The president has investors scared stiff.
We recently saw lots of sit-down strikes and demonstrations — the various efforts in Wisconsin, the Occupy movements, and student efforts to oppose tuition hikes. None of them mattered much or changed anything. There is a sit-down strike, however, that has paralyzed the country and has been largely ignored by the media.
Most economists since 2009 have been completely wrong in their forecasts, reminding us that their supposedly data-driven discipline is more an art than a science. After all, a great deal of money is invested and spent — or not — based largely on perceptions, hunches, and emotions rather than a 100 percent certainty of profit or loss. And the message Americans are getting is that the Obama administration is hostile to investment and business, and thus should be waited out.
Barack Obama’s original economic team — Austan Goolsbee, Christina Romer, Larry Summers, Peter Orszag — have long fled the administration, and have proved mostly wrong in all their therapies and prognostications of 2009. Despite the stimulus of borrowing over $5 trillion in less than four years, near-zero interest rates, and chronic deficits, the U.S. economy is in the weakest recovery since the Great Depression and mired in the longest streak of continuous unemployment of 8 percent or higher — 38 months — since the 1930s. The Mexican economy is growing more rapidly than is ours. Why did not massive annual $1 trillion–plus deficits spark a recovery, as government claimed an ever larger percentage of GDP, and new public-works projects were heralded by the administration?
Much of the answer is found in the collective psyche of those Americans who traditionally hire, purchase, or invest capital. An economy is simply the aggregate of millions of private agendas, of people sensing and reacting to a commonly perceived landscape. Yet since January 2009, that landscape has been bleak and foreboding.
Take the debt. The problem is not just that Obama has borrowed $5 trillion in less than four years, but also that he has offered few plans to reduce the ongoing borrowing and none at all to pay down the debt. Instead, he has demonized as heartless anyone who opposes his serial $1 trillion annual deficits. That demoralizes the public, who privately know that they cannot buy everything they might wish, and who expect that government will not, either. In the business community, there is the unspoken assumption that, at some point very soon, either taxes will have to rise, the currency will have to inflate radically, or debts will have to be renounced — all equally foreboding for those with capital. Some even believe that Obama is not a haphazardly profligate spender but a deliberate one who welcomes the radical measures on the horizon to stave off bankruptcy as laudable in themselves.
Take energy. We are reminded that the ANWR field in Alaska — and others far greater there — are still off limits. So too are over 25 million barrels off the California coast. Federal leases have been vastly curtailed in the Gulf of Mexico, off the Eastern Seaboard, and in the American West. The cancellation of the Keystone pipeline, which would have kept billions of U.S. petrodollars inside North America, coupled with Solyndra-like federally subsidized solar and wind boondoggles, sent the message that the government would oppose energy that was profitable and subsidize sources that were not.
Worse still, in less than four years, we have now an entire corpus of Obama-administration quotations blasting fossil-fuel energy. The president himself promised skyrocketed energy prices with his now-stalled cap-and-trade proposals. He mused that new regulations might bankrupt coal-burning companies. He ridiculed the idea of increasing oil and gas supplies by more drilling and instead pointed to the importance of proper tire pressure and regular tune-ups and spoke of tapping America’s vast algae resources. Secretary of Energy–designate Steven Chu mused that he wanted gas to reach European price levels, apparently in hopes of curbing fossil-fuel consumption while making alternative sources of energy more competitive. Interior Secretary Ken Salazar, who as a senator had claimed that even $10-a-gallon gas would not prompt him to open up federal lands for oil and gas leases, shrugged that there is no way of knowing whether $9-a-gallon gas is on the horizon. More recently, it was disclosed that an EPA regional administrator, Al Armendariz, had bragged of trying to “crucify” and “make examples” of gas and oil companies in the manner that the Romans did to conquered peoples.
The current renaissance in American oil and gas production is primarily a private effort to drill on private land, despite rather than because of the Obama administration. That the Obama administration takes credit for private companies’ finding new sources of low-priced oil and gas, despite government hopes that they would fail, only heightens the sense of private-sector cynicism and pessimism. The result is that “speculators” do not believe the oil companies will be given access to enormous energy reserves on public lands — and that, to the degree they drill new wells on private lands, a horde of apparatchiks from academia such as Mr. Armendariz will make life difficult for them.
