Much of the interpretation of Standard & Poor’s downgrade of U.S. debt focused on the “dysfunction” of the U.S. political process. And certainly the S&P — which, let’s not forget, contributed to the 2008 financial crisis by failing to downgrade bad mortgage debt — invited such analysis by citing “the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate.”
Yes, the confrontation over raising the debt ceiling was ugly, but not nearly as ugly as the underlying policies that are carrying us to the brink of insolvency. This focus on the contentiousness of the debate, rather than on debt, is dangerous and obtuse. It’s reminiscent of those liberals during the Cold War who were more upset about someone being called a communist than about someone actually being a communist.
Standard & Poor’s may have been right for the wrong reasons. The real reason for doubt about our future capacity to pay our debts is that one of our two political parties is wedded to the social/democrat agenda that is, even as we speak, bringing Europe down.
It is our misfortune that at a moment of heightened economic fragility, we elected a Keynesian liberal who thought of the private sector as a bottomless piggy bank for his redistributionist schemes. Rather than bolster the economy in the early months of his presidency and in the depths of the recession, President Barack Obama further burdened it with Obamacare, the Dodd-Frank Act and a truly punitive regulation agenda.
For example, The Wall Street Journal reports that the Obama administration has intensified its pursuit of drug company executives: “The campaign against drug-company CEOs is part of a larger Obama administration effort to pursue individual executives blamed for wrongdoing rather than simply punishing companies.” The Obama raiders at the Food and Drug Administration interpret wrongdoing very broadly.
Henry Miller at Forbes notes that the FDA now “specifies that a corporate officer can be convicted of a misdemeanor for corporate violations if he was in a position to detect, prevent or correct an action that caused a violation of law — even if the person had no knowledge of the action. That is, intent is not required. Penalties for a convicted executive can include forfeit of profits, fines and a prison sentence.”
Multiply that across the hundreds of agencies and departments that regulate U.S. business and you have a substantial chilling effect on risk-taking and entrepreneurial activity. The private sector has been bullied and burdened into quiescence. The public sector, which depends upon a vibrant private economy, has gone on a bender without the slightest nod toward reality.
It isn’t the contentiousness of debate in Washington that has depressed and demoralized the country; it is the Obama administration.
A thought experiment: Obama is knocked out cold playing basketball. When he awakes, he is unhurt but sees the world through new eyes. Recognizing that the economy desperately needs a boost and that the country he loves is staggering under the weight of excessive government, he proposes a new series of policy initiatives:
» 1. Repeal Obamacare and replace it with a market-based, competitive health-care system.
» 2. Reduce the corporate tax rate from 35 percent (the second highest in the world) to 15 percent and close loopholes.
» 3. Require all agencies and departments of the federal government to perform an “economic impact” analysis of any new rule or regulation and examine all existing regulations in that light.
» 5. Privatize Social Security along the lines Chile adopted (exempt current retirees and those older than age 50).
» 6. Abolish Medicaid and give block grants to states to care for the medical needs of the poor.
» 7. Reform the tax code to simplify and streamline it. Repeal loopholes and exemptions, and reduce rates across the board.
» 8. Abolish the Department of Education, which has spent $1 trillion in the past 30 years while student scores have remained unchanged.
» 9. Promote offshore drilling in the United States rather than Brazil.
Does anyone doubt that if some of the above agenda items were successfully enacted that the recovery would dwarf all previous bounces? The vitality of the American economy is still there — it’s just suppressed, as it was during the Great Depression.
It wouldn’t require such an ambitious agenda to restore American growth and financial health. A simple repeal of Obamacare and a reduction in federal spending to 2008 levels would probably do the trick.
But all of the talk about how dysfunctional our political system is just obscures the truth — that our problems stem from mistaken policies, not a broken system.