Sunday, October 28, 2012

President Obama's silver lining

If a silver lining to the Obama administration exists, it's that it has served as another reminder of the vast shortcomings of statist ideology. On issue after issue, the default position of President Obama and his Democratic allies has been to expand government and hand more power to bureaucrats and politicians.  On issue after issue, this approach has also failed. Let's take a closer look at some examples of this that have transpired over the past four years:

Green/Clean Energy

Perhaps no issue better captures the Obama administration's mentality than its obsession with so-called "green" jobs and clean energy. In his nomination speech Obama vowed "invest $150 billion over the next decade in affordable, renewable sources of energy -- wind power, and solar power, and the next generation of biofuels -- an investment that will lead to new industries and 5 million new jobs that pay well and can't be outsourced."

In the first presidential debate of 2008, Obama slammed John McCain for voting "23 times against alternative energy, like solar, and wind, and biodiesel" and said that he would make a "significant investment over the next 10 years" in "alternative energy, like solar, and wind, and biodiesel, and, yes, nuclear energy, clean-coal technology." In his inaugural address he promised to "harness the sun and the winds and the soil to fuel our cars and run our factories," and in early 2010 stated that "robust clean energy sector is how we will create the jobs of the future, jobs that pay well and can't be outsourced."

Supporters of limited government, meanwhile, viewed this as a foolish approach rooted in arrogance. How could anyone possibly know with certainty what the jobs of the future would be, or areas ripe for investment? What reason is there to believe politicians such as Obama have been gifted with such insight? It is also not apparent why this is a role for government. Isn't the identification of new energy technologies and promising companies best left to markets and the private sector? Is the federal government now a venture capital fund? And aren't leftists supposed to be against corporate welfare?

Well, the results are in, and they're not pretty for the pro-government interventionism crowd. Those five million new green jobs? Not even close. How about the promised million electric cars? Nope -- which isn't a surprise given the Congressional Budget Office's conclusion they don't really make sense. Furthermore, for all the talk of federal "investments" in green energy, the Heritage Foundation has compiled a list of 34 green energy firms that received taxpayer dollars that have either declared bankruptcy or engaged in layoffs. But who cares about return on investment when you're gambling with someone else's money?

In fact, not only have the promised green jobs failed to materialize or clean energy transformed the US economy, but the very opposite has occurred. The big energy story of the past few years has not been the ascendance of wind or solar power, but hydraulic fracturing and the boom in shale oil and gas. Heck, at the rate it's going the US might even overtake Saudi Arabia as the world's top oil producer by 2020. If US industry and the broader economy is being transformed, it is because of cheap natural gas rather than alternatives being pushed by the administration. Furthermore, while the promotion of alternative energies has yielded relatively little in the way of environmental benefits, fracking has produced real gains.

Granted, few people foresaw any of this taking place four years ago, but then again that's the point -- predicting future energy trends and related technological developments is incredibly difficult, and it was absurd for Obama to say with any great certainty what the future held. 

High Speed Rail

Not only does the Obama administration believe it knows which energy sources Americans should be using, but how they should travel as well. At a time of gaping deficits, the administration in February 2011 nonetheless called for spending $53 billion over six years on high speed rail. This figure was only an initial down payment, meanwhile, when one considers Transportation Secretary Ray LaHood foresaw total spending on rail reaching $500 billion over 25 years. In another touch of irresponsibility, the proposed high speed rail plan was partly justified through economic nationalism, with the White House highlighting "Strong Buy American requirements [that] will create tens of thousands of middle-class jobs in construction, manufacturing, and rail operations."

Admittedly, we will never know for certain how such plans would have played out due as Republican governors in Wisconsin, Florida and Ohio stymied high-speed rail projects slated for their states and Republican members of Congress succeeded in eliminating much of the funding. However, plans for high speed rail still continue apace in California, which perhaps provides a hint of what might have been in store for the rest of the country. As wikipedia states:
The [California High Speed Rail Authority] released a revised business plan for the system on November 1, 2011, with a new cost estimate of $65.4 billion (in 2010 dollars), almost double the initial budget of $33 billion (in 2008 dollars) approved by [the 2008] referendum, along with a revised completion date was pushed from 2020 to 2033.
By the CHSRA's own admission, in a mere three years the budget has doubled and construction time increased by thirteen years (more than doubling), which probably goes a long way towards explaining why nearly 60 percent of the same voters who approved high-speed rail via referendum in 2008 now oppose it. This has all the makings of a classic government boondoggle, just as predicted by right-leaning observers such as Robert Samuelson

Citizens United

When the Supreme Court in January 2010 lifted restrictions on electioneering communications by corporations and unions the left was apoplectic. The New York Times editorial board quickly labeled the decision "disastrous," reliably lefty columnist EJ Dionne Jr. has called it a "catastrophe" and warned that the country will "greatly regret it" while President Obama singled it out for criticism in his 2010 state of the union address and has endorsed a constitutional amendment to overturn it. 

