Even as President Obama took to the national stage to assure the nation that the state of the union is strong and that the American economy is robust, back in the real world, the cracks were starting to show. For years, economists who understand the consequences of government interventionism in markets have warned that the policies of easy money, reckless spending, debt financing, and tight regulations could only lead to disaster. The mirage of short-term job growth, low inflation, and a booming stock market had to come to end. While it was impossible predict exactly when it would happen, logic and history dictated that the fiscal house of cards Obama has spent the last seven years meticulously building must, eventually, come crashing down.
Now, in the final year of his presidency, it appears as if that moment may have finally come. The Dow Jones has been in freefall, losing close to 1,500 points just since the beginning of the year. Retail sales were down in December, and many fear that this is only the beginning. These ominous symptoms stand in stark relief to the president’s confident assurance in his State of the Union Address that “Anyone claiming that America’s economy is in decline is peddling fiction.” Maybe the cozy insulation of the White House is preventing him from seeing that which is clear to the rest of us.
Then again, maybe he’s just spooked and doesn’t know how to respond. I know I would be, in his shoes. It’s starting to feel a lot like the beginning of the housing crisis in 2007 all over again, only this time Obama doesn’t have a George W. Bush to blame. The responsibility rests squarely on his shoulders, with the struggling economy a direct result of his misguided policies. While the young man who walked into the White House in 2009 thought he could turn back the tides through sheer charisma and oratory, the battered president of today has exhausted every arrow in his quiver, only to find himself right where he started. He literally doesn’t know how to get the economy growing again, nor, apparently, do any of his advisers.
All this underscores the importance of electing people who not only understand how the economy works, but who are willing to fight to implement pro-growth policies over the objections of those who still think income inequality is a greater threat to prosperity than poverty and debt we can never pay back. Instead of responding to an economic crisis with big bank bailouts, increased government spending, more financial regulations, and lectures about how we are too greedy, America needs leadership—not just in the White House, but in Congress as well—that can correctly diagnose the problem as stemming from too much government, not too little.
This is not a complicated prescription. Taxes are robbing the middle class of their hard earned income: lower them. Regulations are limiting opportunity for entrepreneurs and innovators: roll them back. Obamacare is destroying the American health care system: repeal it. The Federal Reserve is distorting market signals and causing bad incentives: stop the printing presses. In fact, it’s a pretty safe bet to pick any policy of the last seven years and just do the opposite.
That the actions of big government attempting to micromanage the economy would lead to crisis was entirely predictable, it was only a question of whether we’d see the fallout sooner rather than later. And while the looming correction will mean dark clouds ahead for all Americans, the silver lining may be that it has happened early enough for us to recognize the cause, and hopefully avoid repeating the mistakes of the past.
At the end of the day, Obama has reaped exactly what his two terms of progressive policies and economic illiteracy have sown.