Friday, September 20, 2013

What the Obamis Get Wrong

We've seen in recent days that the Obama economic policy seems to privilege the rich and screw the poor.  That's because cheap money goes first of all to those closest to money: people with assets.  And secondly, I would argue, that government spending goes to existing interests, people with power.

When I say that government spending goes to existing interests I am saying nothing about the purity or the corruption of the government.  I am just saying that it is in the nature of government spending that it goes to existing interests.  Period.

By existing interests I don't just mean rich bitches and crony capitalists.  For instance, the biggest government programs are entitlement programs for the middle class: Social Security and Medicare.  The poor get screwed with a blizzard of miserable welfare programs and the failing Medicaid.  Then there is education, which subsidizes the education of middle-class children right through grad-school.  And the poor get screwed with abysmal schools in the inner city.

It's simple.  The vast majority of voters are middle class, and so the middle class will get most of the loot.  That's how government works.

Scratch a liberal though, and you'll find someone that genuinely believes that all those programs really help.

Liberals really believe that one-size-fits-all government programs help people.

Conservatives believe that one-size-fits-all government programs will always end up benefiting the administrators of the program and the special interests that gather around them.  Conservatives believe that first and foremost, government spending will be used to get politicians elected.  Modern politicians, in our view, are no better than the leaders of robber bands; they offer the prospect of loot to their supporters, and aim to deliver when they get elected.  As St. Augustine put it, a robber band is made into a kingdom "by the addition of impunity."

The genius of modern liberalism is to dress this naked larceny in the raiment of caring and compassion.

So we learn that the median young, the minority, the single woman has lost real income in the first four years of Obama while the rich like me have benefited.  How could this happen with a president that wants to grow the economy from the middle out?  Whatever that means.

Obamanomics doesn't work because the administrative welfare state model doesn't work.  The administrative welfare state model doesn't work because it is indistinguishable from the robber band model of loot and plunder.  It is a model of net subtraction.

Take Obamacare.  It was a grand attempt to extend health insurance to the uninsured. Never mind that the 30 million or so uninsured might just be people for whom insurance didn't make any sense, people without assets to protect from medical bills.  That is to say, if you are a person without assets it makes sense to go bankrupt rather than pay your medical bills.  But in order to get Obamacare passed the Obama administration and the Democrats in Congress had to hand out goodies to all the special interests.  It looks like they promised a lot and probably double-crossed a number of their special-interest supporters, from Big Pharma to labor unions.  But the point is that in order to give benefits to the deserving poor they had to give away a whole bunch of goodies to special interests.  Net subtraction.

Take Medicaid.  Right after World War II the feds offered free money for hospital construction.  The only caveat was that the hospitals had to let anyone in for treatment.  After a while the hospitals decided that they really needed to get reimbursement for all the government-mandated free care.  Voila: Medicaid.  But of course the government soon found that Medicaid was getting too expensive so they started trying to duck the commitments it had made by reducing the amounts paid for Medicaid-funded procedures.  Hey, what would you expect a robber band with added impunity to do?  So doctors and hospitals started cutting back on serving new Medicaid patients.  And so on.

When you have the whole economy riddled with this sort of scamming and subsidizing, it's not surprising that the economy starts to get kinda rocky.  Like right now.

That's because all government spending, all of it, is a dead weight on the economy and society.  Oh there may be exceptions.  DARPA.  The internet.  Interstate highways.  Public health.  But it is a delusion to project these occasional successes onto government as a whole.  Government spending is waste.  Period.

But people will kill to keep their government contracts, their government benefits, and their government subsidies.  That's why we need government control much more than we need gun control.  Stop the killing!  Actually, politicians are so afraid of people with benefits that it seldom gets to killing; the last thing politicians ever try is cutting entitlement programs.

The solution to the Obama economic malaise is simple.  Cut.  Start cutting now, and keep on cutting.  And return to sound money.  And clean the tax code out and replace it with simple, low-rate taxes.  And reform the credit system so that it's almost impossible for homeowners to get underwater, and banks to get insolvent.

Here's why liberalism doesn't work.  The poor, the unskilled, and the undisciplined are starting out with a problem.  Nobody wants to hire them.  They will get hired eventually, but only when all the skilled and the disciplined already have jobs.  If you have a minimum wage then the unskilled and the undisciplined may never get hired.  If you give money to the unskilled and the undisciplined then you take away some of the incentive for them to get skills and develop discipline.

In other words if you espouse liberal politics and liberal government programs you will keep the poor poor, the unskilled unskilled, and the undisciplined undisciplined.

Meanwhile the rich get richer.

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