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The Obama Watch
All Hail President Blair!
Our president is following a jobs creation model already attempted in Britain. It failed miserably.
This column was written before the president’s Thursday night speech on job creation, but that matters little. The principle behind Obama’s speech — that government can “create” jobs — is well known and utterly flawed.
Government doesn’t create jobs, except in the most banal sense of employing people to meddle in other people’s business. Nor does it create an environment amenable to job creation. Jobs are best created in the absence of bureaucracy. If Washington carries on in the belief that government can do something other than get out of the way, our economy is doomed.
We can get a good idea of what will happen by looking at a country very similar to ours: the United Kingdom, which is farther down that road than we are. In a recent series of reports, aptly titled “Project Armageddon,” Tullett Prebon, one of the world’s largest inter-dealer money brokers, describes the trap in which the UK now finds itself. The final report, “Thinking the Unthinkable,” makes for a sobering read.
The basic premise should be familiar to anyone who has paid attention to the federal government’s activities over the past decade. The UK’s financial regulators, with the blessing of Labour prime ministers Tony Blair and Gordon Brown, implemented a policy of easy money that allowed the British economy to expand dramatically on a foundation of private debt.
With revenues and growth looking like they would increase forever, Brown hubristically declared that he had brought an end to the boom-and-bust cycle. Public spending increased dramatically on the belief that Britain would enjoy a free ride. When the private borrowing bubble burst, government simply assumed the debt. Adding in contingent liabilities such as unfunded pension schemes, Tullett Prebon reckons that UK debt is now 167 percent of gross domestic product.
The new British coalition government rightly recognizes that this is unsustainable, and has embarked on a deficit reduction program that involves modest tax raises and modest spending cuts of around 3 percent and presumed growth leading to greater revenues. However, Tullett Prebon points out that the British economy, under its current structure, cannot deliver this growth.
Previous growth industries like real estate, financial services, and construction cannot grow now that private borrowing has dried up. The retail industry is constrained by falling consumer incomes. Other important areas, like health care, education, and defense, cannot expand without increases in public spending. All of this means that the UK “is now mired in a high-debt, low-growth trap.” Sound familiar?
The Blair-Brown years also constructed a vast illusion about the economy. The British people were essentially told that “free” and generous public services were their absolute right and that it was immoral to argue otherwise. Public servants developed an arrogance “which was reflected in the pay and perks of senior managers and in a relentless encroachment on the rights and liberties of the individual.” (Themes I develop in the American context in my book, Stealing You Blind: How Government Fatcats Are Getting Rich Off of You).
The result is a British people ignorant of the realities of the economic peril it faces. That is why the modest spending cuts proposed by the coalition government provoked political riots earlier this year (and the sense of entitlement may well have contributed to the recent looting riots).
Tullett Prebon calls this a “very British mess,” but the situation it describes is very similar to the one here — with the exception that far fewer Americans have fallen for the line that government has all the answers.
Government cannot borrow its way out of the problem. That would just defer the inevitable crisis, while deepening it. Interest rates cannot decrease further, public spending has failed to increase economic activity, printing money (or “quantitative easing,” as it is now called) has had no discernible effect beyond increasing household inflation, and the Pound has remained depressed in foreign exchange markets, foreclosing any hope of an increase in exports. In other words, macroeconomic solutions of the sort that President Obama wants to try here, have been exhausted — at great cost and to benefit.
The only plausible solution to keep Britain’s bad situation from getting worse, the firm concludes, is to follow a package of low-cost, supply-side reforms to reduce the burden of government while at the same time producing a more self-reliant people. These reforms would include genuine reforms of entitlement spending, a reduction in the pay and conditions of high-earning public sector workers, significant simplification of the small business tax system, an end to regulatory excess, and a “radical ‘liberty agenda,’ getting government off the backs of the public.”
At the Competitive Enterprise Institute, we have a saying: You don’t need to teach the grass to grow, you just need to move the rocks off the lawn. The president’s philosophy is one of moving the rocks around the yard. Britain has already tried that. It’s time for a liberty agenda.
About the Author
Iain Murray heads the Center for Economic Freedom at the Competitive Enterprise Institute and is the author of Stealing You Blind: How Government Fatcats Are Getting Rich Off of You.
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Bill Hussein O'Stalin| 9.9.11 @ 6:30AM
No matter how many times central planning fails, there are always new converts convinced that this time, they will get it right.
They never will.
Mike D.| 9.9.11 @ 7:59AM
Thats what always amazes me. Religious adherence to a completely failed and disasterous concept and yet we have this repeated over and over and over with the same results. You can put this on the educational system which is in total failure mode for keeping this entire ludricrous concept alive in "academia" world. A wonderous land where utopianism, gum drop forests, and rivers of chocolate fudge all coexist in perfect harmony.
