Monday, May 28, 2012

Obama's "Fair Shot"

Last time it was hope and change. This time President Obama is offering America a “Fair Shot.”

I would agree that Obama’s presidency has not been giving America a Fair Shot. What I don't get is why anyone would think that he would do better in a second term.

To Niall Ferguson the message recalls Franklin Roosevelt’s New Deal, though, as he notes, New Deal is a more felicitous phrase than Fair Shot.

To Ferguson Obama’s criticism of private equity recalled Roosevelt’s attacks on Wall Street in 1932. Both presidents were trying to stigmatize those who work for profit, that is, those who work in the free enterprise private economy.

Both attacks are demagogic; both bespeak a Messiah complex.

Ferguson describes FDR’s first inaugural address:

Nearly 80 years have elapsed since Franklin Roosevelt savaged the “stubbornness” and “incompetence” of “the rulers of the [stock] exchange” and the “unscrupulous money changers” in his first inaugural address: “Stripped of the lure of profit ... they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers ... The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.”

For extra credit, which religious group seems to be targeted by the reference to the money changers in the temple?

For extra, extra credit, how well did members of this religious group around the world fare while Franklin Roosevelt was conducting American foreign policy, from 1932 to 1945?

Noting that Obama’s rhetoric is very weak when placed next to FDR’s. Ferguson quotes out current president:

My view of private equity is that it is set up to maximize profits…. And that’s not always going to be good for communities or businesses or workers ... When you’re president, as opposed to the head of a private-equity firm, your job is not simply to maximize profits. Your job is to figure out how everybody in the country has a fair shot. Your job is to think about those workers who got laid off ... to take into account everybody, not just some ... This is what this campaign is going to be about.

Actually, Obama made the same point in his State of the Union address this year:

We can restore an economy where everyone gets a fair shot and everyone does their fair share and everyone plays by the same set of rules.

One may ask who is going to decide what is fair and what is not. How do you determine when someone has been offered a fair shot? Do the outcomes decide it, or is there another standard?

One may also ask if it is fair that half the working population does not pay Federal taxes.

Obama is correct to say that private equity is not always good for communities or businesses or workers. But it is also true to say that it is not always bad. In fact, it is mostly good. Surely it is better than having government come in to run business.

These questions aside, Obama is contrasting his Fair Shot with the profit motive. He, like FDR, is saying that there is something wrong with the profit motive. He finds that the profit motive is morally inferior to some higher virtue, like fairness or justice.

It is almost too obvious to say it, but increased profits do not necessarily preclude fairness. 

When it comes to giving everyone a Fair Shot, increased profits provide increased revenues to the government. Increased revenues mean less government borrowing, and thus less money sucked out of potentially profitable investment. Increased profits also provide higher wages for workers. 

Now, explain why these liberal demagogues are opposed to the profit motive? And why do they insist on presenting themselves as Messiahs. Don’t they understand the separation of church and state? Don’t they understand that, besides throwing the money changers out of the temple, Jesus said: render unto Caesar that which is Caesar’s, and render unto God that which is God’s.

Wasn’t he trying to say that a secular leader should not mistake himself for a religious leader and should not believe that an earthly economy runs according to the same principles as pertain in the Heavenly City?

Capitalism runs on the profit motive. People who do not worry about profit and loss work for the government. Lacking a profit motive they are, as a rule, less efficient than private sector workers. At the least, they do not have a monopoly on fairness or any other moral virtue.

Doubtless, Obama is modeling himself on FDR. Yet, Ferguson notes, FDR tried to throw the money changers in the temple in 1933, at the onset of his administration. Obama is doing it at the end of his first term.

During that term, Ferguson notes, Congress passed and the president signed an important piece of financial reform legislation, the Dodd-Frank bill.

Ferguson writes:

He and his party have already passed a massive piece of financial regulation, the 2,319-page Wall Street Reform and Consumer Protection Act (Dodd-Frank, for short). And guess what? It’s garbage. Despite requiring regulators to create 243 new rules, conduct 67 studies (to see if the rules are actually necessary), and issue 22 periodic reports, it somehow manages to miss the real causes of the crisis. A mass of ambiguous, contradictory complexity, its sole result will be to generate jobs for lawyers advising compliance departments.

We should mention that regulatory burdens, the kinds that the Obama administration loves and cherishes, choke business and diminish profits. Reducing the profits of banks means that there is less money to loan out to business, and thus less of a Fair Shot for aspiring businessmen and job seekers.

Ferguson adds that this is not the only way that Washington is leading the nation toward an economic contraction.

In his words:

… far from putting the nation on track for recovery, the president’s Fair Shot is sending us over a fiscal cliff. Last week the Congressional Budget Office issued a stark warning that if Washington allows the Bush tax cuts to expire and the preprogrammed spending cuts (code-named sequestration) to go ahead, the economy will contract by 1.3 percent in the first half of 2013.

At that point, no one will be getting a Fair Shot.

Since Obama took out after Mitt Romney’s experience in private equity, Ferguson suggests that we compare it with Barack Obama’s experience as a community organizer and lawyer.

Before Mitt Romney entered politics, he started up and successfully ran a private-equity shop. He turned money-losing companies around, partly by firing surplus employees. Before Barack Obama entered politics, he was a community organizer, then a lawyer. The firm where he worked in the 1990s specialized in civil-rights litigation and neighborhood economic development. Visit Chicago to see how well that went.

Obama has been running a government that provides opportunities for bureaucrats and labor union members and lawyers. Is anyone else getting a Fair Shot?

Ferguson answers:

The only jobs lawyers ever create are for other lawyers. And if you don’t believe me, you clearly haven’t read Dodd-Frank.

Amazingly, Niall Ferguson is one of the few people who has read all of the Dodd-Frank bill, which is more than can be said about most of the Congressmen who voted for it or the president who signed it.


Sam L. said...

Don't you know? They're the guys who want to render what is rendered unto Caesar, and tender it to each other.

JP said...

The problem with capitalism is that it doesn't deal with the long term very well at all.

It's wonderful at doing a lot of things extremely well, but long term consequences are not one of those things.

Zenodog said...

And who, exactly, is good with the "long term consequences", assuming of course that anyone can accurately foresee them?

Nick said...

Funny, I was literally just reading that story in the gospel before I read this article.

LordSomber said...

"Fair Shot" sounds like a golf term. I wonder if that was intentional?

CatherineM said...

I keep hearing that from pundits, that PE is not about creating jobs, but profits.


If I open a hamburger stand, I am not going to do it because I want to feed people. I want to sell hamburgers. If people buy them and like them, I will make a profit. When I make a profit, I will expand and hire more people/create jobs.

Obama doesn't seem to understand this.

n.n said...

Actually, capitalism is ideal for coping with the long-term. Unlike a planned economy, where risk is socialized, the consequences of properly assessing risk are born principally by the actors. Capitalism is most effective in a market economy, where the dynamic is adaptive and directed by a comprehensive set of competing interests. It may be less efficient, but, within the realm of reality, it is ultimately higher performing.