Obama's Solution: Cargo Cult Economics

A good friend lives in Pittsburgh. We’ve know each other since the early 80s when we commanded rifle companies in the same battalion. Every year we get together a couple of time to catch up and maybe tell some new lies. A couple of years ago we were returning from an outing to Bushy Run Battlefield by way of Braddock, PA. Braddock was off the beaten path but I wanted to see what the battlefield looked like.
It was a depressing drive. One nondescript steel town ran into another without transition. The factories were shuttered. Gates locked. Storefronts covered with plywood. Those that weren’t boarded up represented the lowest imaginable rungs of goods and services. Nail salons. Tattoo parlors. Cheap shoes. Cheaper clothing.


And then there it was. A corner building in a dystopic urban setting and in it was an “arts center.”
“You’ve got to be [defecating] me,” I said, “an arts center in this war zone.”

“No,” my friend replied, “this is cargo cult economics. Because middle class areas have art centers they think if they build an arts center here it will make it middle class. They don’t realize that arts centers are created by people with wealth, they don’t create wealth themselves.”

That, in a nutshell, is what the Obama Administration has offered us during the long Stygian night of past four years. And that is what he offered us more of last night.

Savor this bit of nonsense from Obama’s speech last night:

Now, our friends down in Tampa at the Republican convention were more than happy to talk about everything they think is wrong with America. But they didn’t have much to say about how they’d make it right. (Cheers, applause.) They want your vote, but they don’t want you to know their plan. And that’s because all they have to offer is the same prescriptions they’ve had for the last 30 years. Have a surplus? Try a tax cut. Deficit too high — try another.

Feel a cold coming on? Take two tax cuts, roll back some regulations, and call us in the morning. (Cheers, applause.)

Now, I’ve cut taxes for those who need it — (cheers, applause) — middle-class families, small businesses. But I don’t believe that another round of tax breaks for millionaires will bring good jobs to our shores, or pay down our deficit. I don’t believe that firing teachers or kicking students off financial aid will grow the economy — (cheers, applause) — or help us compete with the scientists and engineers coming out of China. After all we’ve been through, I don’t believe that rolling back regulations on Wall Street will help the small-businesswoman expand, or the laid-off construction worker keep his home.


Now this is cute, in a very juvenile sort of way; it sacrifices truth to rhetorical devices but truth is something this Administration has sacrificed long ago.

The fact is that cutting taxes and rolling back regulations will do exactly what Obama claims it will not and what Obama’s policies cannot.

Millionaires do not bury their wealth in Mason jars in their back yard. They don’t, as a rule buy gold coins or bullion. They invest their money in things that create more wealth for them. Without going all George Bailey placing more money in the hands of producers, and taking more out of the hands of government, invariably creates new jobs.

On the other hand, sinking federal dollars into keeping teachers, or policemen, or firemen on the payroll when the local community cannot afford them is a misallocation of capital. Subsidizing student loans, especially in a way that encourages colleges, banks, and students to increase costs and the debt taken on by students does nothing to help the economy. Helping the laid off construction worker keep his house is laudable but it in no way contributes to improving the economy.

And we can go on and on. For instance:

So help me. Help me recruit a hundred thousand math and science teachers within 10 years and improve early childhood education. (Cheers, applause.) Help give 2 million workers the chance to learn skills at their community college that will lead directly to a job. Help us work with colleges and universities to cut in half the growth of tuition costs over the next 10 years.


Again, he has this completely backwards. Education does not create an economy that is stultified by high taxation and burdensome regulation. The availability of jobs creates the need for education, not vice versa. Mohammed Atta, the leader of the 9/11 hijackers, became radicalized not because of a lack of education but because he could not find a job in Egypt’s ossified economy. The core of international terror groups are not the poor and uneducated but rather the educated and disappointed. If you doubt that is a problem here, I recommend you visit the “we are the 99%” website and seriously read some of those stories. Educated people are a necessary element in a prosperous society but they are not sufficient to create it. Educated people with no hope for success are not the basis for a stable society.

Likewise, a healthy middle class is the product, not the cause, of a growing and healthy economy. But the Democrats believe that a middle class can be created via a governmental deus ex machine regardless of the economic conditions imposed by the government upon society.

Lest you think I’m being unfair let’s look to their own words:

Representative Nancy Pelosi at the DNC:

Democrats believe we must create jobs, not protect the special interests; build the economy from the middle out, not the top down.

Senator Kay Hagan at the DNC:

President Obama has a “plan to keep building an economy that grows from the middle not, not the top down. That’s what we need


Elizabeth Warren at the DNC:

We know that the economy doesn’t grow from the top down, but from the middle class out and the bottom up.

Representative Chris Van Hollen at the DNC:

Don’t buy the lie that asking the wealthy to contribute more is about punishing success. It’s about asking them to share responsibility for reducing the deficit. It’s about growing the economy-not from the top down, but from the middle out and bottom up, making success possible for all Americans.

And, of course:

Barack Obama:

“The economy doesn’t grow from the top down, but from the middle class out & the bottom up. That’s how we create jobs and reduce the debt.”

We’ve all heard the story of primitive villagers on remote South Pacific Islands who received largesse from Allied cargo planes during WW II and now they worship mock ups of C-47s and wait, in vain, for free stuff to rain down on them from heaven.

What Obama is advocating is applying the cargo cult mentality to our national economy. He believes prosperity can be created by simply aping the trappings of a prosperous economy. In a prosperous economy families send their children to college, therefore if you send children to college you get a prosperous society. A prosperous society uses bird killing wind turbines and hideously expensive solar panels to create energy (rather than that yucky and so déclassé fossil fuels), therefore we will build bird killing wind turbines and hideously expensive solar panels and we will be prosperous. This idea is doomed to fail for the same reason that balsa and bamboo C-47s on remote tropical islands don’t bring prosperity and an arts center will not restore a dilapidated mill town.



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