Growth Should Inform Debt-Ceiling Debate

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Though some conservative pundits have said that the break down between President Obama and Congress over the debt limit stems from Obama's insistence on perpetuating, at all costs, the European-style welfare state he has helped create in America, there's something even more fundamental at issue: At this juncture in human history, is the general welfare better served by redistributing wealth-or by growing it?

In the years leading up to the French Revolution, the then French Queen, Marie Antoinette, when hearing that peasants had no bread and were starving, supposedly responded: "Let them eat cake." Whether she actually uttered those words or their attribution to her is journalistic cliché, it's clear Her Highness misapprehended the plight of the peasants and paid the ultimate price for her ignorance by losing her head to the guillotine.

In the many centuries leading up to the Industrial Revolution, Europe's aggregate economic output was pretty much fixed: Being an agrarian society with slow progress in farming techniques, the land only yielded so much in crops and livestock. The Feudal System grotesquely favored the landed gentry while the peasantry suffered miserable lives, racked by disease and hunger.

And there was no upward mobility because the only real source of wealth-land-remained locked in the hands of the nobility for generations.

But the revolutions (here and in France) did not break the grip the upper class held on society's wealth; that was accomplished by the great strides made by capitalists during the Industrial and lnformation Revolutions-their innovations enormously expanded aggregate economic output.

Today, new millionaires and billionaires are minted every day, and the poor live longer lives, with more plentiful food, better health care and more creature comforts than the nobles did in the age of Marie Antoinette. Life expectancies before the Industrial Revolution averaged a mere 35 years while today they are pushing 80 in America. Many diseases have been largely conquered including small pox, the plagues and polio. Food production has increased manifold, as obesity rates among the poor prove.

In the last few centuries, the betterment of mankind's lot has resulted from overall economic output increasing-that is, growing not redistributing wealth. And that increase in output has been driven by free market capitalism-an economic system where the entrepreneur can only succeed by serving the needs of others.

So while Marie Antoinette failed to appreciate that in her time there was a fixed output that needed to be (but was not) fairly distributed, President Obama has failed to appreciate that in his time, output is not fixed-but rather dynamically increases over time-and by redistributing it (in his view) "fairly," one only insures that future increases in overall output will be severely diminished.

Obama's failure to comprehend this fundamental point-that today's wealth is not fixed, but rather grows dynamically, and that mankind's overall betterment can only be achieved through the growth, not the redistribution, of wealth-is not just some highbrow philosophical point.

It colors the President's daily thinking-as it now does in the debt debate-and leads him to some terribly wrong conclusions.

For example, just last month, Obama blamed the high unemployment rates on ATM machines and airport kiosks. But those technological breakthroughs have created wealth: by freeing up time for millions of Americans who would otherwise be waiting in line to get cash or their tickets, more of everything is produced. Outlawing them would produce some jobs for bank tellers and ticket agents, but millions more would be lost as billions of hours otherwise available to job creators (and their employees) would be lost standing in line.

And if Obama's theory were sound, why stop at ATM's and airport kiosks? Why not outlaw combines and tractor drawn plows? Going back to horse-drawn plows and swinging a sickle in a country of over 300 million would require the employment of tens of millions more workers on our farms, and our unemployment problem would be solved in the stroke of a lawmaker's pen.

Obama betrayed his economic illiteracy back on the campaign trail when he told Joe the Plumber: "Joe, you need to spread the wealth."

Mr. President: You don't. You need to grow it, and the best way to grow it is not to spread it, but rather to let people keep the fruits of their own labors.

Obama's confusion leads to his insisting on "a balanced approach"; or as he put it in his most recent press conference, House Speaker John Boehner's plan "essentially asks nothing of corporate jet owners, it asks nothing of oil and gas companies, it asks nothing from folks like me who've done extremely well and can afford to do a little bit more."

These words betray Obama's misunderstanding: he thinks we are still living in a time where wealth is fixed but not fairly distributed.

Regrettably, where such a profound misunderstanding is held by a man with the power of the Presidency, it can easily become a self-fulfilling prophesy: Obama's relentless efforts to "spread the wealth" through increased taxes and spending on welfare, sap the private sector of resources and entrepreneurs of motivation, and thus thwart the robust growth and consequent enhancement of the general welfare that would otherwise ensue absent those policies.

The Constitution permits the government to promote the "General Welfare" not a "Welfare State." Ironically the latter is inimical to the former.

If he does not to want to end up at the guillotine-politically speaking-Obama needs to understand that the working class folks of today have baked their cakes and would like to keep them.

 

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