Jack in Wi.| 9.9.11 @ 12:25PM
It has also failed miserably in Japan. For 20 years the Japanese have tried to use vast public works projects and low intrest rates to jump start their no growth economy. Japan at least can finance it's own massive budget deficits, because the Japanese are huge savers. People in japan were buying our debt because that is a way to get some intrest on their savings. Now no one overseas wants our toilet paper treasury notes and the FED has to buy them and keep printing money. The only way out of this is to let these bad assets go under and let the bankruptcies occur. The only man running for President who understands all this is Ron Paul.
Mike Hawk| 9.9.11 @ 10:24PM
Ron Paul is a kook and does not uderstand this at all. You are a crackpot too.
Kevin Dunn| 9.9.11 @ 7:09AM
This is a good analysis of some ingredients of the toxic cocktail which Britain is guzzling, but only some. Also important is the fact that the culture has gone rotten. Cameron is groping rather dimly for a solution but he has the Social Democrat's far-leftist Clegg hanging round his neck like a dead and stinking albatross. At present I see no hope.
Pecos Pete| 9.9.11 @ 7:10AM
King O ain't just moving rocks around the yard, he is adding an avalanche of rocks to the yard.
The sooner King O be gone, the sooner we start moving rocks off of the yard.
Timothy L. Pennell| 9.9.11 @ 7:45AM
"I'm not an Ideologue. I'm NOT!"
A tiger is a tiger. A scorpion is a scorpion.
He's a MARXIST. It's in his DNA. He will always do, what MARXISTS do.
We need to TAKE OUT this Son of a Bitch, and bring back an America where we belong.
Southern_Comment| 9.9.11 @ 9:54AM
As Pascal said 'All thoughts of a turtle, are a turtle."
Buck Ofama| 9.9.11 @ 10:34AM
Jokebama needs another vacation... so does Cheney.
career soldier| 9.9.11 @ 8:16AM
"Government doesn't create jobs, except in the most banal sense of employing people to meddle in other people's business."
Funny thing but all during my 26 year military career, I never felt I was "meddling" in other peoples business.
Bottom line is: our government is the single largest employeer in the country. So therefore starting off with y0ur opening statement is amazingly short sighted and/or uniformed.
Have you considered| 9.9.11 @ 8:38AM
Career Soldier, our FedGov was never supposed to be the largest single employer in the US.
Frankly this is what is killing us.
I will point out that at least your function was contemplated by the founders, as Defense is actually one of the Enumerated Powers found in Article 1, Section 8 of the US Constitution.
EPA, NRLB, HHS, DHS, HUD, Energy etc.. simply are not.
This expanded role, and the endless spending on unconstitutional agencies is again, what is killing us.
It is that simple.
WJ| 9.11.11 @ 11:38AM
You may have never felt like you were meddling in other people's business, but you were.
squalis| 9.9.11 @ 10:23AM
Not that liberalism in this country is understandable, I don't understand how they explain all the economic problems of Europe. After all, were Republicans and GWB (admittedly not a great President when it came to domestic issues) in power in Europe as well? Or, is it so impossible for them to see the impact of unsustainable government spending? If so, the USA is doomed as we will never have an honest discourse about such programs as Social Security. Rush had it right yesterday. If social security is not a Ponzi scheme, can't I just get my "invested money" back and opt out?
Mike D.| 9.9.11 @ 11:06AM
Or, is it so impossible for them to see the impact of unsustainable government spending?
I'm sure they see it. What you have to understand is most of them WANT this. These ARE NOT politicians in this herd anymore, these are REVOLUTIONARIES. Politicians are pragmatic, double talking, money grubbing go with the wind direction, finger in the air parasites. Revolutionaries Want this stuff to occur, they want this system destroyed to be replaced by a system they control with NO opposition, that controls YOU, and eliminates ANY competition. When you frame you views in that context its easy to see what they are doing and why. Thats the problem, these are rabid, rigid leftists that want a revolution whether by coersion or by violence, doesn't matter as long as they win. Revolutions are born of collapses, whether by accident or by direct manipulation. This is down and dirty ideology now, not politics anymore.
cicero| 9.9.11 @ 3:33PM
Rather than throwing our hands up, and claiming doom and gloom, we would be better served finding a solution to the problems that our fearless leaders have foisted upon us.
Social security is not a bad idea. It is just not sustainable actuarily in its present form. It was set up during a time when the average life expectancy was around 62 years. Now that life expectancy is is up around 76 (actually around 84 when you delete the infant deaths, and those who die in theirs teen and twenties), the elegibility age has to be addjusted upwards. I suggest that the age be adjusted upwards by 6 months every 5 years.
