Big Government, Big Business, Big Problem
In what Politico is calling “the first whiff of the desperation inside the White House about the slowness of the economic recovery,” President Barack Obama spoke to the U.S. Chamber of Commerce yesterday, claiming: “I understand the challenges you face. I understand you are under incredible pressure to cut costs and keep your margins up. I understand the significance of your obligations to your shareholders and the pressures that are created by quarterly reports. I get it.” No. No, he doesn’t.
President Obama went on to say, “Even as we eliminate burdensome regulations, America’s businesses have a responsibility as well to recognize that there are some basic safeguards, some basic standards that are necessary to protect the American people from harm or exploitation. Not every regulation is bad. Not every regulation is burdensome on business. A lot of the regulations that are out there are things that all of us welcome in our lives.” Sounds nice. But then the President went on to defend Obamacare, which requires hundreds of new regulations, raises taxes by more than $500 billion, and has already forced the Department of Health and Human Services to grant more than 700 waivers to President Obama’s political allies.
Any successful market economy does require some basic rules of the road to function. But there is a big difference between a general system of rules that applies equally to everyone and an invasive regulatory scheme that rewards the politically connected. If the President truly wants to “get it,” he should read Bruce Caldwell’s new Heritage paper “Ten (Mostly) Hayekian Insights for Trying Economic Times.” As Caldwell notes, Friedrich Hayek stressed the necessity for clear and certain rules for markets to work effectively, but he also recognized the dangers that government regulations brought to the table. Specifically, Hayek noted that new regulations (1) always target the causes of the last crisis, not the next one; (2) insert uncertainty into the market place; and (3) are hijacked by strong special interests. On that last point Hayek wrote:
We must finally mention another instance in which it is undeniable that the mere fact of bigness creates a highly undesirable position: namely where, because of the consequences of what happens to a big enterprise, government cannot afford to let such an enterprise fail.
Caldwell notes that this passage is almost certainly referring to President Jimmy Carter’s first bailout of Chrysler in 1979. Fast forward to Sunday’s Super Bowl and the federal government is still bailing out Chrysler. Even as the company spent almost $9 million on the longest Super Bowl ad in history, Chrysler CEO Sergio Marchionne announced he was seeking a “better deal” on taxpayer-financed government loans.
This is what happens when big government and big business get in bed together: The taxpayer loses. President Obama went on to claim that all of the government “investments” he is pushing would be for “projects that are determined not by politics.” That is simply impossible: If it is the government that is making the investment decisions—whether they be for high-speed rail, electric cars, or solar power—then those decisions are by definition political. How can the President deny this simple fact?