The President’s Gaffe

The eWaves are afroth with unsupported speculation, hand wringing, condemnation and counter-condemnation over the atrocity in Colorado. Uncharacteristically, I won't add my bit (at least not just yet). Whatever we may learn in the days to come, I am confident that there is very little we will be willing and able to do about it.

For a bit of relief, I will return to what we can do something about. The President committed a major Kinsley gaffe last week. He made the mistake of telling us what he really thinks at a moment when he had all the attention focused on his opponent. Here is what the President said:

There are a lot of wealthy, successful Americans who agree with me -- because they want to give something back. They know they didn't -- look, if you've been successful, you didn't get there on your own. You didn't get there on your own. I'm always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there.

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you've got a business -- you didn't build that. Somebody else made that happen. The Internet didn't get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

Conservatives in general and the Romney campaign in particular pounced on nine words:

If you've got a business -- you didn't build that.

How you view that sentence depends on the meaning of "that". If it means "roads and bridges" as the Administration insists, then it is obviously true in most cases. Entrepreneurs don't generally build such things in the US; they only pay for them. If "that" means the business you built, as the other side thinks it does, then it is manifestly false and insulting. Having watched a portion of the speech, it certainly sounds like the President meant the latter. However, I am willing to give him the benefit of the doubt.

The passage in context is nonetheless very revealing. Liberals and conservatives both recognize the roll of individual effort in private enterprise and the role of government in laying the foundation for private enterprise. Conservatives like to emphasize the former whereas liberals like to emphasize the latter. A lot of the difference between the two lies precisely in what they like to talk about.

I find the first part of the comment above more problematic than the second.

I'm always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there.

The President does seem to be saying that successful entrepreneurs don't deserve much credit for their successes. It isn't their hard work or genius that made them successful or even luck; it's government. I think that's insulting and unfair.

Still, Mr. Obama obviously has a point. Collective action through government provides a lot of the conditions that make private enterprise possible. That would be a very relevant point if one side in the debate were arguing for the abolition of government. Of course that is not the case. Mitt is no more an anarchist than Barack is a Bolshevik. The problem with the President's comment is that it is an attempt for force a false choice, in order to avoid confronting the real issues.

Precisely to the degree that you value government, you have to be concerned that government can work. To make it work, you have to make it fiscally solvent. At the local, state, and national levels, many governments are going belly up, financially. Three California cities have declared or are on the point of declaring bankruptcy. I believe Scranton is at the same point. The national government is on the same trajectory. That is the issue that the President should be addressing rather than ducking. The question is not whether to abolish government, but how to keep the ones we have from abolishing themselves.

A second problem with the President's comments is that he shows no awareness of the flip side of the argument. Yes, government provides conditions for private endeavors, but it also puts a lot of obstacles in the way. Government frequently makes it much more expensive to start a business or hire new employees. When that burden grows large, both jobs and tax revenues fall off. Ryan Streeter has this at the Indy Star:

Politicians typically believe that job creation happens when existing businesses, big and small, hire more people. That seems reasonable, but it's not quite right. The reality is that almost all new jobs five years from now will be created by companies that don't exist today. Job growth in America is driven almost entirely by new companies, or what we typically call "startups." According to Hudson Institute economist Tim Kane, new companies created 3.5 million jobs in 2005, while 10-year-old companies the same year created 355,000 jobs but lost 422,000.

The reason this fact is important to grasp is because startups themselves are declining. Based on the best estimates I've seen from Kane's work, we would have roughly 2 million more jobs each year in America if we were creating new firms at the same rate as in the 1980s. In other words, despite what we tell ourselves, entrepreneurship is declining in America, and job creation is suffering as a result.

Yes, Mr. President, there are a lot of smart and industrious people out there and only some of them will found the next Apple and Microsoft. Whether fair or not, some entrepreneurs get to be Steve Jobs or Bill Gates. In doing so, they provide almost all the jobs that other hardworking people will apply for. They also generate the wealth that government can spend on all the good things that it does.

Perhaps that is the problem the President should be thinking about: how to return to the business creation of the 1980's. He isn't paying attention to that, of course. He isn't paying attention to job creation at all. As one dreadful jobs report after another arrives, the President is focusing on other things. Over the last six months, he has held about 100 fundraisers. He hasn't met with his jobs council once. That is something we can do something about.

Comments

[financier]

What is Romney's jobs plan that you support? Cutting taxes to perpetuate the myth of voo doo economics that no serious economist believes in because there is no data to support it after two gop led failed experiments spanning over 30 years?

If you old folks keep running up the deficit with nonsense you are going to learn that we don't care that you don't understand how a pay as you go system works. We younger voters will just stop funding your benefits because it doesn't work with declining population growth. Let's be clear on who is sucking this country dry, it isn't the poor you want to demonize, its the aging and the fraudulent medical "nonprofits".

Pay your bills, America. Cutting taxes does not increase revenue, the second order effect of stimulus will never make up for the lost revenue. If somebody had found any evidence to the contrary you would see a statistically significant result that has been duplicated by many.

