Tuesday, 11 October 2016

Obama's Mindblowing Contradictions Pt. 2

This post is a continuation of Barack Obama's horribly inaccurate piece in The Economist ("The Way Ahead") the other day, where I decided to pick about 12 points where he is seriously mistaken or internally contradictory. It's quite an astonishing read, and rather patronising to see how the leader of the free worlds thinks so lowly of his subjects (the first post is found here: "Obama's Mindblowing Contradictions Pt. 1")

5) Inequality and Growth

Without a faster-growing economy, we will not be able to generate the wage gains people want, regardless of how we divide up the pie.
This sounds OK, but considering what comes a few paragraphs further down, I'm confused. There he brags about how his Administration has "boosted incomes for the families in the bottom fifth of the income distribution" and levied taxes on the rich to pay their fair share. Or this one:
Even these efforts fall well short. In the future, we need to be even more aggressive in enacting measures to reverse the decades-long rise in inequality.
He just said that growth was more important than the pie, but now it's back to the pie? What's the story here? Either it's not about growth but simply redistribution, in which case his discussion about productivity and growth is redundant; or it's about growth and productivity, in which case his Administration's efforts to "boost incomes" for the poor by means of redistribution are at best irrelevant? Mr. President, you can't have the inequality pie and eat it at the same time.

6) Productivity, Growth and Political Partisanship 

At several points does he discuss political partisanship and agreement across the aisle, saying that political disputes have prevented him from working all his magic:
A major source of the recent productivity slowdown has been a shortfall of public and private investment caused, in part, by a hangover from the financial crisis. But it has also been caused by self-imposed constraints: an anti-tax ideology that rejects virtually all sources of new public funding; a fixation on deficits at the expense of the deferred maintenance bills we are passing to our children, particularly for infrastructure; and a political system so partisan that previously bipartisan ideas like bridge and airport upgrades are nonstarters.
But rapping up his seriously confused piece he tells us the following
The financial system was stabilised without costing taxpayers a dime and the auto industry rescued. I enacted a larger and more front-loaded fiscal stimulus than even President Roosevelt’s New Deal and oversaw the most comprehensive rewriting of the rules of the financial system since the 1930s, as well as reforming health care and introducing new rules cutting emissions from vehicles and power plants.
Again, Obama eats the pie, saves it for later and duplicates it four times over. When anti-capitalist reforms he imagines will do wonder to his "capitalism" don't pass Congress, it's because of bipartisan non-cooperation. But when it comes to bragging about how he intervened more than the worst public works disaster in history, the bipartisan constraints are magically loosened. You can't have it both ways, Mr. President. Either you're constrained by bipartisan non-cooperation, and you aren't to blame for not passing whatever law you mistakenly believe will cure our ills - or you're not constrained by bipartisan non-cooperation, and can take credit for all the alleged good developments that have happend. Disengenious.

7) the Crisis and the Public Debt

There is so much here, that I may faint from disbelief. First, a point Bob Murphy likes to make, which illustrate Keynesian/New-Keynesian/NSS religion very well: The productivity slowdown (quote above in (6)) stems from a shortfall in public investment, but his administration enacted probably the largest public stimulus the world has ever seen. If that still constitute a "shortfall in public investment", what would it take for you to consider that perhaps public investment doesn't boost the economy? If the stimulus would have been 3x greater, and still no result? How extreme of an outcome would it take to ever falsify the Spending-Is-Mending religion?

Second, Obama goes on about the need to spend-but-not-borrow:
Finally, the financial crisis painfully underscored the need for a more resilient economy, one that grows sustainably without plundering the future at the service of the present. 
Hm, this sounds slightly familiar. Let's see what you said further up:
a fixation on deficits at the expense of the deferred maintenance bills we are passing to our children, particularly for infrastructure
So, we can't be tied down by worries of the federal deficit because the "maintenance bill" shouldn't be sent to our children. But the debt burden to fund said maintenance bill (or naturally, sweet spending of your choice) clearly isn't considered "plundering the future at the service of the present"? And don't give me the standard Krugman-style garbabge that "we owe it to ourselves" - even if that were a good enough justification (which it isn't) the ownership of debt is even more right-skewed than the income distribution you so genuinely despise; in other words even by Democrats' own inequality-hallucinated metrics would an increase in government debt be a terrible problem; it would excacerbate wealth inequality via more assets in the hands of the wealthiest, paid for by general taxation.

