I often tell my students that, when it comes to economic policy, the most important question is not "What shall be done?" but rather "Who shall decide?"
Each of us, informed and trained in matters of economics or not, is opinionated about what should be done to "save" the auto companies, achieve energy-independence and similar important questions. While low-level, relatively simple, decisions in our every-day lives, often paralyze us, we have almost no compunction deciding what steps should be taken to save the nation, its poor and its unemployed, its rich and its old. Of course, most of these statesmen-like decisions are prefaced with such phrases as "we ought to … " without specifying who this "we" is. What it really means is that someone, like the president or the Congress for example, ought to have the power and the resources to do this or that. And there's the rub.
This is an exercise of the fatal conceit of thinking that human-will is all that is necessary to fix the world. Give the power to he-who-has-the-will. And in this case many Americans think that Barak Obama is that guy – the guy who should have the power and the responsibility to put everything right. He thinks so too and he has not been shy about accumulating as much power as possible for this purpose.
Just this week we have him deciding which cars GM should produce – now that the Federal Government is a shareholder – having previously decided who should be the CEO. This includes deciding that GM should produce less SUV's, tucks and mini-vans and more Chevy Volts. No matter that more consumers want the former and pretty much shun the latter. As economic czar he gets to exercise his preference for environmentally friendly cars, regardless of consumers' preferences. (It gives me no pleasure to note that I predicted this would happen – but why do I feel that I am the old one who is terrified by it?)
This week he is also deciding how the credit card companies should run their businesses, what interest rates they should charge and under what circumstances. Pretty much the whole banking industry, including banks and other financial institutions, are now subject to the veto of the Federal government in one form or another in what they do. Is their any part of the economy that is not at risk?
The whole point of a civilization that runs on laws and markets, and not on the decisions of individuals or committees of individuals, is that such things do not have to be decided by our leaders. The leaders are subject to the rule of law and the laws of economics just like the rest of us. In such a society I get to decide, without interference from the president, what kind of car I want to drive. What gives him the right to decide for me? The usual answer is that my car may pollute the air by causing global warming. (Actually even if we abolished all of the high carbon footprint cars, the affect on global warming would be about zero – so this is a terrible answer.) Even if it were true, this would just mean that ways need to be found to cause me to take this into account when I make my decision. If my private act of consumption causes harm to someone-else then I should be made to compensate them. So, theoretically, the price of the car could reflect the cost of cleaning up that pollution – by, for example, levying a tax or a toll (I hate taxes or government tolls – but this is much preferable solution to micromanaging the auto companies). [See GM Is Becoming a Royal Debacle in the WSJ].
At the twilight of the first 100 days of this president I keep trying to find something to cheer about. Its really tough. You might think he would favor parental choice in education for their kids through vouchers or charter-schools, but he is flip-flopping on this, anxious not to offend the toxic teacher-unions. [see The Union War on Charter Schools in the WSJ] And, though I am not an expert on foreign affairs, I cannot but feel uneasy about the enthusiasm with which he is prepared to be seen with the likes of tin-pot dictators like Hugo Chavez of Venezuela and Daniel Ortega of Nicaragua, thereby undermining the credibility of the domestic opposition in these countries who often need at least our moral support to fight for human rights and freedom; and I wonder why he feels it necessary to apologize to the whole world for everything bad America has ever done or to deny the reality of American exceptionalism. [see The President's Apology Tour in the WSJ ]. Why, at least, is he not talking straight on human-rights abuses around the world, including in, most prominently, Russia?
This messiah-president is getting to make a lot of important decisions. God help us.