The Chilling Effect
There has been a great deal of bantering back and forth about the effect Obamanomics is having on the economy. The Left has argued there have been 30 trillion jobs saved or created and Nancy Pelosi believed over 500 millions jobs a month were disappearing. Not-withstanding their nonsense, it is important to have a good, solid argument for this being Obama’s recession, completely without reservations. The so-called Bush recession, which was really the Fannie Mae/Freddie Mac recession, is gone. By now we would have been seeing serious growth in the economy and the jobless rate would be dropping. But how do we know that? It’s counterfactual given that Bush’s term ended and Obamanomics is the economic plan foisted upon us, so what evidence can you use? I believe we can look at the actual cause and effects of Obamanomics and arrive at the conclusion this is his economic model at work, and it ain’t pretty.
Justice Brennan, as interpreted, spoke of the government’s overarching power to regulate free speech through either preventing such speech or punishing it afterward. He believed that given certain perimeters, government could stop something being delivered in the mail and while that wouldn’t necessarily be preventing a person from speaking freely, it did, in effect, silence that speech. And, he believed the power of the government over speech could be even more endemic. He argued that simply by making some speech too difficult or punishing speech if it went too far, the governmental action would have a ‘chilling effect’ on all speech regardless of its expression. What he was arguing was government could act legitimately within its power but the effect of that action would be the same as if the government actually put a gag in the mouth of the speaker.
Why this little discussion of freedom of speech and effective restraint? Well, Brennan’s argument was based on the premise that governmental action was far more powerful than just performing a simple act. Our law is based on the ideal of the rule of law, as opposed to the rule of a man, so the effects of governmental action can have reprecussions that ripple far beyond the simple task. In other words, when LBJ and the Democrats enacted the War on Poverty, they did not understand it would have unintended consequences, like destroying the institution of marriage among the poor. Daniel Patrick Moynihan, Democratic Senator from New York, stated in his sociological survey entitled, The Negro Family; The Case for National Action, “[t]he steady expansion of this welfare program, as of public assistance programs in general, can be taken as a measure of the steady disintegration of the Negro family structure over the past generation in the United States.” Hardly a rock-ribbed conservative, Moynihan nevertheless realized there were broad effects from legislation that may not be anticipated.
The point being, President Obama came in with an economic agenda based on social democratic (really just socialist) principles of redistribution and further centralization of economic authority by the government. We know the problems in the European models they used, but he didn’t care. He would ‘change’ this country, and change it he did. His actions have had an overall ‘chilling effect’ on the economy beyond anything he imagined. We are witnessing the stark, destructive, terrible power of government as economic authoritarian.
First thing Obama and his handy huge Democratic majority did was pass a huge stimulus bill and behind it a bloated Omnibus budget bill. This enormous spending, on top of a hefty TARP program had the effect of sucking all the oxygen out of the room. No private enterprise could even fathom the shear weight and heft of this governmental spending. It was daunting, and it daunted them. We’ve all discussed and considered the impact of sucking that much money out of the financial system and directing it to specific political ends. That is part of the chilling effect of this act. But, what hasn’t been discussed is the social aspects of these acts. TARP, the stimulus, and the overly bloated budget bill all had far more pervasive psychological effects. It’s easy to forget that economics is a social science, not a physical science. The corporate community flocked to the honey pot.
Remember the auto executives flying out to Washington? Once they got there, because of the honey pot, they were turned away. Go back, Obama’s minions said amplified through public opinion at the time, go back and drive your cars here. Now it is our time. We call the shots. We get to set up the fiery hoops for you to jump through, and jump through they did. Instead of reasoned discourse about what could be done to bailout the auto industry, the Obama administration went to a dark place. They decided to not just humble, but humiliate these CEOs. Every CEO in the country was watching this with dread in their heads and greed in their hearts. A little abasement could reap such great rewards. You could feel the cold wind of economic arrogance blowing from Washington. That was the first social casualty of Obamanomics.
Business leaders must be smart, savvy, but most of all confident in their abilities. The car makers offered us such a craven example of leadership we all blushed with embarrassment. What is the cause? Governmental bullying and debasement of business leaders. What is the effect? We have a stock market that stutters in fits and starts. It doesn’t go up because future prospects look woeful. But, it doesn’t go down either, because they are making money. Then came AIG.
