[Editorial note: Doug French is co-author of this piece today]
Why all the long faces?
The election results seem to have sent many people into fits of depression, hysteria, and rage. Commentators on the right are proclaiming that the last days are here. The hordes of welfare dependents are taking over. The wealthy will be looted. Business will be destroyed. Demographics and demagoguery have at last come together to create the perfect storm for America. Socialism has at last arrived.
Well, let’s all just settle down a bit.
What was the alternative to Obama? The truth is that Romney inspired a very low level of passion among voters. No one knew for sure what he stood for. Not even his tax message was clear. He seemed to call for lower rates, but also promised to “broaden the base,” which sounds like raising taxes through the back door. His foreign policy program of protectionism against China and war with Iran actually made Obama’s stealthy warmongering seem less dangerous by comparison. All the rest was a muddle.
So in retrospect, there should be no great surprise at the outcome. The betting market called Intrade.com featured election markets that had been correct for the entire political season…
There is no more reason to be morose and maudlin about the next four years than the last four years. The last four years featured some of the worst government policy since the 1930s, most of it coming from the Federal Reserve and the Treasury Department. These policies have broken the banking system, entrenched unemployment, and stagnated middle-class incomes. That would have stayed the same regardless of who was elected.
Yet despite these policies, the market forged ahead. These last four years have seen some of the biggest advances in technology in history, including the app economy, the radical democratization of all media, and 3-D printing.
The world is connected by market networks as never before. Food is more prevalent. Housing is cheaper. The much-feared hyperinflation never arrived. Having long experience with dealing with stupid government policies, entrepreneurs and capitalists still somehow managed to keep the engines of progress rolling forward. The markets have shown themselves to be resilient beyond what most people imagined.
People in democracies tend to exaggerate the influence and effect of particular presidents. They have some power to steer policy, but nowhere near what people imagine. Most of their talk about their “visions” for bringing a new future is puffery and nonsense. The bureaucracies that make and implement the rules by which we are forced to live pay very little attention to the comings and goings of the political class. Most of what they do was not discussed in the election at all. And presidents have very little practical, day-to-day influence over their behavior.
The state that is the menace to society is not somehow recreated every four years. It is 100 years old and lives off its own momentum. It is intrusive, debilitating, invasive, and evil, but it is not sent into upheaval upon elections. Its grip grows tighter, but not mainly because of electoral politics. It runs off its own energy and tends to be impervious to political attempts to shift its direction.
That said, sometimes U.S. presidents end up making some degree of difference. But it is by no means a foregone conclusion that a second Obama term is going to be worse than a Romney term might have been. Again, Romney made some very scary noises about shutting down trade with China, raising taxes through deduction repeals, and starting wars with Iran and who knows what other countries. Based on his rhetoric alone, it’s hard to say that Obama is going to be worse.
More significantly, the biggest, for better and worse, political moves of the last half-century were made by presidents who were expected to do something completely different. No one expected, for example, that Nixon would be the man who would go off the gold standard, put in wage and price controls, and establish the EPA.
At the same time, the best thing he did in office, namely make peace with China and open trade, was the last thing anyone expected from this old-line anti-communist. And that is precisely why he was able to get away with it. It is through confounding expectations that political change happens.
We saw this with Jimmy Carter too. Here was a man everyone thought was dedicated to government control of everything. Yet he worked with Ted Kennedy in the Senate to accomplish the great deregulations of the late 1970s that changed life completely and continue to benefit everyone. He deregulated trucking, airlines, and energy. Those were surprising and amazing moves — accomplished entirely by what we now call the political left. These three moves astonished the world.
Moving forward, Reagan ran as the most libertarian-sounding president in a century, but he proceeded to balloon the budget as never before and even raise the payroll tax in a way that broke all records. On the other hand, the best thing he did in his two terms shocked the world. He sat down with the Soviet leader and agreed to the hope of eliminating all nuclear weapons. It didn’t happen, but the friendship between Reagan and Gorbachev led to an astonishing thaw that encouraged dissidents all over the communist bloc. The world that the Cold War kept alive melted with the advent of the most peculiar and implausible friendship in the history of politics.
No one thought Clinton would reform welfare, but he did it. And no one thought he would work to repeal one of the most crippling legacies of the 1970s: the 55 mph speed limit as set by the federal government. Clinton did this with very little attention given to the event. But it was a huge boon to the private sector.
The same was true of George W. Bush. He ran as a peace candidate and gave us horrible war.
The message here is that you rarely get what you expect from politicians. Sometimes — very rarely, but sometimes — they do the right thing despite every expectation to the contrary. So yes, Obama might be a socialist, but he is also a politician, and surprises can happen. And regardless of what happens, protecting your rights and liberties is ultimately up to you.
There are huge looming issues in the second term of Obama. The Keynesian path has not fixed the economy, exactly as Hayek predicted in A Tiger by the Tail. The spending boom has not stimulated anything, exactly as Henry Hazlitt said it would not, confirming the whole theory behind Economics in One Lesson. The monetary stimulus has been an incredible flop, precisely as Ron Paul said it would be in The Case for Gold. The whole claim that the government would save us has turned out to be an aspect of what Hans-Hermann Hoppe calls The Great Fiction.
This is the end of the road for the planners. The American people are extremely resistant to tax increases. Even on health care, some pullback would not be unexpected: the Obama administration does not want to be the trigger that causes more unemployment stemming from higher costs on small and medium-sized businesses.
The other legislative monster of the president’s first term was the Dodd-Frank financial overhaul, which inspired a constant battle cry for repeal from Republicans during the primary season. But while this regulatory dog may end up biting, for now only a third of the act’s required 398 rules have been finalized. The courts have struck down a few of legislation’s new provisions, and more legal challenges will follow.
The Fed is mostly out of options. The central bank can only keep doing the same old QE thing over and over. But while the Fed makes itself bigger, as Steve Hanke pointed out in an LFB interview, the biggest engine of money creation is the commercial banking system, and the banks are not creating money by lending. Dodd-Frank uncertainty and tough bank examiners are making bankers shy to lend. This has grounded, for the moment anyway, Ben Bernanke’s inflation helicopter.
The fiscal crisis cannot be solved through mere reform, but reform would help. War with anyone would break the bank completely, and the military knows this. No one is even talking about gun control anymore, thank goodness. And there is extreme grass-roots pressure for letting up on the war on drugs.
This isn’t the end of the road for the state, but it is getting close. Politicians are usually liars and thieves, but they are not entirely impractical men and women. They will try the wrong thing a thousand times before they finally relent to the obvious. But eventually, they can relent. If the economy double dips in a serious way, that could prompt a complete rethinking of the path of the last for four years of folly.
The bigger point is that the really big changes happening to the world today are taking place outside politics. Russ Roberts puts it best:
“Remember that politics is not where life happens. Policies affect our lives, but we have much to do outside that world. Yesterday, I helped my youngest son learn Python, learned some Talmud, played with my photographs on Lightroom, had dinner with my wife, and went shopping with my oldest son for his first nice blazer. Lots of satisfactions there. Nothing to do with politics.
“Put Tuesday night behind you for a while. Remember what matters. Take a walk. Read to your kids. Go out for dinner with your spouse. Read more Adam Smith and less of the Drudge Report. And smile at your neighbor. That’s always a good idea. But there’s a bonus — it might help your neighbor imagine that someone who believes in leaving things alone when it comes to the coercive power of government might actually be a decent person after all. And then maybe he’ll be a little more open to those crazy ideas you talked about at that dinner party.”
Especially considering the holidays coming up, a time when the beautiful aspects of private life are on display as never before, he is precisely right.