So what has actually transpired in the nearly three years since the decision? Has democracy unraveled? Far from it. As Josh Kraushaar of National Journal writes:
None of the Democrats’ nightmares came to fruition. The Republicans’ much-feared financial edge never materialized in the presidential campaign, as President Obama and his allies have been outspending Mitt Romney and outside groups by a healthy margin down the home stretch. Outside GOP groups spent big money on bad Senate candidates and offered muddled messages on behalf of their choices, muting their significant spending edge. And Democratic-aligned super PACs have enjoyed a decisive spending advantage over their GOP counterparts in House races, and are putting races in play that few expected to be competitive months ago. 
The reality is the Citizens United ruling has sparked renewed competition across the political spectrum. Far from creating an uneven playing field, the influx of super PAC money has allowed Romney to avoid getting buried by the president’s team financially, given the Democrats opportunities to make deeper inroads against Republicans in the House, and expanded the number of competitive Senate races to historic levels. As Democratic Senatorial Campaign Committee Executive Director Guy Cecil told The Washington Post, it’s the largest Senate playing field he can ever remember (emphasis mine).
How did all the early doom-and-gloom predictions turn out to be so off-base? Campaign finance reform advocates made the mistake of assuming that more money in the system protects the politicians in power, when in reality, it fosters competition because the money disproportionately goes to the party challenging the status quo. That’s why Democrats have benefited from super PAC spending in the battle for the House, while Republicans have been able to even up the score in the presidential contest and Senate races.
Jacob Sullum of Reason magazine has a similar take:
Even opponents of super PACs concede they have made the GOP presidential contest more competitive. “Take away the super PACs,” the Sunlight Foundation’s editorial director told Slate’s David Weigel in February, “and Santorum would have probably had to drop out after Iowa. Gingrich might have had to drop out after South Carolina.” 
Super PAC donors such as billionaire investor Foster Friess (a Santorum supporter) and casino magnate Sheldon Adelson (a Gingrich fan) enabled two of Mitt Romney’s opponents to stick it out despite his big fundraising advantage. Such patrons indirectly serve the same function as the wealthy backers who enabled Eugene McCarthy to mount his history-changing anti-war challenge to Lyndon B. Johnson in 1968, before Congress restricted campaign donations.

There is even a super PAC officially dedicated to fostering competitiveness: the Houston-based Campaign for Primary Accountability, which supports challengers to entrenched congressional incumbents. So far this super PAC, whose main backers are three rich guys, has taken credit for the retirement of Rep. Dan Burton (R-Ind.) and the defeat of Rep. Jean Schmidt (R-Ohio).
It's worth noting that the Campaign for Primary Accountability mentioned by Sullum has in fact succeeded in claiming at least one scalp, that of 16 year incumbent Silverstre Reyes in a Democratic primary. Indeed, the success of these SuperPACs -- an indirect product of Citizens United -- helps explain why even Republican incumbents are now calling for tougher campaign finance laws to help protect them from free speech.

Rather than undermining democracy, Citizens United appears to have had the opposite effect of making even more vibrant. 



An oft-heard response to this chart is that it simply reflects the fact that the economic crisis inherited by President Obama was worse than what his advisers realized at the time. It's an interesting implicit argument: the diagnosis was botched but the policy response was still appropriate. Another explanation frequently offered is that recoveries in the wake of financial crises are inherently slower and less vigorous than recessions resulting from other reasons. 

Well, there's a chart for that too:

Source: John Taylor

Defenders of the stimulus are then left with the unfalsifiable argument that, absent its implementation, the economy would have descended into a depression or that far higher unemployment would have resulted. Perhaps that's true, or perhaps the economy would have recovered on its own absent hundreds of billions of taxpayer dollars being spent, just as has occurred after pretty much every recession. 


