Last week I presented an admittedly simplified explanation of the two economic theories that are represented by the candidacies of Barack Obama and Mitt Romney. I characterized them as “bottom-up” for Obama and “top-down” for Romney.
To briefly restate the difference between the two, the bottom-up view holds that a vibrant economy grows from the bottom up, with consumer demand pushing growth. The top-down approach sees an economy that works best when those at the top have incentives to create new businesses.
Both theories have been tested over the recent history of the country, and both have adherents who claim that their theory works. I am an unabashed proponent of the bottom-up approach, but I acknowledge that part of my reason for propounding that perspective, apart from the empirical evidence that it works, is that is also addresses a moral issue I see in the equation (to wit: poverty is destructive of the human spirit and should never be countenanced in a just society).
But what if a country’s economy is essentially uncontrollable? What if the ups and downs of the economic cycle are as imponderable as the patterns of weather that develop across the globe. Yes, we can predict the weather from one day to the next, and yes, we know that certain regions have climates that are continuous over the centuries. But can we know on September 13 what the weather in downtown Sacramento will be on October 13? Moreover, can we do anything to change what it would otherwise be a month later in a given locale?
The answer, of course, is no; we can’t predict the specific weather for a specific locale more than a week or so in advance, and we can’t control what that weather will be.
What if the economy of a given society is much the same in terms of its unpredictability and its uncontrollability?
Well, first of all, let’s acknowledge that very real possibility. It isn’t that the forces that determine economic cycles are unknowable any more than the factors that determine the weather a city will experience on a given day are unknowable. But the theoretical ability to know does not by any means equate to the actual ability to know or, even more problematic, to control.
And it may just be that in a complex society such as ours, with so many identifiable and unidentifiable factors and influences at play at any given time, the ability to control or even guide and direct the economy is all but impossible.
In other words, it may well be that there are either too many factors that can increase or decrease employment, or keep prices stable, or push wages higher, or give incentives for new business development, or discourage corporate mergers, or lead to increased research and development, or promote good management techniques.
And just think about that list for a moment. Its length alone suggests how foolish it might be to focus on any one factor or to embrace any one theory as superior to another.
“Economy” is a word we use to describe, among other things, the flow of money in a society. If the amount of “money” (I use the word loosely here to mean all of the assets that have value and can be used to purchase and trade in goods and services) in a society is constant (admittedly another imponderable, since both the federal government and the federal reserve have the ability to create additional “money”; and both do with some degree of regularity), then whether that amount is spread evenly over all the individuals in that society (as in a purely communistic society) or is allowed to go wherever it may (as in a purely anarchic society) will depend on the degree to which governments seek to control its path.
But if the path that the society’s “money” takes is uncontrollable, then the debate over what method of control should be in place becomes an irrelevancy, or, to put it another way, a waste of time.
Now let’s put all of this theoretical imagining in a political context.
When Obama became president the nation’s economy was in the toilet. Many knowledgeable economists were fearful of a second great depression. Others thought the economy would never recover to the levels it had been before the fall. Still others were convinced the recovery would be very long and very slow.
Under Obama (whether due to his leadership and policies, or in spite of them, or neither) the economy did not descend into a second great depression. It has, instead, been on a very long and very slow recovery. Whether it will ever return to the levels it had been at before the fall is still uncertain, although both presidential candidates (on this point they most certainly agree) are convinced it will.
So, if we put all of this theoretical conjecture and the reality of what has happened under the Obama presidency aside, what are we left with? As to the economy it really turns on which side of the equation you are on. That is, do you favor an economic model that promotes advantages for the wealthy, thereby allowing them to become wealthier at the expense of those below them on the food chain? Or do you favor an economic model that requires greater financial sacrifice from the wealthy, thereby providing from them the means to assist those lower on the economic food chain?
It may well be that neither approach will have much of an impact on the development of the economy, for the theoretical reasons I’ve just detailed. But even if so, which of the two is adopted can still significantly impact the lives of those directly affected.
A second Obama term promises greater redistribution of wealth from the top down. A Romney presidency promises greater protection of the wealth for those at the top and more incentives for those at the top to acquire greater wealth.
Neither may exert any real control over the path of the nation’s economy, but both can dramatically affect the lives of the nation’s citizenry.
Pick your poison.
If, as is taught in economics, 70% of the economy is based on consumer spending, I have trouble understanding how more austerity is going to revive our economy and jobs. And how can employment be increased (ever?) with increasing automation and free trade agreements that send jobs out of the country to China and other low wage countries? How is the deficit ever going to be decreased unless unemployment is lessened (or employment is increased?) – Unemployed people don’t pay income tax – or, if they do, they pay less income tax and less Social Security. The naivete of so many of our well-meaning citizens scares me to death. And the prospect of Romney being elected and selecting members of our Supreme Court scares the hell out of me. If Romney is elected and appoints other Justices, the Supreme Court is bound to overturn Roe v Wade – and women will be returned to the “coat hanger” era or to being adjudged insane so as to be able to obtain an abortion (See California law prior to Roe v Wade).
As Alice correctly points out, employment is the fundamental issue in the U.S. economy, not the “fairness” of the tax code. Obama’s plan to raise taxes at the top does nothing to create jobs.
Obama is the most anti-business President we’ve ever had. If you can’t believe your own eyes, then listen to the U.S. Chamber of Commerce, or Jack Welch, or Steve Wynn, or Steve Jobs, or ask Boeing, who he sued when they tried to build a non-union plant in North Carolina (quietly dropped in disgrace).
