The mid-term elections have had at least some positive effect so far. The president was more middle of the road and conciliatory in his State of the Union address. It had a lot of happy-talk about Mom and apple pie issues, the economy, and how strong the state of our Union is. Nearly the entire text of the speech, however, shows that nothing really has changed. The president often talked about how "we" did this or "we" need to do that, but in almost every instance, "we" referred to big government planners.
There are serious issues in this country. State governments are in a panic, with some people talking of state bankruptcies for those which have run out of gimmicks to fleece their citizens. High corporate taxes, regulatory burden, and an anti-business climate are driving jobs overseas. International bankers have a revolving door with our government and use it to enrich themselves and their companies at the expense of everyone else. Corporatism stifles competition and innovation. Our official debt is almost as much as our gross domestic product. Our unofficial debt is many times that. An ever-growing portion of our population is dependent upon government for their well-being. With all of the talk of "sustainability," nobody wants to recognize that the present path of our government is unsustainable.
One of the themes of the president's address, as well as speeches of nearly all politicians for the last three years, was the need to create jobs. The president and the other politicians, however, have fallen for the biggest fraud of modern-day economics - that the government can spend the country out of problems it spent itself into. For them, the solution to every difficulty is a new bureaucracy, an army of government functionaries and the spending of billions of dollars of other people's money. They look to president Franklin Roosevelt for inspiration, chanting the mantra that the New Deal got the country out of the Great Depression. What really happened was that an ordinary depression, which was less severe than many prior instances, was transformed into the Great Depression by irresponsible economic manipulation by government planners. The depression of 1921 was steeper and deeper than the crash in 1929 but the economy was recovering within a year, while the government did everything that modern guru's say would bring certain disaster: they reduced the debt, they cut spending, and they reduced taxes. The monetary base collapsed and severe deflation depressed prices. The cure for the 1921 depression is exactly what was missing in the Great Depression, and it is what is missing today.
How are jobs actually created, productive jobs which don't come as a burden on someone else? There is just one way. Entrepreneurs must have a reasonable belief that they will be able to make a decent profit by hiring people. They must believe that they can add enough value to the materials and services they purchase so that people will be willing to pay more than the cost to produce. It is pretty straightforward. Without that, there are no jobs. The president pointed to countries like China and India, which are growing and improving rapidly. What he refuses to see is that those countries have been embracing capitalism and markets and, at least to some extent, backing off of old socialist dogmas. The United States, on the other hand, continues to fall down the list in the various indexes of economic freedom.
Government cannot create jobs. Even in those countries with nationalized industries, those jobs are not in addition to private sector jobs. They are not the result of competition and innovation, but rather they are the result of coercion and politics, they are jobs taken from private industry. They simply replace private jobs with public jobs. They are the monopolization of industry by anti-competitive forces.
It is right for the president to call for cooperation, as it is the basis of free society. We need more voluntary cooperation between people in a free market but less cooperation between predators on Capital Hill. The president was, unfortunately, referring to the latter. He wants Republicans to cooperate with Democrats so they can do more of what they have been doing. Mr. Obama addressed the growing cynicism and says he want to rebuild faith in the institution of government. The best way to do that is to quit patronizing the population. We don't want a more efficient big-brother government. We want a small, inefficient government that just gets out of the way.
Dan McLaughlin is a columnist for The Post-Journal. Contact him at danmcl999@roadrunner.com.