Saturday, June 11, 2016

It's Still the Economy Stupid - Part 1

Hillary Clinton's Views On Fixing the Economy

Roma Downey Doing the Big Reveal
Hillary Clinton: On a Mission From God
Touched By An Angel was a popular television series that ran from 1994-2003.  Basically it was feel good show about an angel, played by Roma Downey, who would intervene in the life of someone who needed help.  The payoff scene was always the same: Downey would start glowing in a supernatural way and explain that she had been sent by a loving and caring God to help that individual.  The reaction of the person being helped was always the same: awe, wonder and gratitude.

Watching the coverage by CNN on Hillary Clinton's victory speech reminded me of that payoff scene.  When I saw the holy glow around Hillary, I was congratulating in my mind the brilliant sound and light crew who were able to pull that off.  I was more than a little disappointed that it was instead accomplished by CNN's own video editing.  CNN's fawning reaction and manipulation of things is what many of us have come to expect and many on the left are blind to, as they hypocritically decry the "bias" of Fox News.  The reporting was filled with the same awe, wonder and gratitude of a Touched By An Angel episode as well.  For me though, it is just the latest example of Hillary hype over substance.  She still is less than useless when it comes to the realm of ideas.  

Bill Clinton's 1992 campaign was executed with brilliance and consistency.  George Bush, who only two years before in the wake of the Gulf War seen incredibly positive performance ratings, seemed to be in complete control of the political landscape and in an unassailable position.  Many prominent Democrats with presidential ambitions were not inclined to run against him.  Yet a relatively unknown southern governor was undaunted by the challenge.  He recognized weakness in the form of widespread dissatisfaction that existed with Bush's performance following the war, particularly on domestic issues.  More importantly, he capitalized on the growing dissatisfaction as well with the declining economy as the prosperity of the Reagan years waned through Bush's rejection of the "voodoo economics" of his predecessor.  Lower wages and growing unemployment created a slight opening and, sensing this weakness and exploiting it brilliantly, the Clinton campaign strategist James Carville came up with an unofficial motto that kept them focused on this weakness: "the economy stupid".  It was a focus that propelled Bill Clinton to the White House and illustrated how important economic issues were in the post Cold War world to American voters.

This week Hillary finally dispatched what should have been an easy bunny like foe, Bernie Sanders.  However, like the scene in Monty Python and the Holy Grail, a grenade was needed to dispatch the fierce bunny in his rampages.  In Hillary's case the "Holy Hand Grenade of Antioch" was the controversial and
premature declaration of her clinching the nomination by the Associated Press the night before the California primary.  Hillary was looking a little shaky in California and, as increasing scrutiny about her scandals was also coming to the forefront, there was speculation as to the damage a loss in California to Bernie Sanders would do to her campaign.  By declaring her the de facto Democrat nominee before a vote was counted in California, on the basis of the supposed commitment by a few superdelegates, the AP created a situation guaranteed to keep Sanders voters away from the polls.  It was another shockingly partisan display by a press that seems "all-in" on making her president.

However, that is history; the race for the White House now begins in earnest without distraction.  On Wednesday, Hillary walked into the lion's den of Fox News and was interviewed by Bret Baier. Baier is no fawning Hillary fan, and did a proper job of asking her tough questions, something she is entirely not used to.  A couple of minutes into the interview Baier, citing a recent right direction/wrong direction poll showing that 65% of Americans feel things are moving in the wrong direction, asked Clinton what she would do differently about the economy from Obama.  The premise of the question is obvious: if Americans by a 2:1 margin think things are not going well, what changes would she make.  Her answer was rather amazing - essentially she discounted the poll and said she would double down and do nothing differently.  Her jobs plan would be to work on infrastructure, giving another once over to the same roads and bridges which evidently still are in need of repair even after seven years of Obama's hard work.

There are a couple of problems wrong with this approach.  First, it is based upon the flawed notion that government spending is the cure to all ills. More importantly, it also trusts the false notion that economic growth can be achieved, not by creating new and productive jobs, but by essentially performing maintenance.  So what's the difference?  

I learned the difference between capital improvement and maintenance in a practical way several years ago when I was selling my house.  My realtor told me that the badly needed new roof and furnace I had recently purchased for a good deal of money did not add a dime to my house's value. The reason for this is things like home maintenance and infrastructure maintenance are like the Red Queen's race in Alice In Wonderland: they are merely running as fast as you can to stay where you are.  Only by expanding and improving things is value added.

This idea of government creation of busywork jobs is an example of a school of thought that says a model where 100 men are paid to dig holes and another 100 are paid to fill them in accomplishes something useful. What is missed here, however, is that in order to have value, the work that a worker does must exceed the value of what he is being paid.  In sales, as I am, this is an obvious reality.  My company pays me a salary, benefits and expenses of $X a month.  In order to justify my position, I have to generate enough sales to cover not only my costs, but the operational overhead costs of the company and contribute to the greater financial goals as well.  By doing this, I contribute to the success of the company and ensure it has the capital it needs to grow and expand.  This is the only true measure of the value of the worker and his wage, and is why attempts to make a moral argument about how an unskilled worker needs to make a "living wage" (like $15 an hour) make no sense to any businessman.  So just hiring people to do stuff is not the answer now any more than it was in 2009.  They have to do useful stuff.  

Don't get me wrong, potholes need to be filled and bridges need to be repaired.  I just think it is ridiculous to base a road to economic recovery on them.  A different vision is needed and in Part 2 I will describe Donald Trump's ideas on the economy.

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