American Elephants


Obama Has Brought Economic Mobility to a Screeching Halt. by The Elephant's Child

The federal government, for its own convenience, divides the American people into five classes by income. One poor, three middle, and one rich — or perhaps now it’s two middle and two rich. The Occupy people, an unfortunate distraction, divided Americans up into the 1% and the 99%, the filthy rich and the rest of us.  I always assumed it was the 1% of Occupy layabouts and the rest of us, for I certainly didn’t care to be associated with that mess.

There are reasonable ideas behind these divisions, for Americans believe there should be a safety net, and the poor and disabled should have the help they need. But then everybody starts using the “classes,” and drawing sharp lines and becoming obsessed by inequality, and the “growing gap” between the rich and the middle class. They do not understand the economy as a living, changing entity.

They see the economy as a pie, and if the rich get richer, then the rest will have to subsist on less. The rich make the poor poorer. But that is nonsense. The amount of money in the economy grows to accommodate increased economic activity. In theory, when the economy needs more money, the treasury prints some. In our current situation, we borrow more and sign more promissory notes.

The current battle over “The Fiscal Cliff” is all about “the rich.” President Obama wants to tax “the rich” significantly more because he has decided that they aren’t paying their “fair share” even though we have the most progressive taxes among  industrialized countries (until France elected a socialist president who raised taxes on the rich and the rich moved out of the country). This has long been a fixed idea among liberals.

According to Timothy Noah, a senior editor at the New Republic, the inequality dates from the Reagan tax cuts. The present gap between rich and middle class is intolerable. Noah declared it indisputable that income inequality is bad not only for people on the losing end but also for society at large.

There has always been enormous mobility in the American population. Young people start out poor, find jobs, get promoted or find a better job, and with hard work some even get rich.The rich are not the same people over time, nor are the poor. Obama hasn’t managed to make people richer, though he’s tried with his subsidies for political cronies; but  he has succeeded beyond anyone’s dreams at enormously enlarging the numbers of those considered poor. Over 540,000 people have dropped out of the labor force. More than 24 million Americans who want jobs don’t have them, driving labor force participation down to 63,6%. That is his accomplishment, not, as he so often claims, Bush’s fault.

There will be another big drop in the ranks of the employed in January as company after company lays off workers as a result of ObamaCare, and the threat of sequestration hits military defense contractors. Increasing taxes on “the rich” will only add to the unemployed as small businesses, who are the usual engine of prosperity, are deprived of the funds they might have used to hire or expand. New regulations being streamed out of the EPA will do more damage to the economy. The EPA has announced that consideration of costs or job losses are not a matter that they consider. They are only protecting the environment.

To make the economy prosper, we do not need to extract more taxes from the rich, we need to add a minimum of 200,000 new jobs every month. It is not happening, and because we are determinedly pursuing the wrong policies, there is no relief in sight. Obama created this mess, his policies have cost millions of jobs and money he has extracted from taxpayers has been wasted in endless, useless green schemes. If the president wants to know why the economy isn’t recovering, he only has to look in the mirror.

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