Obamacare, aka the Patient Protection and Affordable Care Act, does not enter into full effect until 2014, and thus it will be years before the scale of its folly can be fully measured. Here's, however, what we know so far:
  • One justification for Obamacare was the need to cover people with pre-existing conditions who were uninsurable. Towards this end the PPACA created federal high-risk insurance pools, with projected enrollment by the end of 2010 at 375,000. Actual enrollment as of February 2011: just over 12,000.
  • The CLASS Act, passed as part of Obamacare and scored by the Congressional Budget Office as generating savings of $86 billion over the next decade, has come to an end after the Obama administration admitted it is unworkable
  • President Obama has been forced to sign repeal of an Obamacare provision which mandated increased tax compliance paperwork -- a tacit admission of the legislation's burdensome nature. 
  • The GAO has found an Obamacare health insurance tax credit for small businesses to be deeply flawed, which perhaps explains why only 170,300 businesses out of a pool of as many as 4 million potentially eligible companies in 2010 elected to participate in it.
  • Obamacare has resulted in health insurance providers deciding to stop selling child-only insurance policies in 34 states.
  • Companies have already started to reduce the hours of their employees in a bid to avoid some of Obamacare's burdens on business. More here.
This is far from a comprehensive list of the problems and concerns resulting from the legislation.

Cash for Clunkers

Implemented in 2009, the Cato Institute's Chris Edwards called this possibly the dumbest government program ever, listing the following reasons:
  • A few billion dollars worth of wealth was destroyed. About 750,000 cars, many of which could have provided consumer value for many years, were thrown in the trash. Suppose each clunker was worth $3,000 at a guess, that would mean that the government destroyed $2.25 billion of value.
  • Low-income families, who tend to buy used cars, were harmed because the clunkers program will push up used car prices [there's good reason to think this analysis is accurate].
  • Taxpayers were ripped off $3 billion. The government took my money to give to people who will buy new cars that are much nicer than mine! 
  • The federal bureaucracy has added 1,100 people to handle all the clunker administration. Again, taxpayers are the losers.
  • The environment was not helped. See here and here.
  • The auto industry received a short-term “sugar high” at the expense of lower future sales when the program is over. The program apparently boosted sales by about 750,000 cars this year, but that probably means that sales over the next few years will be about 750,000 lower [Edwards' prediction appears to have been borne out]. The program probably further damaged the longer-term prospects of auto dealers and automakers by diverting their attention from market fundamentals in the scramble for federal cash.
Airline regulation

During the 2000s issue of passengers being stranded on airport tarmacs received increasing attention. Rather than figuring out why this was happening, the Obama administration simply decided to start fining airlines. The result: thousands of more canceled flights, just as libertarians predicted. Full details in this blog post.


Beyond follies perpetrated by the Obama administration, events in Wisconsin have provided another lesson in public policy. When in early 2011 Governor Scott Walker proposed, and the Republican-controlled legislature passed, legislation eliminating the right of public sector unions to bargain collectively over pensions and health care and limiting pay raises of public employees to the rate of inflation, the left went berserk. 

Indeed, they were so enraged that they almost quite literally stormed the state capitol in protest. President Obama also involved himself in the affair, calling it an assault on unions. Of course, the left insisted that its reaction was not due to selfish concerns about they pay and benefits being reigned in, but rather concern for the greater welfare of the state and its impact on public services.

So what has occurred since then? Well, ABC News says the state's $3.6 billion budget deficit will have turned into a small surplus by next summer, and various localities have reported savings realize due to the reforms. Summing matters up, the center-left Washington Post editorial board opined:
So far, [Walker's] opponents’ predictions of disaster have not materialized. The state has balanced its two-year budget without tax increases, and local school districts have used their new bargaining power to save money without layoffs or significant increases in class size. Higher tax revenues, the fruit of an improving national economy, have helped. But those who voted for Mr. Walker to show approval for his policies, and not just disapproval for the recall itself, had plausible reasons for doing so.
Perhaps this also explains why voters opted to re-elect Walker in this year's recall election by a margin greater than his original victory in 2010.


In short, the left has been pretty much wrong about every major public policy issue in the past few years. They've been demonstrably and objectively wrong about the impending success of clean energy and high speed rail. They've been wrong about money in politics, cash for clunkers and the ability of government to promote economic growth via Keynesian-style stimulus. They've offered up ridiculous policy initiatives such as Cash for Clunkers and preached apocalyptic doom in response to reforms in Wisconsin. 

Lets not harbor any illusion that being confronted by such facts and the demonstrable failure of leftist policies will prompt any introspection by those who advocate for them. This is an ideology, after all, that remains unfazed by past events such as the success of transportation deregulation and welfare reform, nor by the failure of past statist adventures such as public housing or federal involvement in education. While the ideologues who advance such policies will be dissuaded by their failure not in the least, recent years may serve as a lesson to voters that will help from repeating such mistakes.

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