Obama has also been a disaster on energy. He reduced oil production on the federal lands he controls (private production is up), he stopped the Keystone pipeline, and his newly appointed head of the NRC just shut down all nuclear power applications. Not only does this make us more dependent on Middle Eastern oil, it kills jobs for thousands of small sub-contractors.
The Labor Participation rate has gone straight down every year under Obama. That is the percentage of working age Americans who are working. Who is unemployed? The top 10%? NO, it’s everyone else. Obama has caused terrible pain and suffering to the middle class and the lower income class because of his inaction, inept action, and ideological social engineering.
Many people believe that states should decide the parameters of abortion and the return to “coat hanger” abortions is a hysterical canard.
If people vote on pro-choice or gay marriage, we will continue to have a clueless President who doesn’t know how to create jobs, but hey, he gives great speeches .
Obama inherited this mess – he, alone, is not responsible.
On October 15, 2008, Anthony Faiola, Ellen Nakashima, and Jill Drew wrote a lengthy article in The Washington Post titled, “What Went Wrong”.[55] In their investigation, the authors claim that former Federal Reserve Board Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and SEC Chairman Arthur Levitt vehemently opposed any regulation of financial instruments known as derivatives. They further claim that Greenspan actively sought to undermine the office of the Commodity Futures Trading Commission, specifically under the leadership of Brooksley E. Born, when the Commission sought to initiate regulation of derivatives. Ultimately, it was the collapse of a specific kind of derivative, the mortgage-backed security, that triggered the economic crisis of 2008.
While Greenspan’s role as Chairman of the Federal Reserve has been widely discussed (the main point of controversy remains the lowering of the Federal funds rate to 1% for more than a year which, according to Austrian theorists, allowed huge amounts of “easy” credit-based money to be injected into the financial system and thus create an unsustainable economic boom), there is also the argument that Greenspan’s actions in the years 2002–2004 were actually motivated by the need to take the U.S. economy out of the early 2000s recession caused by the bursting of the dot-com bubble—although by doing so he did not help avert the crisis, but only postpone it.
While I am not totally pleased by Obama, he inherited this mess. Bill Clinton and Sr Bush pushed the Financial Modernization Act which eliminated the Glass Steagall Act which was designed to keep the banks from gambling with tax payer insured deposits. Clinton signed NAFTA which started the trend of sending jobs out of the country (even tho’ he gave a great speech at Democratic convention).
The national debt that the Teapartiers keep yelling about could be at least partially alleviated if the wealthy 1% and the corporations (that send jobs overseas) paid their fair share of the income taxes – after all, they earn most of the money so why shouldn’t they pay most of the taxes. Some corporations paid as little as 5% corporate tax so I don’t know why they keep crying about the tax rate – they AREN’T PAYING THE TAX RATE.
And obviously Tom James is completely oblivious to women and their unique physical problems. Unwanted children are economic problems. Conservatives want government out of their businesses – but want government to control women’s bodies (except when they want a subsidy (hand out) – like farm subsidy. And those who are so concerned about pro life are only too willing to have these same grown fetuses become boots on the ground in senseless wars (Viet Nam and Iraq are only two examples). Our politicians have never seen a war they didn’t want us (the 99%) to participate (fight) in and pay for. Wars cost $$$ – lots of it – but 1% want to have others fight on front lines and pay for it. Not only are wars expensive, but consider the pain and suffering of those who have been wounded and lost arms and legs and have psychological problems from the wars we don’t need.
Obama is cognizant of global warming – that is probably why he is trying (unsuccessfully) to emphasize solar, wind and geothermal – renewable energy. And Congress (both parties) are at least partially to blame (along with automation) for the present high unemployment. One person commented that if he had enough money, he would hire a lobbyist – lobbyists are the only persons that most in Congress listen to. Campaign finance reform is badly needed if we are not to lose our democracy – if we haven’t already lost it.
While Obama’s medical care is far from satisfactory, at least most will have medical care. Of course Romney and Ryan want to turn Medicare into a voucher system – but what happens when voucher amounts won’t buy insurance????? No or not enough care. They also want to eliminate Soc Sec – so hope all of you have enough $$ to retire on – because pensions can be wiped out (and are) by corporations filing bankruptcy – also dump pensions on PBGC.
There is plenty of bipartisan blame to go around.
Enough with “he inherited this”. All Presidents inherit a host of problems. With regard to the economy, Obama was hired to fix it, and it’s his job to fix it. Instead, jobs continue to go away and the tax receipts with them.
His policies have strangled business. At best he has prolonged the problem he inherited, but the labor participation rate says he made it worse.
As an aside, Obama has been been a disaster on energy. Words, words, and more words while he kills ALL energy development other than wind and solar which will NEVER solve our energy problems.
Obama did inherit economic problems from Bush and the deregulation of the financing industry not to mention war in Iraq (wars cost money – and conservatives do not want to fight “boots on ground” nor do they think that they should pay taxes (haven’t been for 12 years and job picture is still grim). Plus global warming is reason for alternative energy – please see pictures of Artic where ice is melting. Fracking for natural gas is contaminating water supply. What is your proof that wind and solar will never solve energy problems??? Which of his policies have strangled business? Name all specifically. Business won’t hire or expand unless there is demand for products – demand backed up by ability to pay for products. And the tea partiers have stopped almost every thing Obama has wanted to do. Of course tax receipts are down – unemployed and 47% don’t pay income taxes but they pay Soc Sec Tax, Sales Tax (almost 10% in California). Please watch something besides Fox News.