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Hillary's statist solution

By Dr. Peter Morici
web posted October 10, 2016

The most critical question that emerged from the recent presidential debate is quite simple. Is the Obama economy as good as Hillary Clinton cracks it up to be and should the nation lunge head-first into a European-style statism to accelerate growth and offer young Americans, minorities and women more and better opportunities?

Listening to her — and the worshipping liberal media — President Obama rescued America from the worst economic crisis since the Great Depression by creating nearly 15 million jobs after unemployment peaked at 10 percent. Voters should validate his success by electing Mrs. Clinton to finish the job he started.

What she says is needed now to accomplish a utopian state is yet even more government regulation — for example, by federalizing the California Equal Pay Act, which regulates salary and hiring decisions in the Golden State down to the smallest businesses — higher electric rates to pay for massive investments in solar panels and windmills, and more taxes on successful Americans and businesses to rescue Obamacare and finance free college tuition and other new entitlements.

And Donald Trump would ruin it all by returning the nation to the failed policies of President George W. Bush. After all, according to America's would-be Joan of Arc, his deregulation created the financial crisis in the first place and tax cuts are nothing more than trickle-down economics — something modern experiences teach always fail.

It is amusing how politicians twist, spin and otherwise rewrite history to create a narrative supportive of their ideological agenda. For liberal practitioners of this intellectual alchemy, the media fact-check machine offers a pass and demagoguery becomes visionary leadership.

Mr. Bush's Treasury Department did ignore a gathering storm in the banking sector and warnings from FDIC Chairwoman Sheila Bair and others, but among the principal architects of the mess on Wall Street were former Treasury Secretary Larry Summers and President Bill Clinton, who championed repeal of Glass-Steagall in the closing years of their administration. That permitted Wall Street executives and their financial engineers to turn America's largest banks into federally insured casinos.

Now the Democrats' most vocal financial reformer, Sen. Elizabeth Warren, wants to resurrect that Depression-era law. In the interest of full disclosure, so does this economics professor — although we have too many regulations, not all regulations are bad.

That's the point — it's not about mindless adherence to liberal or conservative dogma but good judgment that makes a president an effective steward. Sadly, the Democratic politicians have been able to stick all the blame for the financial crisis on Mr. Bush and in the bargain, discredit tax cuts.

More broadly to set the record straight, President Jimmy Carter initiated the modern era of deregulation by removing federal oversight of the airlines. That unleashed competition, the consolidation of incumbent carriers and emergence of many new and more nimble airlines that dramatically lowered prices and put flying within reach of even moderate-income Americans.

Still, President Ronald Reagan arguably inherited as big a mess as Mr. Obama — an economy reeling from a jump in oil prices — thanks to Mr. Carter's unwillingness to stand up to the OPEC monopoly and to unleash America's oil-producing potential — double-digit interest rates and unemployment that peaked at 10.8 percent.

Applying what Mrs. Clinton would call sorcery — lower taxes and prudently targeted deregulation — over a period equal in length to Mr. Obama's tepid recovery, Reagan accomplished 4.5 percent gross domestic product growth and created more than 19 million jobs in a much smaller economy. Incomes rose for all groups of Americans — not just those in the technology sector and among Ivy Leaguers that staff the big banks in New York and would occupy powerful positions in a second Clinton administration.

It is hardly a leap of faith to conclude returning to simpler and lower taxes and prudent regulation — as Mr. Trump advocates — would reignite that kind of growth accomplished by Reagan, create 25 million jobs and offer America's youth, minorities and women a more promising future than they now face.

All of us would enjoy greater dignity than by enduring more government intrusion into our daily lives and lining up for more federal handouts. ESR

Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.

 

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