President Obama has just taught the people of the United States a very big lesson. If you want to hurt the poor and workers by destroying jobs and draining animal spirits, then do all in your power to discourage the rich from investing in new discoveries, new products, new industries. In his first three years in office, Obama has presided over the loss of more than one million jobs a year.
So in the US we now have proof positive that promoting class warfare freezes economic growth and puts jobs in frigor mortis. This is a bipartisan point. Ronald Reagan understood it. Bill Clinton understood it. In his two terms, Reagan inspired and assisted in the growth of 16 million new jobs. In his two terms, Bill Clinton (with the wind of the post-1989 “peace dividend” at his back) supported the creation of almost 23 million new jobs.
The two presidents accomplished this in the teeth of the Carter depression of 1977-80, which left interest rates at 20 per cent, unemployment at 7.5 per cent, and inflation at 12.5 per cent. Because of this inflation, older people on fixed incomes lost about half the value of their incomes. Millions of them suddenly slid below the official poverty line. (In 1980, that line was at just $8,414 for a family of four, and $4,190 for a single person living alone. Today’s poverty line is just over $22,000 for a family of four, and just under $11,000 for a single person.)
This is how Americans learned that it is foolish to drive the rich away from investing creatively and productively. The rich have many ways to spend their high income. The least creative and productive way is to spend it on idle living for themselves. Another unproductive way is to spend it lavishly somewhere overseas, which does not really help the poor even there.
It is wiser public policy to arrange both public honours and sound incentives (incentives both real and psychological) that challenge the rich, give them an opportunity to prove their mettle, and to show the world that they can be as inventive and dynamic as their ancestors.
President Obama has now taught our country this lesson afresh, by counterexample. No president in our lifetime has spoken of the rich so disparagingly and with such down-his-nose moral superiority, regulated them more gallingly, spoken more insistently about raising their taxes (not once, but again and again), and portrayed them as enemies of workers and the poor.
Meanwhile, the US Census Bureau has just released data which show that under Obama the raw numbers of those below the official poverty line have hit a level (43.6 million) never seen during the 51 years of recording such numbers. The percentage (14.3 per cent) of the poor has hit heights not seen since 1994. Census Bureau and other figures show, ironically, that no demographic group has suffered as much from loss of jobs, youth unemployment, diminished income, and longer periods out of work than black Americans. How can this be? No one can fault Obama for coming into office during a severe recession. But people do fault him for achieving much less than other presidents in similar recessions, who fairly rapidly turned downturns into upturns. They also blame him for failing to achieve the success from his policies that he himself predicted. He misunderstood reality.
The President is said to be a very bright man. How can it be, then, that he still doesn’t understand that to create more employees he needs to inspire more employers — and that he can’t find the funds to increase the labour pool unless he increases the pool of capital. The indispensable way to generate good, well-paying jobs in the market economy is by encouraging, cajoling, praising and challenging men and women of high animal spirits to do creative things with their capital. Like it or not, the way to create jobs, to raise up both workers and the poor alike, lies in shifting the interests and creative economic juices of the rich — and also of the not-yet-rich but lean and hungry — towards creating more wealth. This they do through creating new products, services, technologies and industries. Most became rich by being unusually creative people. So use them, don’t abuse them.
There is an old maxim that you can more quickly get a man to loosen the heavy cloak he has tightly wound around him by letting the sun beam warmly upon him than by sending icy blasts of howling wind against him. Another maxim puts it: you can catch more flies with a spoonful of honey than with a jug of vinegar.
Is that not also the best way to raise government revenues? Ronald Reagan had the wealthy paying more in tax revenues and also paying a greater proportion of all the income taxes paid a year than ever before — and liking it. They were prospering, and workers and the poor were moving up briskly in income and benefits. President Reagan saw to it that the public equilibrium was win-win.
Reagan concentrated on making America a creative society, favouring invention and entrepreneurship. Capital gains taxes were cut. Larger pools of venture capital were created than ever before. All sorts of new technological breakthroughs brought unheard-of goods to market: personal computers, fax machines, cellphones, fibre optics, gene therapies and many more. The nation moved out of the Age of Mechanics and into the Age of Electronics.
Government did not invent these products. Brilliant individuals did — Steve Jobs, Bill Gates and a legion of others. President Obama thinks, against the evidence, that governments can routinely invest and innovate (see his chimerical plans for new “green industries” and “green jobs”, at government’s beck and call). Under Reagan and Clinton, private invention proved an infinitely shrewder revolutionary course.
Humans are not angels, and so of course there came in due time the historical quotient of abuses, frauds, and new ways gone wild, for which Enron, Fannie Mae, AIG, and other disgraced names may stand forever. Periods of human creativity have always brought chiaroscuro effects of dark cumulus clouds and brilliant shafts of light.
