WASHINGTON, July 15, 2015 — President Obama could have set better economic policy priorities during his administration. Hillary Clinton could set better economic priorities during her campaign. Instead, both have embraced policies that are dismantling the great American economic machine. Because these include an increase in government handouts, the American people seem to support them.
Obama’s priorities should have been those that every president who governed during recession has set: economic growth, then opportunity for all Americans, then social responsibility. Obama’s priorities were inverted: social responsibility, opportunity for those who have the least, and then economic growth. The result has been little economic growth and a dismantling of the American economic machine.
The Obama/Clinton solution to slow growth is bigger government. Even recognizing that these policies have produced the stagnant economy of the past six years, they push for big government policies of higher taxes, particularly on capital-creating, high-income earners, and increased government spending on social programs. These actions serve to reduce freedom in the marketplace and dismantle the American economic machine.
A similar problem existed in 1981. President Reagan famously noted “Big government is not the solution. Big government is the problem.” He then began to reduce the size of the government, to reduce the number of Americans who were dependent on the government, to lower taxes for all Americans, and to provide opportunity for all Americans.
These actions revved up the American economic machine by providing incentives for consumers and business. The economy grew rapidly. Presidents Bush and Clinton followed this approach. In 1996, President Clinton declared that the era of big government was finally over.
President George W. Bush continued these policies as the economy expanded until 2008. The financial crisis that exploded in the economy then was the result of government policy geared to increase the home ownership rate from the historical norm of 62 to 64 percent of households to 70 percent of households, which was achieved in 2006.
The policy allowed about 10 million households to be granted $200,000 mortgages which they could not afford. Eventually almost all of the $2 trillion in mortgage loans went into default, leading to the financial crisis and the great recession. Today the home ownership rate is back down to 63 percent.
During that unprecedented growth period, those who accumulated capital to invest in expanding industries, like technology, did well. Workers who acquired the skills needed in this growth economy earned high salaries. Those employed in the finance industry who were able to raise the large amounts of capital needed for companies like Google, Facebook and Amazon, were also well rewarded.
The problem was that there were many people who were unable to contribute significantly to the dynamic sectors of the economy. They may have had skills more suited for the manufacturing industry which shrinks as economic development moves from a manufacturing based economy to a service and technology oriented economy. This lack of demand resulted in stagnant wages.
Obama/Clinton concentrate their economic policies on government programs to give income to those who haven’t earned it and take income away from those who have earned it. This reduces incentives for individuals to increase their contribution to the economy and begins to dismantle the American economic machine. In addition, because they believe that big business causes most of the income inequality, new burdensome regulations are placed on business activities further dismantling the American economic machine.
If Hillary is elected president she will continue the policies that have led to a stagnant economy. She will raise the minimum wage which ends ups hurting the vast majority of Americans. Prices will rise and the number of job opportunities available to unskilled workers will decline.
She will over tax the highest income earners so she claims they will be forced to pay their “fair share” without noting that almost half of the income earners pay no federal income tax at all. This policy will reduce capital formation and continue the dismantling of the great American economic machine.
There has been a black cloud of depression hanging over the American people since shortly after Obama was elected, although he has helped the bottom 15 percent of income earners who, for whatever reason, contribute little or nothing to the economy. This has come at the expense of the majority of Americans who feel a sense of hopelessness and despair because the stagnant economy of the past six years has produced little opportunity.
We need to really rev up the great American economic machine. We need policy which will create growth in the economy of more than 4 percent per year. We need business to be free to expand and enough capital creation to encourage expansion. We need to allow people to keep the vast majority of what they earn.
We need to stop dismantling the great American economic machine to return to prosperity and return America to the land of opportunity.