Public pensions have to be revisedd to, while allowing for retirement after 20 to 25 years, begin paying sometime after age 65. Instantly all of the public pensions fall into sync. To have 40 and 50 year old "public servants" retire, and live off of the rest of us for the next 40 years is a bad joke. (Maybe we should have a 3 day hunting season once a year when all retired civil servants have to run around in the wood wearing white tails. It would be llike cullling the herd.)
I am sure we could find similar solutions to all sorts of economic problems created by our government. It only takes a little bit of common sense.
Russ| 9.9.11 @ 4:51PM
Cicero, that is a fantastic idea!! The hunting season is a riot, but I mean not allowing "public servants" to start collecting their pensions until after 65. I am 44, my age to collect SSI is now 67, so do not let them collect until they are eligible for SSI, and reduce what they also receive from SSI. Another thing, no double-dipping!! It makes my blood boil to hear of a former "public servant" collecting 2 pensions that are each close to six figures!! Even better than that would be to eliminate them altogether and let them provide for their own retirement through IRA's, 401k's, or whole life policies like the rest of us!!
Anthony| 9.9.11 @ 10:07PM
The biggest problem for our cousins in the kingdom of England is their immigration policy. Soon, when the country becomes a plurality Islamic and King Charles converts, socialism will be the least of their worries. I don't think there are any Thomas Mores left on the island.
POST American| 9.9.11 @ 10:16PM
---------------------FINAL WORD-----------------------
"We are using MASSIVE third world
(largely muslim) immigration and DESTROY
British culture beyond repair, once and for
all ----FOREVER."
--Fmr PM and Globalist TONY BLAIR
(Daily Mail interview)
"We used immigration to humiliate the
'Right'."
-Gordon Brown
Fmr PM/ Globalist
----And all this decades after 'REAL conservative'
Maggie Thatcher, a confessed servant of the Masonic/ Globalist 'shadow government',
pushed unrestricted immigration and lavish
welfare bennies for a Britain already unable
to employ its people.
AS that latest 'Trans Pacific' NAFTA program is
rammed through, in conjunction with those
HUGE tunnels connecting Pigeon Lake B.C.
with Asia, and the 'first of several' RED China
'sovereignty zones (south of Boise)
-------BETTER WAKE UP KIDDIES.
----------THIS IS TREASON----------
----------------REALLY-----------------
----------------NO JOKE----------------
martin j smith| 9.10.11 @ 12:13PM
Obama's "job speech" was a waist of time. In fact every single letter in every single word written or spoken about his "job speech' was a waist of time and thus, this president is a waist of our time. I think it is time for some leader on our side to make the following comment: Mr President, we do not think you have the slightest interest in working with the private sector and thus enabling our economy to rebound. Mr President the economy is a national security issue. Mr President, if you do not make more serious efforts to ,work with the American People then we have no choice then to recommend that you be IMPEACHED.
That would work for me.
Jack London| 9.10.11 @ 6:23PM
One thing's for sure - whatever education you had was a 'waist' of time.
The article is also a 'waist' of space - a big part of the Texas job 'miracle' is public sector employment. Many of the world's strongest and most stable economies have substantial public sectors.
Mike Hawk| 9.10.11 @ 11:15PM
Do any of you igoranuses(a play on words) know the difference between 'waist' and 'waste'. Name me one nation with a 'substantial public sector' that is an economic powerhouse. As for impeachment, it's 13 months to election time. Ain't going to happen, especially with a Dumocrat controlled Senate.
JQ| 9.11.11 @ 6:46AM
Germany
Daves| 9.11.11 @ 11:52AM
The Malagasy Republic
General Quarters| 9.12.11 @ 7:52AM
Can Self-Professed British Subject be President of the U.S.?
Obama, "My citizenship is governed by the British Nationality Act of 1948,"
- No They Can Not!
Thomas G. Gainer| 9.27.11 @ 3:41PM
The idea that governments don't create jobs is absolutely ludicrous. NASA is one U.S. Government agency that has certainly created many private sector jobs. NASA doesn't build spacecraft; they have spacecraft built for them by private industry under government contract. They do this because, at this point, spacecraft building is not commercially viable. No one in private industry could build spacecraft without the funding provided by the taxpayer. There's no profit in it.
Interstate highways, city streets, and most public works are built by private contractors, creating many jobs. The public sector doesn't have much in the way of construction and manufacturing capability, and must depend on the private sector to provide that capability. (To say that governments do not produce jobs is to say that there are no such things as government contracts, which is ridiculous.)
wedding dresses | 11.14.11 @ 3:14AM
The article is also a 'waist' of space - a big part of the Texas job 'miracle' is public sector employment. Many of the world's strongest and most stable economies have substantial public sectors.