AIG is an insurance giant that wrote policies guaranteeing many of the bad loans generated out of Fannie and Freddie. They got hit bad when banks began to demand compensation for their mounting losses. Treasury provided the funds. Obama provided the threat. Remember the speech when Obama warned AIG employees that all that stood between them and the pitchforks was him. He told them not to make too much money, it was unseemly. He told them not to pay bonuses, they hadn’t earned them. He stood before the American public and abased these people. A frigid sleet began to flow from Washington.
You see, the AIG company had provided a product of insurance for banks. Banks paid premiums to AIG for this service. But, so many terrible loans had been issued, many backed by the full faith and credit of the country, that they didn’t know how deep the liability would become. These mortgage-backed bonds had been rated. The ratings were junk. But, the president and his party saw an opportunity to make political hay and jam their agenda down our collective throats. They took it by making these people look dangerous and craven. Every person who creates a new product based on faith in the system watched this scene unfold and it took away their ability to take a chance. This chilling effect of making risk-takers demons and the government the savior is still being felt. We are not going to make that mistake, and so we won’t take any chances.
What is the cause? Obama used AIG’s innovations as an example. What is the effect? We have corporations stashing a couple of trillion dollars for fear they will bet on the wrong product or badly chosen market and they’ll all get greased. But, they weren’t done with that, then came taking over the car companies.
The Obama administration decided not only would GM and Chrysler go into bankruptcy, they’d go into bankruptcy and come out as governmental/union entities. They lined up the lawyers, dictated the terms, and marched it into a federal judge. No doubt, that judge wondered whether this was kosher or not, but since the parties agreed, it seemed like a done deal. Until some of the stockholders got a little frisky.
Remember those teacher union groups that filed suit against the governmental theft of their ownership and transferto the government and union officials? (pretty much one in the same). This was the Great Automobile Company Robbery and we all knew it. They went to court trying to block this legalized holdup, and were told to shut up. This is none of your affairs. GM and Chrysler are broke so you get nothing. Goodbye investment, sucks to be you. There was an icy, driving blizzard coming from Washington on that day.
What’s the cause? Obama’s mobster takeover of private citizen’s investments and investiture of the government and its political ally as owner. What is the effect? We have people paying off their debts and not investing in new enterprises. They are thinking, why try and pick a winner? The government could just take our savings over and give it to their political buddies. That’s one reason we are seeing money in bonds and not in equities, like it should. Bonds are safer, equities can be stolen, legally.
Finally, we have one more example of Obamanomics, but it is not a formal part of their policy statements. This action occurred recently after the Gulf oil spill. BP was trying to stop the spill and the Obama administration was looking especially slothful. Critics openly mocked this administration as incompetent and made comparisons to Katrina, an event that lowered the public’s perception of the Bush administration. Never one to let his critics go unanswered, the Petulant One decided to one up his critics. He demanded a 20 billion dollar slush victim compensation fund to be placed into government hands. Obama had no authority to do such a thing. He didn’t have a congressional mandate or judicial order. He simply backed BP into a corner, stuck a gun to their heads, figurately, and demanded compliance. They acceded to his request.
What is the cause? Obama shook down a giant multinational corporation in his crosshairs. Effect? We are seeing fewer and fewer people invent new products, start new businesses, and try more effective and efficient ways of doing business. Obama has sucked the very enterprise out of our free enterprise system. We are seeing a country awash in a freezing huge white out as never seen before.
Now, I’m not arguing the stimulus wasn’t a criminal waste of money that restricted business’ ability to grow, it did. I’m not arguing healthcare deform isn’t keeping business from hiring employees, it is. I’m not arguing financial strangulation isn’t striking confusion and fear in the business community, it is. What I am saying is this president did the wrong things but also did them in the wrong way. Our current economic stagnation is partially due to his gross misbehavior as president. The president should use his bully pulpit, he should not be a common schoolyard bully. The president should look out for the country’s best interests, not just those of his political allies. He should not act capriciously and casually without thought to reactions. The president, and government, have big feet. They must be careful, and cautious, where they tread. Otherwise, their actions can have consquences that travel very far afield, to our peril.
That’s another reason we need some grownups in Washington, to keep an eye on our little bully in chief.
Cross-Posted at Looktruenorth.com