2011 August 13 Saturday
Obama Supporters Want More On Economy

Obama's allies think (incorrectly) that he could make a bigger positive impact on the economy.

With President Obama’s reelection on the line, Democrats are increasingly anxious about what they see as his failure to advance a coherent and muscular strategy for addressing the nation’s economic ills.

The political class in America have not yet figured out that we have big problems that aren't solvable. Their great expectations go unmet and they think it must be due to a lack of leadership. But the problem is with their expectations given the conditions.

Growing numbers of Obama’s allies, beyond the liberal activists who have expressed disappointment in the past, contend that he has trimmed his sails too much since the party’s electoral defeats last fall. This sentiment has sharpened in the wake of the negotiations over the debt ceiling, when the president accepted Republican demands for spending cuts without obtaining guarantees of tax revenue increases, which he said were necessary for a “balanced approach.”

These criticisms are unfair for a basic reason: A mere President of the United States can not fix what is wrong with the US economy. Getting to this state of affairs took decades. Some of the changes that brought us to where we are were inevitable.

The inevitable and problematic changes mostly involve resource depletion. Peak Oil and other resource limits to growth can't be avoided. Other limits to growth are looking pretty unavoidable as well.

Other problematic changes in theory could have been avoided with wiser and less corrupted leadership. For example, total debt rose from 150% of GDP in the 1960s for decades until peaking over 350% of GDP as the real estate bubble began to burst. The rise in total debt began in earnest in the late 1970s and continued across multiple presidents of both parties and many Congresses. Bill Clinton and Bob Rubin contributed to it. But so did George W. Bush. Obama inherited a problem decades in the making as a result of bad policies with bipartisan elite support. That debt overhang problem has a long way to go to unwind.

Harvard economist Kenneth Rogoff (he who co-authored This Time is Different: Eight Centuries of Financial Folly) sees the debt as such a huge burden that it will stifle growth for years. Rogoff advocates inflation in order to reduce the size of the debt. Well, Obama can't turn on the inflation. Debt deleveraging takes years, especially when accumulated debt is over 3 times GDP. Unless the US government cuts its deficit all that is happening now is private debt is getting converted into public debt. Arnold Kling correctly argues government policies aimed at speeding deleveraging via mortgage modifications are likely to do damage. We have no easy way out of where we are now.

Similarly, the immigration policies supported by a bipartisan elite for decades have created a US labor force increasingly less able to compete. While Obama supports these policies he's not their architect and he's coming in at the tail end of their history. The Left refuses to even recognize that immigration is a drag on per capita income. That drag will grow even if all illegal immigration were to stop today.

The many limits to growth have few quick fixes available to address them. Technological advances might eventually provide us with a way around the limits to allow growth to resume. But those advances aren't coming soon enough. Conditions will get much worse for years (possibly decades) before they get better.

Update: Since the economy is unfixable and yet economic well-being is key to popular approval of government it is not surprising that people are losing faith in government. Obama is still trailing the Republicans in the race to the bottom of total loss of faith in government.

Confidence in Obama to make the right decisions for the country’s economic future is down 10 points, to 33 percent, since January. Confidence in congressional Republicans, at 35 percent in January, dropped to 18 percent.

The voters will toss out incumbents and things still will not get better. Then the voters will toss out some more incumbents. Again, stagnation will continue. American politics has become a zero sum game because the pie isn't growing as fast as the populace.

Share |      By Randall Parker at 2011 August 13 10:09 PM  Economics Government Effectiveness


Comments
WJ said at August 14, 2011 9:06 AM:

I disagree. I think if Obama adopted the right policies he could restore faith in the American economy and reverse our economic decline. The problem is that the policies he would have to adopt - a smaller welfare state, deportation of illegal immigrants and repatriation of non-citizen residents, a greatly reduced government - he is temperamentally and perhaps even biologically incapable of supporting.

The economy was a mess when Obama took over. The American government and the American people have taken on too much debt. Growth was going to be slow for a while, no matter who was in office. That much I get, and it's why I'm glad Obama won instead of McCain. If McCain had won we'd now be staring down the barrel of a liberal, neofedualist, neoconservative Republican with a Democratic supermajority in both House and Senate. Amnesty would've been a reality by the end of last January.

But with the right policies Obama could've salvaged something from this mess. In fact *because* he's a Democrat he would've had a better shot at getting the Left to accept some reform - "Nixon to China" and all that. But he didn't, and that means we're probably toast, because Obama's likely replacements - Romney or Perry - are cut from the same open borders/neofedualist cloth as their Republican predecessor.

Randall Parker said at August 14, 2011 10:11 AM:

WJ,

At best a US President at this point, given the power of a King, could slow the decline.