Take also new mandates. The problem with Obamacare is not just that it represents a vast new entitlement at a time of record annual deficits, but that no one knows how much it will cost employers to enroll their employees. Potential hirers instead suspect only that their health-care expenses will spike, and those who are politically connected for that very reason have sought and obtained exemptions from the Obama administration: All companies, liberally owned or not, want out, not in — exactly the opposite of what the administration forecast. The public likewise suspects that Obamacare will come to resemble the hated TSA they see at airports — lots of employees milling around, little guarantee that the job at hand is done well, and an evident resentment of federal employees toward the public they serve. Will X-rays for our kidneys resemble the sort of scanning process and pat-downs we endure at airports? And the more the government seems to take over private enterprise — the car bailouts, the mortgage industry, student loans, wind and solar partnerships — the more private enterprise is frightened of being the next small guitar company or the next Chrysler creditor. Government seems now to be not only incompetent but arrogant, as if its vast recent growth ensured its impunity from oversight — whether in the GSA scandal, the Secret Service debacle, or the Fast and Furious mess.
Take wealth. There is a crass war against wealth. Obama has ridiculed those who have done well as the one-percenters, the fat cats, the corporate-jet owners, and the ones who don’t pay their fair share or don’t know when to stop making money. But the problem with this boilerplate populism is that it does not emanate from the muscular classes and is not aimed uniformly at the proverbial rich. The first family vacations in Martha’s Vineyard, Costa del Sol, Vail, and Aspen, not at Camp David; and the lieutenants in this class warfare are themselves one-percenters, an Al Gore, John Kerry, or Nancy Pelosi. Likewise, who determines whether to go after the Koch brothers or Warren Buffett; is this week’s enemy to be Exxon or Google? Why is the non-income-tax-paying GE under Jeffrey Immelt apparently approved, while a CEO on Wall Street is deemed a fat cat? Is it give to Obama and you are canonized; give to Romney and your name is posted on an enemies-list, pro-Obama website?
The only thing more discouraging to investors than class warfare generally is a certain type of class warfare: a hypocritical crusade that emanates from the upper classes and selectively targets enemies on the basis not of wealth, but of the degree to which they have failed to buy exemptions with their wealth. Meanwhile, on the other end, the message is more weeks of unemployment insurance, vastly more food-stamp recipients, and constant promises of mortgage-debt relief, credit-card-debt relief, and tuition-debt relief. If one were to dream up a perfect way to destroy incentives on both the top and bottom ends, one could do no better than what we have seen since 2009.
The net result is that those with capital, even if they are small businesses, do not believe that the Obama administration likes them. They feel that regulations will increase, that taxes will increase, that energy costs will increase, and that as they pay more to government and keep less, government will nevertheless become even more arrogant and inefficient — and they will become even more demonized. When people pay over 50 percent in payroll, federal, state, and local taxes and are still caricatured as “not paying their fair share,” a sort of collective shrug follows and bodes ill for the economy at large. One need not be liked to make money, but the constant presidential harangues finally take their toll in insidious ways.
Countless times each day, a contractor chooses to hire only a part-time electrician, a CEO hoards cash rather than opens a new plant, a renting family declines to buy a reasonably priced new house, an indebted graduate heads home to kick back and wait until “something turns up,” and an unemployed worker wonders whether it is not wiser to receive all two years of federal benefits before reentering the work force.
I don’t know whether Mitt Romney’s economic package will bring instant prosperity. But I suspect that the fact alone that it is not what we have seen and heard for the last four years will unleash a pent-up energy of the sort we have not seen in a long time. In short, President Obama has achieved the impossible — he has convinced millions of rational, profit-minded Americans eager to invest, buy, and hire that he doesn’t worry much whether they do.
Victor Davis Hanson is a classicist and historian at the Hoover Institution, Stanford University, and the author most recently of The End of Sparta. You can reach him by e-mailing email@example.com.