8) Mandatory Child Care = Flexibility

Following the discussion in (1) and (6), Obama continues acting as if the economy is an endless source of revenue with free lunches lying around. Seeing all these pesky entrepreneurs and employees who aren't doing what is so clearly in their best interest must be frustrating: 
There are many ways to keep more Americans in the labour market when they fall on hard times [...] Paid leave and guaranteed sick days, as well as greater access to high-quality child care and early learning, would add flexibility for employees and employers.
Again, what universe is Obama living in? Adding more burdens, steering more compensation into politically fashionable areas removes - not adds - flexibility for employees and employers, adds to the regulatory burden and makes life more difficult. Besides, if this really was the case, and employees and employers value flexibility over compensation in other forms - why aren't they doing it already?

Here's a novel idea: maybe they don't actually value flexibility over incomes. CongraKrugman recently had a good discussion on this.

9) Unions

Unions should play a critical role. They help workers get a bigger slice of the pie but they need to be flexible enough to adapt to global competition.
Deep breath. Repeat after me: Unions have never helped workers get a bigger slice of the pie. Never.
It must be annoying for Obama, or anyone else, to argue the pro-Union case in the face of reality; union membership has steadily fallen for decades, labour's share of income is fluctuation around a stable level - yet real incomes are up-up-up.

Furthermore, isn't that sentence internally inconsistent? If unions are flexible enough to adapt to global competition, what difference do they make? If they follow whatever markets in global competition demands of them, they're not making a difference - in which case they're not "helping workers get a bigger slice", should that even be possible; if they don't adapt and adjust, and so they are trying to ensure a bigger slice for their members, that can only be achieved by unions not being flexible - or benefitting insiders at the expense of outsiders. So, Mr. President, what exactly is the story here?

10) Suicide and Life satisfaction

Involuntary joblessness takes a toll on life satisfaction, self-esteem, physical health and mortality. It is related to a devastating rise of opioid abuse and an associated increase in overdose deaths and suicides among non-college-educated Americans—the group where labour-force participation has fallen most precipitously.
First, we need to help social unease among drug users, but Obama's administration has devotionally continued the War on Drugs. This isn't even me ranting economicsy things: even left-wing The Guardian accepts that the War on Drugs has been a massive failure.

Moreover, he wants to help the groups of unskilled, low-productive members of society who for one reason or another have problems entering the labour market or staying clean. As far as I understand, he's right: the labour-force participation has fallen most precipitously - because You, Mr. President, and politicians like you, mistakenly believe that Minimum Wage Laws helps these people. They don't. They simply price them out of the market, making their unproductive labour illegal until they stop trying, ie dropping out of the labour-force altogether. Which explains the fall in labour-force participation. 

11) Too-Big-to-Fail is over

Hands-down, this is the funniest claim:
Big American financial institutions no longer get the type of easier funding they got before.
I'm sorry, did you look at Fed rates at any time during your administration? If anything, Big American financial institutions are now drenched in the cheapest funding the world has ever seen:

Too-big-too-fail and protection for Big Finance is alive and well. Then again, that comes with significant costs in terms of regulation and oversight, so probably a blessing in disguise.

But don't take it from me, your friends over at New York Times - as well as regulators and bureacrats - say the same thing. I wonder who fact-checked you here, Mr. President...?

12) Climate Change - Here we go

Finally, sustainable economic growth requires addressing climate change [...]
Progress in America also helped catalyse the historic Paris climate agreement, which presents the best opportunity to save the planet for future generations.
Correct me if I'm wrong, but isn't it a bit strong even for Obama to take credit for the Paris agreement, that most cheerleaders even hold to be insufficient?

Even though I split the post in two, I'm exhausted and overwealmed by the sheer stupidity and inconsistency in Obama's propagande piece. And I'm sick of Climate Change arguments already; the planet isn't on the verge of extinction. The argument is irrelevant, move on. For those reason, I'm gonna let much smarter people do this one for me. See Epstein's lecture here:

or Murphy's from last year's Mises U:

For more reading, check Epstein, Murphy, Murphy again, ContraKrugman or Cordato (2004).


Obama tries to finish off his two-term presidency by a grand 3000-word summary in The Economist. It's filled with mistakes, inconsistencies and awful analysis. Reading it makes any sane person doubt humanity, and the internal consistencies alone make it worse than your average Trump speech. How this went past the editors at The Economist is beyond me. 

The irony of it all, is how the Economist itself has published several articles in the last few months (see (1) above), preempting and rebutting Obama's superficial points; it would be great if Mr. President actually read some of it - he might learn a thing or two. But in perfectly Orwellian ways, The Economist gave him all imaginable attention during the last few days. 

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