President Obama's Legacy Of Economic Failure
Upon returning from the winter holidays, Congress launched the new year with a debate over raising the minimum wage and extending unemployment benefits. President Obama is an enthusiastic supporter of these efforts, and no doubt, his upcoming State of the Union address will focus on the need for continued government interventions to shore up the lagging economy as well as addressing concerns over persistent income inequality.
Unfortunately, this debate is a distraction from the larger question of restoring economic growth and the abject failure of the administration's various stimulus programs to boost the economy. Rather than promoting economic prosperity and expanding the economic pie, the administration's economic legacy will be viewed as an attempt to divvy up the existing pie, while saddling the economy with massive debt levels and a rising tide of regulation that has stymied even the best of entrepreneurs seeking to expand economic output and create new jobs.
Since taking office in 2009, it has been tough sledding for the economy. Congress and the administration have increased the federal debt held by the public from $7.5 trillion to $11.2 trillion in 2012. To clarify, in terms of percent of gross domestic product-a measure of the nation's total output-the federal debt has grown from 54 percent of GDP in 2009 to 72 percent of GDP in 2012, according to the Congressional Budget Office. And the Federal Reserve's aggressive quantitative easing has seen its assets increase by more than $3.7 trillion-much of it composed of questionable mortgage-backed securities. Yet Americans still face a palsied economy, with an unemployment rate of 7.3 percent, roughly where it was in 2008. From "shovel ready" spending projects (including the Solyndra fiasco), to bailouts of banks and automakers, the administration's economic policies seem intent on recreating the world as it was before the financial collapse.
But economies are dynamic and the world is changing at an increasingly rapid pace, thanks to advances in the technology sector. It remains unclear whether the Wall Street financial institutions that benefited handsomely from the bailouts are structured optimally for today's markets. Rather than simply restore these institutions under the overwhelming new Dodd-Frank regulatory regime, a better approach may have been to identify unnecessary distortions and government mandates that helped shape the financial institutions in the first place. And rather than lose billions in taxpayer dollars bailing out Chrysler, perhaps it would have been more appropriate to have markets and the bankruptcy courts address this failing company. For all the administration's efforts, Chrysler today is an Italian car company, an outcome that may have been achieved without federal intervention.
Rather than tinkering with the economy at the behest of companies with powerful political interests, Obama and Congress need to address the underlying structural impediments that limit opportunity and hamper job creation. But sector by sector, the administration appears bent on imposing the regulations that thwart entrepreneurial activity and economic growth. ObamaCare, the jewel of Obama presidency, is fraught with problems that have many small businesses questioning their ability to expand or provide health care for their employees. While the online rollout proved problematic, there is much more to this law that will pose problems for both consumers and businesses. From the insurance company bailouts baked into the law to the low enrollment numbers in the exchanges, ObamaCare poses a real fiscal challenge for America's taxpayers.
And the regulatory ramp-up doesn't stop there. The EPA is moving forward with aggressive new rules to reduce CO2 emissions at power plants, and a horde of federal agencies are working to rewrite regulations for the financial sector. To date, only 40 percent of the rules have been written, expanding the law from 848 pages to 13,789 pages. All told, Wayne Crews of the Competitive Enterprise Institute finds that federal agencies will issue 56 regulations for every law passed in 2013-at total of 3,659 rules and regulations.
Readers should not be distracted by the coming sideshow over income inequality. The larger question is developing a pro-growth policy agenda that promotes economic prosperity. This includes addressing the looming federal debt crisis and the challenge of expansionary entitlement programs. At the same time, regulatory burdens must be addressed, perhaps by imposing a regulatory budget that imposes a limit on the annual cost of regulations, or through a regulatory sunset program that forces agencies to identify and retire outdated but costly regulations. Ultimately, it is economic growth and entrepreneurs creating jobs that pull people out of poverty. The real challenge for Washington is to unleash these entrepreneurial forces rather than bicker over spending programs.