem is that we didn’t hire enough teachers or that we spent too little on bogus green energy companies?

In an interview with CBS’s Charlie Rose, Obama said he needed four more years to “ build an economy where the middle class is strong and growing and those who are willing to work hard can fight their way into the middle class. . . [and] we can also continue to do is change our tax code so that we’re rewarding companies that invest here in the United States as opposed to shipping jobs overseas.” But why didn’t he do this in his first term?

Obama had a Democratic Senate and House for two years, yet he spent his political capital on crony energy projects and Obamacare. In that interview, he was still pitching to Big Labor (“ investing in our education system so we have great new teachers”). What is missing is any comprehension that crony capitalism, stimulus spending, reams of new regulations, refusal to make way for domestic energy production, the Obamacare taxes and the threat of the fiscal cliff have created the perfect storm for the economy.

Sure, crony capitalism is fundamentally unfair and does much to contribute to inequality (rich donors vs. politically unconnected entrepreneurs). But the more critical problem here is that it is part of Obama’s larger approach to the economy that produces more poverty, fewer jobs and less confidence.

The president said he needs four more years to focus on “how do we make sure that every man and woman out there who is willing to work hard has a chance.” The catch: Obama is ideologically opposed to the policies that would spur private sector growth. The reality is you could give him and like-minded politicians 40 or 400 more years and his policies still wouldn’t work. That’s the argument Romney needs to make.

By  |  12:00 PM ET, 07/16/2012

Categories:  2012 campaign, Economy

 
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