Reagan and Clinton prompted the greatest, most long-lasting burst of prosperity America (and perhaps the world) has ever seen. The US added to its own economy in those years new value equivalent to the entire economy of Germany. A higher proportion of adults were working for pay than ever before.
Ideas did this. Incentives did this. Praise and self-interest and open challenges did this. Above all, creative individuals did this. And governments, mirabile dictu, hit the correct balance among instigating, facilitating and getting out of the way.
Recessions and depressions are illnesses, like running a potentially serious fever or flashing an early warning of a cancer or a heart attack. Governments need to know what to do to break the fever quickly, and get the listless and the faint of heart back up on their feet, raring to go. Obama doesn’t know how. He keeps repeating the same mistakes.
Concerning the presidential election already under way, a topmost adviser in the White House recently said to a Chicago friend: “From here, 2012 isn’t 2008!” Support for President Obama in constituency after constituency is falling away like autumn leaves. Here is a telegraphic presentation of Obama’s approval ratings on January 19, 2009 (Inauguration Day) compared with those of this autumn (data from Gallup). It shows a drop in support by independents (about a third of all voters nationwide) which is especially disheartening.
Every week, more and more Democratic leaders and influential opinion-makers voice disappointment with Obama. Their disappointment soon gives way to revised judgments about the man’s strengths and weaknesses. The strengths (his poise in speaking on his feet) appear ever emptier; his weaknesses (a rigid fixed sum of ideas, repetitively repaired to) more irreparable. One even hears it said by early and strong supporters, “He isn’t as bright as he seemed.” There is even talk after the months and months of uncritical adulation that there may be a need for a primary challenger to Obama (Hillary, some improbably suggest), to save the skins of the rest of his party. More and more of them do not wish to run on his policies.
The ideological extremism of Obama’s appointees to powerful regulatory agencie — the Environmental Protection Agency and the National Labor Relations Board, among others — is finally becoming visible, in very unpopular and not easily defensible decisions. For instance, at the bidding of petulant union leaders, the Labor Department refused to allow a crucial American manufacturer and export firm — Boeing — to set up a new facility in South Carolina, one of a growing number of so-called right-to-work states (i.e., the right to work without joining a union). The principle that the federal government in cases such as this can control in which states a private firm may or may not do business is attracting withering political fire.
The Lilliputians of government are tying down the energetic, spirited Gulliver with thousands of silken threads, in order to impose a new “soft tyranny” by a myriad of tiny inducements on the one hand, and almost invisible restraints on the other. The result is enervation and lassitude in the body politic.
Already, nearly half of the American population (including the rapidly growing portion of retirees) depends on government for a sizable amount of its income. At what point does the ratio of productive taxpayers to dependents on government become unsustainable? The question is no longer idle speculation. When Bismarck arbitrarily set the age of eligibility for pensioners at 70, he did not have to worry that many would live that long, nor that highly advanced medical care could keep them living longer and longer, and at ever higher, almost astronomical, medical costs.
Add to this mix the fact that families everywhere are having fewer children, so the labour force relative to the army of retirees is shrinking, and you begin to see the premises of the welfare state cracking open. Without especially creative and inventive economies, welfare states today cannot survive. Does Obama know enough to know what to do? The signs are few.
Barack Obama was born to a mother who fled from living in a corrupt America, and a father who was an ideological third-worlder. Both parents tended to picture American capitalism as an unjust system and a major cause of the larger world’s poverty, backwardness and suffering.
So it is no surprise that Obama has presented himself as the president with the lowest opinion of business of any in our history, and the most persistent fomenter of class warfare, between the fat-cat with his private jet and the poor youngster on the street who just wants modest funds to cover his college tuition. Every chance he gets, Obama launches into “tax cuts for the rich” and the too-heavy burdens of widows and poor children. He portrays the rich and the poor as natural enemies.
But that isn’t the way it is in America. The overwhelming experience of most Americans is of “moving up” through the income brackets. Many if not most of those who enjoy high salaries today remember when they were still poor. Americans do not value the ideal of income equality nearly as much as polls show Europeans do. They value opportunity much, much more.
In Europe, it seems to an American, a comparatively high proportion of the Continent’s business elites have their roots in the old landowning class — aristocratic, privileged, with significant inherited wealth and position. Those of Europe’s working class do not tend to see themselves or their children as potentially among the leaders of business. Americans do, however, which is why they have so marginal an awareness of “class”.
In small towns across America’s Middle West and West, villages would not survive without at least a few successful first-generation founders of businesses. Down the corridors of America’s schools, one is less likely to see a portrait of a military officer or an aristocratic pillar than in much of Europe, and far more likely to find portraits of local business leaders.
