July 26 2012
America's Two Economies
President Obama is trying to disown his “you didn’t build that” speech in Roanoke, Va., but it was the perfect summation of the philosophy enshrined in the economic acts of this administration.
Indeed, the president’s words resonate precisely because they capture perfectly what the outcome of this election will determine. Daniel Henninger nails it in his column in today’s Wall Street Journal:
For a long time, the United States had one economy. Now we have two economies that compete for America's wealth: A private economy and a public economy. The 2012 election will decide which will be subordinate to the other. One economy will lead. The other will follow.
Sometimes we view the divergent views of the two major parties as being rooted purely in ideology or philosophy. Henninger shows how they are rooted in history—and in doing so explains the conundrum of smart Democrats who know the economy is a mess but nevertheless defend the Obama administration’s policies:
How the U.S. arrived at the need to choose between two competing economies reveals a lot about the political polarization in the country. Any history of the Democratic Party in the 20th century will recognize its roots in the American labor movement. The party was defined by the names of those unions. The United Mine Workers. The United Auto Workers. The Brotherhoods of Teamsters and Railroad Workers. Consider what those names represented: Both Democrats and Republicans were rooted in the private economy. Unionized workers knew then that this private economy was where they made their living. The arguments were over dividing the productive fruits of that economy. That was your father's Democratic Party.
From the 1960s onward, the professional Democratic Party began to lose its relationship with the private economy. Democratic politicians drew closer to a rising public-sector union movement and its campaign financing, while the private unions declined. This meant the party itself was slowly disconnecting from the machinery of the private economy and becoming part of a rising parallel economy, the public economy of government.
There was one other big event that convinced Democrats that their public economy was equal to or better than the private economy. It has to do with the Democratic Party's moral identity. After JFK's assassination, Lyndon Johnson passed the building blocks of the Great Society, notably Medicare and Medicaid. But most importantly came the Voting Rights Act of 1965. The legislative events of that period (no matter that they passed with bipartisan votes) convinced the Democratic Party once and for all of government's moral efficacy. Public spending, conclusively, was now a public good.
Henninger explains that the GOP, with the notable exception of Ronald Reagan and a few others like him, has until recently played the role of “confused onlooker.” The spending of the Obama years may have clarified a private-enterprise philosophy for the GOP, however. In the 2010 midterms, Henninger writes, the private economy “pushed back” against government spending and expansion.
Another Must-Read: Ronald Bailey has a good piece in Reason on the human capital required to create prosperity. The article is entitled “Government Did Not Build Your Business: Obama Is Wrong—Entrepreneurs, not Bureaucrats, created ‘this Unbelievable American System.’”
But we may not have the human capital we used to have--thanks to government policies:
The United States is not Venezuela or Zimbabwe, but recent research suggests that the social and institutional background conditions that encourage and enable voluntary cooperation in markets to produce wealth and new jobs are being eroded. A bellwether for this erosion is the falling rate of new business startups.
And we’re talking about “likeability” at a time like this? (And we’re finding the man from the faculty lounge more authentic than the guy who built businesses? An interesting indication of the disdain many citizens feel for the private sector.)