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  • Obama, the Democrats, and the Economy

    Posted by David Foster on October 22nd, 2008 (All posts by )

    As I pointed out in the post below this one, “the economy” cannot be separated from security and foreign policy issues. Security and foreign-policy disasters can easily lead to economic devastation, and voters would do well to bear this in mind.

    But in this post, I’d like to talk about the economy per se. This is the first part of a long post; it will be extended within the next couple of days.

    I think that an Obama administration, combined with a Democratic-controlled Congress, would do grave and long-lasting damage to the American economy. Several specific points:

    1)Energy. The Democrats, and the vast array of “activists” whom they enable, have demonstrated hostility to all practical forms of energy production and distribution. This is not just a matter of oil & gas drilling: as we have discussed many times on this blog, the U.S. electrical system faces a problematic future. There is every likelihood that, under a Democratic administration/Congress:

    a)The building of new coal plants would go from “difficult” to “impossible”
    b)The building of nuclear plants would continue to be virtually impossible
    c)Even the building of new natural-gas-fired plants would be severely delayed by environmental lawsuits and regulatory maneuvering based on the CO2-is-a-pollutant theory.

    Solar and wind, beloved of Democrats, have their uses, but they also have their limitations. I see no evidence that either Obama or the Dem Congressional leadership has any interest in understanding the technical and economic factors that govern the extent to which these technologies can be practically employed. The intermitant nature of wind and usable sun, the difficulty of storing electricity, the supply-chain constraints which govern the large-scale introduction of any new technology–there is much less interest in these things than in the glib repetition of catch-phrases. And even the use of environmentally-blessed technologies will be greatly inhibited by environmentalist protests against the transmission lines required to connect these systems to the cities that need their power. These activists would, of course, gain great impetus from a Democratic administration.

    Obama talks a lot about the middle class. The existence of a large and affluent middle class is enabled by widely available and reasonably priced energy, especially electricity. If electric rates are driven up by a factor of 2X or 3X, as is entirely possible with Democratic policies, there will be not only a direct effect on consumers, but an effect on virtually all workers as U.S. businesses–especially manufacturing businesses but also things like data centers–become less competitive.

    Lenin once remarked that “Communism is Soviet power plus electrification.” Our present “progressives” seem more interested in de-electrification. Where the New Deal (and the Soviets) wanted to build hydroelectric dams, today’s “progressives” are, for the most part, more interested in destroying them.

    Remember, electrical infrastructure is a long-leadtime item, and if we dig outselves into a deep hole in this matter, it will take a long, long time to dig ourselves out.

    No one should kid themselves that because gasoline prices are on a downtrend at the moment the gas-price problem is solved. Even if economic stagnation in the U.S. persists for a long time, a recovery in the Far East will drive demand–and, absent new supply, prices. Drilling in the U.S. is important not only for gasoline and diesel supplies but for supplies of natural gas–this commodity also comes from wells, and often from the very same wells that produce oil. This is something that Nancy Pelosi, with her apparent belief that natural gas is not a fossil fuel, does not appear to grasp.

    2)International Trade. There has been, understandably, a lot of concern about jobs lost to the offshoring of business activities, especially in manufacturing. But it’s important to understand that international trade also creates jobs. If you work at Boeing or Caterpillar, for instance, exports are very important to your employment future–and countries are much more able to buy your products when their economies are thriving. The ability to sell products/services to the U.S. has, of course, been a major factor in the economic success of countries like China and India and their consequent ability to buy jetliners, tractors, and other things from the U.S.

    Democrats seem to think that trade is something that Americans do for other countries, kind of like a global welfare system. They tend to underplay trade’s benefits to Americans–the attitude often being “we send our jobs to China and all we get back is cheap t-shirts at Wal-Mart.” The reality is that we get plenty other than cheap t-shirts. What would a PC or laptop cost if all manufacturing (including that of all components) had to be done in the U.S.? I haven’t reviewed any manufacturing bills of material for such products lately, but I’m fairly confident that prices of a domestic-only product would be much higher. The same is true of a wide array of consumer products–there are many things that are broadly affordable to Americans that would, absent imports, be available only to the relatively affluent.

