There are reasons why five and a half years into the Obama presidency things are still crummy and uncertain.
As I’ve mentioned before, specific statist and redistributionist policies have kept a lid on growth. It’s not an accident that President Obama has been unable to bounce the economy out of recession like Reagan or either of the two Bushes did.
The Wall Street Journal the other day excerpted a speech by University of Chicago economics professor Casey B. Mulligan, given on receiving the Hayek Prize on June 25 from the Manhattan Institute for his book “The Redistribution Recession”.
He provides some illustrations of Obama policies that have kept the economy in neutral. Or in reverse. It’s called “help” by Democrats, and “free stuff” by conservatives, like me. Free stuff is okay when you’re in a fix, but free stuff become deleterious when you keep getting it. Or when you’re not in a fix. And that’s what’s happening to people.
Mulligan writes about Food Stamps:
Participants are no longer required to seek work and are not asked to demonstrate that they have no wealth. Essentially, any unmarried person can get food stamps while out of work and can stay on the program indefinitely.
People who owed more on their mortgage than their house was worth could have their mortgage payments set at a so-called affordable level—in government-speak, that means that you pay full price for your house only if you have a job and earn money.
There were new rules for consumer bankruptcy, with special emphasis on the amount that consumers were earning after their debts were cleared.
Unemployment insurance expansion, which adds to unemployment:
The federal unemployment-insurance expansions were paid by taxpayers generally, which means that an employer could lay off as many people as he wanted without adding to his federal tax burden.
Obamacare, which makes it easier to lay people off:
Lay somebody off during the crisis and, for the first time, among other things, the employer wouldn’t have to pay for former-employee health insurance.
These are no doubt just a few examples.
All the “help” increases what Mulligan calls the “marginal tax rate,” or the extra taxes paid and subsidies forgone by people who choose work over welfare.
“Waves of new programs increased the typical marginal tax rate from 40% to 48% in two years,” Mulligan writes.
People are much smarter than policymakers in Washington think. They will make rational decisions about what’s best for them, as opposed to doing what policymakers think is best for them.
Mulligan offers up an odd story to demonstrate the facts on the ground:
I met a recruiter—a man whose job it is to find employees for businesses and put unemployed people into new jobs—and he described the trade-off pretty well. Stacey Reece was his name, and he said that in 2009 his clients again had jobs to fill. But he ran into a hurdle he hadn’t seen before. People would apply for jobs not with the intention of accepting it, but to demonstrate to the unemployment office that they were looking for work.
As Mr. Reece described it, the applicants would use technicalities to avoid accepting a position. The applicants would take Mr. Reece through the arithmetic of forgone benefits, taxes, commuting costs and conclude that accepting a job would net them less than $2 per hour, so they’d rather stay home.
The circumstances we find ourselves in, and have found ourselves in, are not the fault of George W. Bush. They are not mostly due to some unique “financial” recession. They result from the incorrect policy choices made by the current administration.
That is, they are Obama’s fault.