Btw, the President post Eisenhower who has increased spending the least? Obama. Second? Clinton. The most? Of course you know the answer. Check Forbes.

I don't believes its the governments job to create jobs, that is for entrepreneurs. We can tax cut and spend every year trying to do it, but that is a structual deficit, not stimulus. Meanwhile corporate profits are at record highs while the number of jobs still stagnates. No trickle down. At all.

[larry kurtz]

“Anyone who thinks socialism failed in America has never spent time on a military base.”

http://www.foreignpolicy.com/articles/2012/07/19/welfare_state

"Larry, anyone who thinks socialism failed in America has never spent time learning about the National Football League."

http://www.rushlimbaugh.com/daily/2012/01/30/goodell_admits_nfl_is_sociali

yer slippin,' ken.

[MJL]

I think that you and a lot of the Conservative forces are missing the real point behind Obama's recent speeches. The point is simply that a person doesn't do it by themselves. It takes hard work, smarts, and typically a lot of support from the community around them.

[Ken Blanchard]

MJL: try reading the post before you comment. I agree with your point and said so. I also pointed out why it wasn't relevant.

Financier: what?

[Donald Pay]

Uh, wrong. The "job creation" in the 1980s is myth. We should pay attention to that only to learn how government can work with new industry to create jobs.

You really need to review your recent economic history. The 1980s was a time of job destruction. In fact whole industries were destroyed by the 1980s economy, and the Rust Belt and agricultural Midwest took a pounding. The Rust Belt never recovered and the agricultural Midwest required massive federal intervention in markets to correct.

The 1980s "boom" was a bi-coastal bubble centered around a few new industries---computer technology (mostly on the West Coast) and deregulation of the financial services industry (mostly on the East Coast). Government purchases of computer products and services were key to the boom in computer technology, and the financial industry deregulation resulted a bust within the 1980s, and again in 1992. Other growth was fueled by consumer and government debt.

Learn from the past, KB. Republican policies drive deficits, debt and collapse.

[Donald Pay]

Another factor partly accounts for the 1980s appearance of job growth also occurred. The awful economic conditions for men in manufacturing whose family supporting jobs were outsourced led to more women being forced by economic conditions to enter and remain in the workforce for a longer time.

[Dave]

"Job creation" happens when demand exceeds production... not 'cause some rich dude got his tax rate cut...

[financier]

The only other freaking factor is massive spending.

Neither Reagan nor W had the balls to cut taxes without it.

Without "that" portion of bankrupting the country, the myth is alive and well for the folks who inherited a family farm and think they hit a triple. Probably book residuals work the same way.

[duggersd]

President Reagan, W, Clinton, Obama, or any other president can raise taxes without the help of Congress. Also, no president can cut spending or increase spending without the help of Congress. Reagan famously accepted a tax increase in exchange for a 2 for 1 cut in spending. Guess which came into fruition and which did not. W for much of his administration had a Democrat Congress to deal with. Granted, when he had a Republican Congress, the Republicans spent like Democrats. When the Democrats took over in 2007, spending went up. I really wish W had the gonads to veto those spending bills.
As for the gaffe, President Obama has revealed his feelings about the American entrepreneur. Contrary to the professor's assertions, I believe President Obama a Marxist or a fascist. He certainly advocates policies for both. He believes in the collective and the need to "spread the wealth around". The gaffe is so bad, he accused Romney of misquoting him in a commercial and in the same commercial used the "misquote" word for word http://www.weeklystandard.com/blogs/obama-ad-accuses-romney-launching-false-attack-quoting-obama_648762.html. This could be the gaffe that kills his effort, much like Ford saying Poland was not under communist control.

[Ken Blanchard]

Donald: Obama would give his left nut for economic numbers like the 1980's. Clinton, with a Republican Congress, cut the deficit. What did Obama do with a Democratic Congress? A trillion and a half a year. Your argument is utterly ridiculous.

[duggersd]

"President Reagan, W, Clinton, Obama, or any other president can raise taxes without the help of Congress." should read: President Reagan, W, Clinton, Obama, nor any other president can NOT raise taxes without the help of Congress.

[Donald Pay]

No one in there right minds wants to go back to the 1980s economy. If you worked in the elite financial world, a multi-national corporation outsourcing jobs, the import business or Silicon Valley during the 1980s you did well. If you worked anywhere else you did not.

I grant you there were mini-booms associated with corruption in government. For example, the coal industry and the hazardous, nuclear and solid waste industry had a boom because of what were later found to be corrupt practices in Reagan's environmental permitting agencies. Also, the deregulation of the savings and loan industry led to a huge scandal and a recession. But you conservatives never learn from history. You praise the worst aspects Reaganomics, which tanked the economy, and want to repeat them.

[Ken Blanchard]

Donald: I nominate your comment above "No one in there right minds wants to go back to the 1980s economy" for the honor of Dumbest Comment Not By Larry Kurtz". So far there is only one other nominee, so keep your fingers crossed.

[Religion Jeans outlet]

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