We’ve all heard of, “I cut, you choose.” It’s a game theoretic principle, well known to children, that basically says if someone is dividing the pie, the other person should get to pick which slice he gets. That way the cutter has an incentive to divide it as evenly as possible. Well, with Obama, it’s all about redividing the pie. That great big pie that represents our collective economic wealth. For him, it’s a pie fit for redivision, where 90% of the wealth is supposedly in 10% of the hands. If that’s the case–and this Marxist folk wisdom defined Obama’s entire adult life–then the problem of governance is relatively easy: you simply need to organize the aggreived majority, demonize the wealthy minority, and, in Obama’s words, take from the “money people” in order to “spread the wealth.”
He spent most of his life thinking about how to redistribute wealth from the wealthy to the less wealthy through various schemes like redistributionist taxation, nationalized health care, community organizing, affirmative action, increased government sector, unionization, minority set-asides and the like. But now he’s in the awkward position of having to come up with policies designed to replace and create wealth. Massive wealth has been lost in this recession, both in housing, bank balance sheets, government revenues, and all the rest. It threatens to remain this way for a long time.
Obama did not want to be president at this moment, any more than George H.W. Bush wanted to be a post-cold-war president. Obama doesn’t know what to do, as evidenced by the large proportion of stimulus dollars going to “jobs” like government sector jobs at the state and local level, such as clerks, teachers, etc. The minor exception to this is the “flying cars” concept; you know, so-called green jobs. Truthfully, no one really thinks this will work, and, if it does, it won’t create all that many jobs, since the unemployed in construction, service sector, sales, office workers and others with industry-specific skill sets can’t easily move into manufacturing nifty flying cars and solar plants all that easily.
Further, the pretension that Obama can pick the next big growth sector is kind of quaint. This kind of industrial policy–as opposed to broad-based monetary and trade policy–has been a major failure where it’s been tried, as evidenced by the overinvestment of the Japanese Ministry of Trade in HDTV 25 years agoand other mercantalist schemes, such as Brazil’s inefficient investments in airplane and auto manufacturing. He probably knows nothing about the sorry history of public-private investment partnerships.
He does not accept, does not benefit from, and does not realize that the best thing he can do for the economy is to restore confidence in government finances, shrink the deficit, avoid radical moves, and restore sound financial regulation to prevent market blowups, while channeling investment generically into productive sectors (as opposed to the prevailing trend of leveraged gambling on currency trades and what not). In other words, most of what he needs to do is less of everything involving government intervention, and it’s against his nature to do so.