President Obama wants to call his economic policies "Middle Class Economics" but the reality is every economic policy of his has been nothing more than "Price Distortion Economics."
Let's look at some of the policies over the past 6 years. Cash for clunkers happened because Obama didn't trust that buyers and sellers of automobiles could agree on price. Free birth control. Free or subsidized health care, though quite a few found they couldn't keep their doctor or their health plan. Is there any commodity that President Obama would trust the market to set the price?
In his State of the Union address, President Obama called for a tax credit for child care. Certainly that could help low income families afford to send their kids off to day care so both Mommy and Daddy can work. Is it really the role of government to encourage people to drop their kids with total strangers for 8 hours a day? The market gives a choice between day care centers and the cheaper alternative of in-home day care. Among those choices, people decide. If the cost of day care is too high - and many families found that out - the alternative might be to stay home with your children and watch a few of the neighbor's kids. The price fluctuates. Too many stay-at-home day care centers and the price sinks. Suddenly, it becomes worthwhile to drop your child off at a neighbor's house and you go off to work. That is the ebb and flo of the market.
Paid sick leave sounds wonderful. Again, it is a distortion in the market. Imagine you work 250 days a year and your value is worth $100 a day. That means your salary is $25000 a year and since there are 52 weeks in the year, you would have 10 unpaid days off. If you instead are hired at a salary of $25000 a year, you will make $480 a week instead of $500, but you'll have "vacation days" instead of "unpaid days off." The end result is still that you work 250 days and you still have $25000 for the year. Adding "free sick days" only sounds better. An employer still pays you for your productivity. If suddenly you are only required to work 245 days per year, you could take 5 sick days in addition to your vacation days. Then, your value to the company would be $24,500. Only in Fairyland would you get free sick days, free vacation days and all the salary you were promised. And probably a unicorn.
Of course, the Price-Distorter-In-Chief doesn't think you should get the salary you agreed to when you were hired. He thinks he knows when you deserve a raise and how productive you are at work. The call for raising the minimum wage is never accompanied by a demand for higher productivity. Why not?
The call for Free Community College is yet another distortion in the market. Sounds great if you are a community college faculty member because the next contract might be easier to get ratified, but how will the policy affect other colleges? Why not get the first 2 years of college paid regardless of whether it is at a community college or not? Is it just a plan to distort price and push the private colleges out of business?
More importantly, how does price distortion affect demand? Lots more students may enroll, but will they be motivated enough to follow through when they have "no skin in the game?" At a price of "free," everybody wants one. At a price of $3000, maybe only the committed will sign up.
The state of the union is tied to the state of the economy and the state of the economy is tied to the ability of the free market to adjust. Want proof? Though drilling on Federal land has decreased significantly during the Obama years, productivity from private wells is booming. The free market - against the Obama headwinds - has brought down the price of gas to below $2.50 a gallon. Remember, it was Obama who mocked Republican opponents in 2012 when they claimed we could see prices that low again.
The falling gas prices are a counter-balance to Price-Distortion Economics. There are two ways to grow the middle class. Either tax the rich until they become middle class or allow the free market to adjust so that lower income folks can afford middle income luxuries - like gas. |
