July 8, 2009, 3:51 PM ET Mean Street: Human Nature and the Coming Failure of Obamanomics
This is my “told you so” column. Truth is — I was saving it for later in the summer when the Office of Management and Budget revises its deficit figures and reveals just how badly Obamanomics is faring.
But in the last few days, the president and vice-president have been confessing the administration’s failings on the economy to the world’s media, so I’ve had to hurry things along.
So here it is: I told you so.
I told you the president should have focused 100% of his energies on the economy.
I told you the president’s housing plan wouldn’t work out.
I told you that all the class warfare involving taxing the wealthy would hurt consumer spending.
I told you that in spite of the stimulus, unemployment was heading way higher than forecasts.
And I told you that the Obama budget was a fibbers’ delight — and that the White House would eventually be forced to fess up to its Pollyannish forecasts.
And, of course, that’s exactly what is happening right now.
President Obama claims he had “incomplete information.” And in Vice-President Biden’s words, “The truth is, we and everyone else misread the economy.”
Poor Mr. Biden. He can’t even get his truth right.
“Everyone else?”
Not me. And as much I would like to claim some special gift for prognostication, I can’t. There were hundreds of commentators, economists and politicians who were questioning Obamanomics from the very beginning. Just recall the Cato Institute full page-ad from February that warned against the stimulus. Or read through the dozens of cautionary WSJ op-ed pieces published since January.
Now, the White House will try to cover up its failures with the artful language of technocrats. We had incomplete information. Our models didn’t work the way they were supposed to. It would have been even worse had we done nothing.
But that’s obfuscating mumbo-jumbo. It’s the logic and language of career number-crunchers, who believe an economy can be distilled into a giant input-output model. Just read the Council of Economic Advisers papers on the stimulus package.
Obama’s promise of creating 3.5 or 4 million new jobs by year-end 2010 is in essence no more than a mathematical formula. Spend X amount of money and you get Y number of new jobs.
But the White House didn’t just get the formula wrong. It made the mistake of thinking the formula mattered. Capitalism just doesn’t work that way.
And herein lies the real shortcoming of Obamanomics. It is an invention of academics and bureaucrats. And it takes little account of human behavior — how individuals and businesses operate in the real economy.
As I tried to illustrate in my columns, the economy is the sum of billions of individual decisions. Should I modify my mortgage or walk away? Should I buy the car or wait until I really need a new one? Should I fire more staff or take a hit to this quarter’s earnings?
Our behavior may be unpredictable, but it’s not that complicated. Individuals fight to protect their own interests. Businesses fight to protect their profits. That’s what we do — and what we’re supposed to do.
So why did the White House believe that new income and capital gains taxes on the wealthy would keep them spending and investing?
Why did the White House believe that removing overseas tax shelters and raising energy prices would make CEOs keen to bring on new hires?
And why did the White House believe its angry class warfare rhetoric would unite rich and poor, the CEO and worker, the employed and unemployed in our shared goal to grow the economy?
It’s too early to write the obituary for Obamanomics, but when measured against the White House’s own expectations on saving homes, creating jobs and running deficits, it’s clear Obamanomics is falling well short.
The White House shouldn’t blame “everyone else” or “incomplete information.” The coming failure of Obamanomics rests with the Obama administration and human nature itself.