    One of the things Obama talks about is using tax policy to punish companies that move jobs offshore. How would this actually work in practice? Consider an example: GE makes CAT scanners and other high-end medical equipment in Milwaukee, as well as in other places. Many of the components that go into these products are sourced from other countries, including China and Mexico. Suppose GE had been effectively required to get all these components domestically, either by making the parts themselves or by acquiring them from domestic suppliers. The finished products would cost much more, and, in international markets, would likely be uncompetitive with similar products made by (for example) Siemens. This would not be good for employment in Milwaukee, or anywhere else in the United States.

    Democrats like to talk about working cooperatively with other nations, but this does not seem to be their actual view in the case of trade, as evidenced in the high-handed attitude toward Columbia and in Obama’s comments about NAFTA, which caused considerable dismay in Canada.

    I am not a free-trade absolutist–I’m not absolutely opposed to tariffs and other import restriction under all circumstances. I do believe that trade is on balance a net benefit to the U.S. and also to the billions of people throughout the world that it has helped to raise out of poverty. And I’m very concerned that the Democrats’ extreme politicization of trade–to the point of demagogy–threatens to undermine the competitiveness of American business, cost American jobs, raise prices for everyone, and possibly set off a global trade war.

    Most economists agree that the Smoot-Hawley tariffs were a major factor in bringing about the Great Depression.

    (to be continued)

     

    10 Responses to “Obama, the Democrats, and the Economy”

    1. sol vason Says:

      The liberals will take over and ban nuclear power and “fossil” fuels. They will promote nighttime power conservation with a lights out at 9 pm curfew because there is no sunlight and very little wind at night. Patriotism = power conservation. Generators will requires licenses – just like machine guns do. Generator licenses will be as scarce as machine gun licenses.

      With GM and Ford bankrupt, there will be no US automakers. High tariffs on imported cars will virtually eliminate new cars. Gasoline stations will continue to disappear. US will become a land of used cars, seldom used cars.

      We will all be proud that jobs are not exported; that we hardly use any foreign oil. $10.00/gal gasoline helps, so do import restrictions. People are encouraged to walk instead of drive. Walking = patriotism (provided you don’t wear leather shoes or shoes made from oil). Processed foods will have disappeared from grocery stores; indeed supermarkets will have disappeared because cars are scarce.

      Roe V Wade has been extended. Since a person is a foetus because he or she is unable to live outside the womb (ie without constant care), the Supremes rule that anyone who is unable to support himself without constant care is a foetus. Foetuses (young and old) may be aborted in the privacy of a family planning clinic. Suddenly the SS and Medicare crisis is solved. Patriotism = family planning.

      Liberals are very patriotic. Liberalism defines patriotism.

    2. Andrew Garland Says:

      A central theme of the Democrats is that “It is all so easy”. They imply that Republican obstruction is stopping a glorious future. If only we would develop the correct resources we would all be busy in our jobs, happy and secure.

      When this is applied to energy, the thought is that we don’t have to be money-grubbing. Just a bit higher price, and some encouragement to the technologists, is surely all that is needed to have plentiful energy. Twist this wire and push that button. How hard could it be? It is so easy to imagine. We sent people to the Moon, so why not energy for all? It just takes the political will.

      Of course this is disasterous, wishful thinking.
      There is more on this at my post Magic Power

    3. Joseph Somsel Says:

      The big initiative in the electric power section is the “Smart Grid.” Again, more “magical thinking” as Andrew and Sol noted.

      What this really means is that no longer is the grid there to serve you, but now you serve the grid. The Smart Grid is build on “demand management.” You are the demand and the government provides the management – for your own good, of course.

      The California plan of last winter to require remote controlled home thermostats was just one example of much more to come. By managing YOUR electrical demand, the government can now make consumption fit the limitations of the politically correct power sources. As Sol said, lights out after sundown on systems with progressive solar power!

      More screwage from the liberals when the simple fix is build more nuclear power plants.

    4. Mitch Townsend Says:

      As a rule of thumb, when starts a sentence with “Couldn’t they just…?” it’s time to go get another beer and get lost on the way back.

    5. Tyouth Says:

      We’ll mostly all become criminals when the black market comes around.

    6. Obloodyhell Says:

      .

      > I’m fairly confident that prices of a domestic-only product would be much higher.

