In President Barack Obama's 24 February speech before a joint session of Congress we find several telling comments. According to the president, the economic crisis didn't start yesterday. It began some time ago, when a surplus within our economy "became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future." In other words, we didn't sufficiently tax the rich in order to create renewable energy, thwart climate change, reform health care or properly educate our children.
The president's statement implies that all money, in essence, belongs to the society - to the collective. The president's statement implies that the money we earn from the free market system isn't properly our own. It belongs to the community and the community has been generous enough to let us have a portion of our earnings. Given the scale of the emergency today, the president suggests that the community has been too generous in letting us have what we erroneously imagine to be ours.
There is a further implication as well. The president is suggesting that the capitalists do not know how to invest money. The government is the best judge of investment, knowing how much to invest and where to invest it. "Now is the time to act boldly and wisely - to not only revive this economy, but to build a new foundation for lasting prosperity," the president declared. "Now is the time to jumpstart job creation, re-start lending, and invest in areas like energy, health care, and education that will grow our economy, even as we make hard choices to bring our deficit down. That is what my economic agenda is designed to do...."
As a check to government hubris, it is worth noting that no economy on earth has grown because officials decided to pour billions or trillions into renewable energy, health care and education. There is no evidence that such a scheme has ever worked, anywhere. There is no reason to think it will work now. Using enormous sums of government money in an attempt to revive a faltering economy is in itself a confession of economic ignorance. And also, it shows us a president who doesn't understand the Constitution he is sworn to protect and uphold. The U.S. Constitution is not a socialist document. It does not contain the assertion that wealth belongs to the collective and private property is trumped by public "need."
The president thinks that the free market system is allowed to exist insofar as it provides a "free lunch" for society as a whole. This consists in free public education and free health care - without the addition of greenhouse gasses. Allowing entrepreneurs and investors to keep their earnings has been a mistake. We should not repeat this mistake in the future, says the president. If only we hadn't transferred so much wealth to the wealthy. If only we hadn't allowed them to become rich. Think how rich our country would then be! Global warming would no longer threaten us. Our children would all be earning doctorates and medical care would be free.
Ours is an ignorant country that has forgotten the source of its wealth. As the Austrian economist Friedrich Hayek pointed out: "The disdained middleman, striving for gain, made possible the modern extended order, modern technology, and the magnitude of our current population." To eliminate the middleman was the first rule of Soviet government. That is the kind of government our new president apparently favors.
Can the state fix the economy? It is an absurd proposition. The state is necessary for defense, for maintaining law and order. But the state cannot "fix" the economy. Whatever the economic process, the state must step aside and allow the market to function. The president claims to have a "blueprint" for creating 3.5 million jobs rebuilding roads and bridges, constructing wind turbines and solar panels. But how will he pay for these 3.5 million jobs? The price must be paid through taxation. Even if the government borrows, the money must be paid back - unless the government defaults.
According to the president, "when we learn that a major bank has serious problems, we will hold accountable those responsible, force necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy." But the free market does this automatically, without the government wasting a penny. The free market holds everyone accountable and leads us to necessary adjustments. If we want a modern economy with modern technology, we must preserve the free market - not give way to government management of the market.
The president has told us: "I will do whatever it takes to help the small business that can't pay its workers or the family that has saved and still can't get a mortgage." Here the government takes over for the market, pushes the market aside, dictates who collects wealth and how wealth is created. But it isn't up to you, Mr. President. The process belongs to the market. Our wealth and our technology stems from the market - not from the government. Allowing the market to correct itself, through the painful healing process of deflation, is the only way. But our new president is economically uneducated. "I reject the view that says our problems will simply take care of themselves; that says government has no role in laying the foundation for our common prosperity."
President Obama doesn't understand that government cannot successfully accomplish what his speech proposes. Besides making himself ridiculous by wanting to "save our planet from the ravages of climate change," he does not understand that the free market is the only viable mechanism for correcting the errors of a generation. The government isn't smart enough, and doesn't possess a fraction of the economic know-how that the market possesses. The government exists to protect the country. And here is the greatest danger of all: When the government takes over for the economy, then say goodbye to the government's chief legitimate function - defense!