In America, business is a creative force close to the bottom of society, classless and highly receptive to new talent regardless of social background. American business leaders cherish a reputation for daring, invention and discovery, taking significant risks today for larger gains tomorrow. Tocqueville points out how American sea captains left port before the weather was wholly clear, in order to gain a day on their European competition in getting to China’s tea, and bring it back faster and a few pence cheaper.
Finally, the founders of America’s small businesses (the source of nearly 90 per cent of all new jobs in America) have willingly sacrificed the higher salaries and greater security of working at larger firms, in order to gain personal independence and to prove just how creative they can be. In America, such animal spirits are still alive and vigorous, as Reagan conclusively proved during his two terms. And Clinton followed suit, “stealing” as it was said “the Republicans’ clothes”.
It is against this backdrop that Obama seems so petty, so obsolete a throwback, so oddly imperceptive, even impervious to obvious realities. There is no reason, a great many judge, why Obama should have been systematically discouraging and depressing job creation for three years, instead of helping it to blossom. His desire to punish business seems to have got the better of shrewd political judgment.
There is no institution more incessantly powerful in America today than the media, especially the many television and cable networks, but also the six or seven print and online organs that shape elite opinion. Most people in the media are considerably more secular than the nation’s centrist voters, and also more pro-government, which leads to a certain blindness in our elites. They think the nation is more secular — a good deal more secular — than it is. They tend to favour the “reforming” progressive state over the business sector. They are the cheerleaders of the secular political state. They have loved Obama with an unparalleled love.
Yet this powerful institution has no ear for the music of popular outrage from the broad middle, and no ear for the music of America’s religious vitality. As Tocqueville shrewdly observed, there are many things that the law allows Americans to do that their religious convictions prevent them from doing. Even under the heavy pressure of media-supported secularisation, the broad American middle-class is far more Christian in conviction and more loyal to the founding principles of the Republic than are the glitterati.
Most in the media, it seems, have a visceral distaste for the good folks who in unorganised but potent fashion called into being the Tea Party movement: the broad swell of public opinion against insupportable deficits and ever higher taxes on success. Much of the public feeling really does call to mind Boston in 1773 — weary of their political leadership, the first Tea Party supplied on their own the decisive signal of rebellion.
Similarly, still out of sight, a group of very successful Silicon Valley entrepreneurs, who are part of the new class of highly educated, proficient and visionary evangelicals, are together putting up several million dollars to help kindle a revolt among those in the churches who have been hitherto unpolitical. Their aim is to inspire and register five million new voters among evangelicals.
Observers today tend to forget that evangelical voters by the millions, especially but not solely in the “solid South”, were once the backbone of the great Democratic majorities of the New Deal era. In any case, there is no area of life in which most journalists are less informed and less experienced than in the religion of their fellow citizens.
Here I am trying to make two points. The first is about the growing wealth, learning, and sophistication of American evangelicals (and other religious people). The second is about the swelling rebellion of the broad middle against the excessive and elitist secularisation of American life, secularisation from the top down, not the bottom up.
My advice is: watch Iowa. Great movements deep under the surface are stirring there, and are being given strong local leadership and modest but significant resources. Pastors who steadily resisted the Moral Majority of the 1980s and other voices for political activism among religious people have reached a breaking point, and are becoming active with a fresh determination.
And stop looking at Iowans and others in the great religious middle through the bigoted eyes of H.L. Mencken who described them as ignoramuses, yokels and apes dragging their knuckles on the ground. Don’t underestimate the ever-higher levels of education and the complex leadership experiences of the American clergy and laity. America today is home to the most highly educated and technically expert body of Christians seen on earth. One of the most modernised nations in the world has more in common with the religious Third World than other secular nations do, and an under-appreciated pitch of education and practical success.
Given the deterioration of Obama’s popularity ratings in almost all areas, and among almost all constituencies (especially in his base), many Republican observers are crowing about a success that is not yet in their hands.
There is an old story about the Bengal tiger running briskly through the jungle toward a remote village. When warning reaches the village, most people run. But one young lad stops to lace up his Nikes. His companion tries to rush him along. “You can’t outrun a Bengal tiger.” The terse reply: “I don’t have to — only outrun you.”
There are many very good, and yet not quite presidential, Republican candidates in this pre-election run-up that Obama can probably outrun. Whoever comes out ahead as the Republican nominee is the only one Obama has to beat. And that nominee may not be without grave weaknesses, which the Obama-loving press will magnify.
Every American presidential race (well, a great many of them) seems to be a turning point for the country. This one certainly looks to be. I expect Obama to be resoundingly defeated. But that may not be the way American destiny works out.