A greatly reduced government: How to create an electoral majority in favor of this? The old folks and those near retirement want Medicare and Social Security. The Left, the poor, and quite a few sympathetic middle class people (women especially in my experience) want the poor to get housing, food, and medical care subsidized by government.

WJ said at August 14, 2011 10:55 AM:

A Republican or a moderate Democrat might only be able to slow the decline. But I am coming around to Obama's Messianic potential in one way. Obama, as the most radical American president ever to come out of Bill Ayers' living room, could change the dynamic of the debate - if he wants to. His status as a leftist is unassailable. If he understood America's precarious position, and how the entitlement state stands to bankrupt us, and how it especially harms the blacks he professes to care for, he could be the one president who could successfully enact reform. Of course Americans would have to know that no group was getting unequal treatment.

People have started to ignore Obama. He has probably given more public addresses in 2 1/2 years than most presidents give in 8. He has become background noise. If he said something different, something unexpected, people would sit up and take notice.

Of course Obama doesn't want to reform the welfare state. I think he views the American taxpayer as a source of wealth to be redistributed to himself and his allies. He has no concern whatsoever for average Americans, and I have serious doubts about his loyalty to the country. So it probably won't happen. But it could.

solaris said at August 14, 2011 1:17 PM:

>"A greatly reduced government: How to create an electoral majority in favor of this?"

The government has spent the last several decades trying, with a fair amount of success, to create an electoral majority in favor of greatly expanded government, so the project itself is clearly not impossible. To answer your question, a good start would be to deport the illegals and end chain migration.


>"women especially in my experience"

Don't go all Whiskey on us. White women are a pretty conservative bunch.

WJ said at August 14, 2011 2:36 PM:

"White women are a pretty conservative bunch."

*Married* white women. Whether it's conservatism that makes them get married or marriage that makes them more conservative I do not know. Perhaps it's a virtuous circle. Once females of any species have their own hatchlings to consider they can become viciously selfish. In the case of human politics that's generally for the better.

I think a place to start with regards to entitlement reform is to tie entitlement benefits to a percentage of income - i.e., a 10% payroll tax on all income, including cap gains, distributed to the elderly based on some formula. Eventually we need to shift to private accounts, which is what we should have had all along.

Mthson said at August 14, 2011 3:07 PM:

Randall: "At best a US President at this point, given the power of a King, could slow the decline."


That's an interesting point. What would be the best solutions, given absolute power?

Would the fastest way to achieve extraordinary economic growth be to increase the rate of progress in reprogenetics by an order of magnitude? Raise the productivity/intelligence of the bottom 95% up to that of the top 5%, and most social problems take care of themselves. Identity groups will also diminish because most people will choose to look more European, and the root cause of their unhappiness - lesser cognitive complexity - will be removed.


On the other hand, there is a 2 decade lag before reprogenetic babies start contributing, but once people know all problems are getting better, they'll be much more satisfied.

Randall Parker said at August 14, 2011 7:54 PM:

Mthson,

Best solutions: There are so many things that need changing. I would implement lots of policies I've argued for here:

- Enable kids to accelerate their education with pre-recorded lectures, standard exams on the web for testing themselves, places anyone can go to take proctored exams to get certified in assorted subjects. This will bring kids into the labor market at a younger age and enable older people to retool. So the supply of smart workers trained in the most valuable subjects would go up.

- Deport all the illegal aliens and make immigration totally skills-based.

- Raise the retirement age. Give incentives for working even longer.

- Cut our dependence on oil as a very urgent matter.

- Slash any welfare programs that reduce the downsides of single parenthood.

Boosting IQ with genetics: We do not know enough. We certainly need to go for that knowledge much more quickly with orders of magnitude more resources put into brain gene research.

Randall Parker said at August 14, 2011 8:20 PM:

Mthson,

I'd also take major steps to cut soil erosion. Breeding for perennial grains should be treated as an urgent matter. We face many resource limitations. Another reason to just about halt immigration btw. More people means less resources per person.

no i don't said at August 15, 2011 1:18 PM:

"Obama Supporters Want More On Economy"


Are there still any of those "Obama Supporters"?

Hmmmm... yeah... very few I guess.

no i don't said at August 15, 2011 1:31 PM:

I'm betting that Obama's popularity would go up if he is now getting blown by his secretary and the gossip leaks as a sacandal, and Michelle gets all mad, and all the bimbos in the country joining into a common outrage, empathetically wanting vengance from the first lady.

There'd sounds from the dudes in every tavern shouting: "Atta boy Oby" or "Yeah baby, that's my President!" or "Now, that's a real 'Tiger' in the 'Woods' man"


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