      I suspect we’d roboticize the f*** out of it, so, prices would be higher, but not as much as you might think. There would not, however, be a lot more jobs out of it, and the downside is that, in addition to costing us more, it would not help the other nations of THE WORLD to bootstrap THEIR economies up to at least industrial level. I believe that that is one thing missed in all of this.

      The whole problem with this crap is that these idiots are arguing from the point of view of a feudal lord about the notion of an industrial economy based on manufactured goods. They cannot see how it would work, since growing food==wealth is all they grasp. The notion that only 3-5% of the populace is actually involved in the production of food would be inconceivable by their lights. Likewise, we have moved on, to the third economy — IP & Services. The notion that only 3-5% of the people will make all manufactured goods fifty years or more from now (however long it takes to bootstrap much of the rest of the world’s peoples out of poverty), is beyond these idiots. “How could that possibly be!?!?” they whine. All new wealth for the next century or so will come from creating IP and providing services. That’s why I laugh at these idiots who were protesting the WTO while WIPO is going on across town, to their total cluelessness.

      Back on the overall topic — China, in particular, is an important example where there is a hidden security benefit to trade and development.

      China has an excess of males approaching adulthood, as a result of the one-child-one-family policy and their cultural bias towards males (that’s about to flip-flop, as people with girls realize how much power they have as potential mates in a limited-supply market). Historically, the result of such a situation in human cultures is to get rather jingoistic. By bringing the Chinese economy into at least the 20th century, there is now another out for males to excel in — business and trade — and those run directly against jingoism. War is usually bad for trade.

      Hopefully, China can channel that aggressive cadre of young males looking to compete for mates into business and trade channels. Otherwise, the s**t is going to hit the fan in a decade or two.

      .

    7. Obloodyhell Says:

      P.S. I find it particularly absurd that people don’t grasp this when they had a pretty obvious vision of it laid out for them in Minority Report, as a car is literally built, with no human interaction at all, from parts around Tom Cruise on the assembly line, which he then drives away in.

      That’s the future of manufactured goods, folks. Robots, robots, and robots. The industrial robot is the McCormick Reaper of the post-Industrial age.

    8. Mike Drew Says:

      Just think, we will soon be rationing energy as the smart and politically thing to do for our enviornment. Only an elitist illuminati socialist would think that this is a progressive way to manage energy. If we don’t start creating our own energy and breakoff our dependence we are doomed to relying on MiddleEast terrorist to bail us out. (or China)

    9. Carl from Chicago Says:

      I think our power situation was dire before the democrats were in a position to take over… as you put it, new power goes from difficult to impossible.

      To watch what will happen, look at England. When they take over the public services (NHS), then a private system springs alongside it.

      Power will become localized; businesses will / are building backup generation to avoid relying on the grid as a continuous source of power, and new housing will either have backup generation within their walls or from some localized, walled-off source.

      “The commons” will deteriorate, and the rich will wall themselves off. It is happening with health care now, and it will happen with power soon. It has already happened for education (by moving away from the big cities) and is in-progress for air travel (private jets bypassing overburdened public airports).

      This happens with security, too – you either move to a city with a de-facto private security force because the poor can’t live there (a rich suburb) or your building buys its own security guard (our city condo building).

      The outcome of a public takeover is that those with the means to do so leave the system or minimize their reliance on it… then it becomes a patronage sinkhole for public servants and falls inexorably into destruction, like inner city schools and hospitals.

      This is far less efficient than doing it RIGHT for all, but if the government is going to sloppily take it over (like it is kind of doing with power in a back hand way) then the logical step is to let the public system fall to ruin (will take a decade or so) and build a parallel, private system for those with the means to fund it.

      This is what happens everywhere under socialism, but it is often too slow to note.

      Must discount tiny countries like Sweden or even Canada… you can arrest this deterioration for a while with an efficient bureaucracy and social cohesion… but we don’t have this on a broad scale in America so it will be faster.

    10. Joseph Somsel Says:

      Carl,

      The scenario you describe of everyone getting standby generators is happening now in South Africa.

      Recurrent power outages and rationing means that anyone who can afford it is buying their own. That’s grossly inefficient and expensive but electricity is too valuable to do without.