Obamanomics: The Flat Earth Society

By: Dock Treece | Thu, Jun 9, 2011
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In 2008 the United States experienced an economic downturn as the result of a financial crisis which, according to policy leaders like Ben Bernanke and then-Treasury Secretary Hank Paulson, nearly caused a global financial meltdown. Prior to this most recent collapse, the most recession of such magnitude occurred in 1982, just a year into Ronald Reagan's first term.

In fact, by many metrics the 1982 recession was even more severe than our most recent calamity. Unemployment was higher (as measured by Initial Claims, according to the St. Louis Federal Reserve), and GDP growth was lower - actually further in the red (according TradingEconomics.com and the Bureau of Economic Analysis).

Just two years after the 1982 recession, the United States' economy was experiencing nominal growth in excess of 7% on an annual basis. Contrarily, two years after the 2008 collapse the US is seeing annual growth of less than 2%.

The obvious question, then, is this: Why? Where did Reagonomics succeed where Obamanomics failed? Why is growth so slow and unemployment so high? Why are manufacturing and new orders falling off, and the housing market slumping (prices, construction, sales)?

Just as importantly, why as President Obama elected to stop receiving economic briefs? Why doesn't he care about what many agree is the number one issue on the minds of Americans, especially for the 2012 election? Is he incompetent, or simply detached?

In order to understand Obama's [low] ranking of the economy on his to-do list, it's important first to understand the economic theory in which he is schooled.

Progressive economic theory espoused by many liberals, particularly those as far left as Obama, center around government control. The basic premise is that the business community exists at the behest of the government; that "we the people" are too dumb to run our own economy. Instead, it's crucial for the all-knowing government, consistent of the country's academic elite, to do so for us.

In this school of thought, President Obama is considered a relatively "smart" man, as he is well-versed in the theories. He attended extremely prestigious institutions that promote this kind of thinking, and he got to know many of those on the forefront of progressive economy theory. He mastered the curriculum, and did extremely well in this school.

Just one problem: the theory is wrong.

Consider this rough equivalent: Someone goes to a school which teaches that the Earth is flat. They take all the classes that are offered, and absorb all the reasoning and justifications for how and why the Earth is flat. They adopt this thinking as their own, and the excel in this school; they ace their exams, coalesce with their professors - who happen to be the leading theorists that the Earth is flat - and even become the editor of the Flat School's Law Review. They might even graduate with honors; but are they really a smart person?

The sad fact is that President Obama, for all his charm and charisma, comes from an outmoded school of economic thought which has been repeatedly disproved throughout history. It didn't work in China, Mexico, Russia, or Italy. It didn't work in Argentina, Brazil, East Germany, or Greece. It certainly hasn't worked - and won't work - in the United States.

Essentially, economic theories fail when their focus leaves the fundamental component in any private sector: the individual. More "conservative" economic theories, i.e. the Austrian school, Reagonomics, et al, place high value the individual.

In its simplest terms, a business owner is risking capital to produce some product or service. That businessman's employees are willfully selling their labor to their employer in exchange for some agreed-upon compensation (wages, benefits, and so on). It's a simple transaction.

The more progressive theories (e.g. Obamanomics), on the other hand, don't care about the individual. Everything is about "the masses." Looking out for the masses; ensuring fairness for the masses. And, yes, even providing for the masses.

Obama doesn't care about the economy because, according to the theories he espouses, he's doing everything right. Heck, since he took the reins, government now has oversight of another 13+% of our national economy (healthcare) thanks to ObamaCare.

The President's not interested in changing; why would he change when he's already doing the "right" things? He believes his own hype, particularly that provided by his slow-pitch media that proclaims him the smartest man in any room he enters.

Unfortunately for "we the people," if President Obama continues the policies he has thus-far pursued, the question isn't whether we will get out of this recession. We won't; and what's more - things will likely get much, much worse.



Author: Dock Treece

Dock David Treece

Dock David Treece

Dock David Treece is a partner with Treece Investment Advisory Corp (www.TreeceInvestments.com) and is licensed with FINRA through Treece Financial Services Corp. He provides expert content to numerous media outlets. The above information is the express opinion of Dock David Treece and should not be construed as investment advice or used without outside verification.

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