One of the main factors determining incumbent election success is economic performance. When disposable income is rising and people feel good about the future, it is difficult for an incumbent to lose. So why, then, is Obama pursuing policies that are undermining growth? Sure, it is in the interests of the left in the long run to create more dependency on government. That’s one of the reasons why there is nothing resembling a free market party in most European nations. But America isn’t at that stage yet (thankfully). And as John Stossel writes, Obama’s bad government policy is causing joblessness and uncertainty. This is going to hurt Democrats this November and may linger until 2012, when Obama would suffer the consequences (in the unlikely event that Republicans put forth a semi-decent candidate).
Why isn’t the economy recovering? After previous recessions, unemployment didn’t get stuck at close to 10 percent. If left alone, the economy can and does heal itself, as the mistakes of the previous inflationary boom are corrected. The problem today is that the economy is not being left alone. Instead, it is haunted by uncertainty on a hundred fronts. When rules are unintelligible and unpredictable, when new workers are potential threats because of Labor Department regulations, businesses have little confidence to hire. President Obama’s vaunted legislative record not only left entrepreneurs with the burden of bigger government, it also makes it impossible for them to accurately estimate the new burden. In at least three big areas — health insurance, financial regulation and taxes — no one can know what will happen. …Nothing more effectively freezes business in place than what economist and historian Robert Higgs calls “regime uncertainty.”
In the business world, which is ultimately where wealth is produced, the major source of pessimism comes from:
The foregone conclusion that incentives to produce for both rich and poor Americans will not go anywhere but DOWN from here.
Productive people will be taxed further, while perhaps at the same time, less productive people will be further subsidized. With decreased incentives to produce, future economic performance cannot but decline. After all, a country’s prosperity is almost by definition equal to the total value of goods and services it produces. There is no escaping that reality. Even the extra 5% that the rest of the world lends the US (lent against future growth) so that Americans can live a mere 5% beyond their means is essentially a pittance. And even that extra 5% will become increasingly hard to obtain from foreigners as the US stagnates to the low growth levels associated with decreased incentives to produce.
The bottom line is:
A nation’s prosperity = the total value of goods and services it produces.
With decreased incentives to production, prosperity cannot but follow the downward trend.
This recession is different because it was created by insufficient collective control and insufficient central planning of the economy. Economic calculations indicate that it will likely last at least another 6 years, …until the 2016 election.