By appointing Bill Daley Chief of Staff, President Obama hopes to present a centrist face to voters skeptical about his commitment to free enterprise.
Don’t be fooled.
Deeper in the Administration, the president’s electricians are busily rewiring American capitalism for failure.
The recent crisis was caused by a huge international trade deficit, massive foreign borrowing and shoddy Wall Street practices.
From 2004 to 2008, Americans spent and consumed five percent more than they produced and earned, scarfing up electronic devices made in China, Middle East oil and houses whose mortgages they couldn’t afford. The Chinese and Middle East royals bought U.S. bonds and other securities with the dollars not spent on U.S. exports, and Wall Street banks recycled those to consumers through first and second mortgages.
Big Wall Street bankers bundled those questionable loans into bonds, which ultimately failed and nearly destroyed the global financial system but for four trillion dollars in loans, gifts and favors to Wall Street from the Treasury and Federal Reserve.
This resulted in the destruction of much U.S. manufacturing, eight million additional jobless Americans and falling wages for almost everyone, save Wall Street financiers and West Coast designers of those snappy electronic gadgets.
Both groups contribute generously to Democratic campaigns and get special handling from the Administration and on Capitol Hill.
Meanwhile, the White House harasses the rest of private business with onerous, micromanaging regulations—for example, on food processors with stellar records, energy companies having no hand in the BP tragedy, and regional banks that played little role in the financial crisis but who lend to small businesses creating most new jobs.
Now, the Administration is gearing up to impose onerous limits on CO2 emissions that the President could not push through the Democrat-controlled 111th Congress. Higher energy prices and emissions limits will chase more jobs to China, which subsidizes gas prices and refuses to impose comparable CO2 emission limits.
The President boasts the economy created private sector jobs every month in 2010.
For the record, the Bureau of Labor statistics reported the private economy produced 112 thousand jobs per month—at that pace, it will take six years to recoup the eight million jobs lost during the Great Recession. By then, another nine million job seekers will have joined the labor force.
"The Obama Administration is overrun with inexperienced intellectuals and community activists."
Simply, the President’s jobs machine is not keeping up with population growth.
Bill Daley hardly understands much of this. A lawyer, he is the brains behind a storied Chicago political machine, a former Clinton Commerce Secretary adept at pushing deals like NAFTA through a skeptical Congress, and most recently, a JP Morgan chief for Mid-West operations.
At JP Morgan he did little real banking, and likely absorbed even less about finance and the abuses that caused the crisis. His principle responsibilities were to hustle up customers in Chicago for the real bankers in New York, and to help Jamie Dimon minimize damage in passed Dodd-Frank reform legislation. Judging from the pace big banks are gobbling up smaller competitors, hammering down the interest rates paid on CDs, and the size of recent Wall Street bonuses, he was not just a great lobbyist for JP Morgan lobbyist but Manhattan’s Messiah.
More importantly, though, folks like EPA head Liza Jackson, Interior Secretary Salazar, Ken and Energy Secretary Stephen Chu continue to beaver away in the bowels of the Obama Administration. Two lawyers and an academic physicist, none have much private business experience, and all are steeped in politically correct, but economically wrongheaded, ideas about the future of the economy.
Pseudo-economics causes the President to embrace the folly that the 17 million jobs needed over the next six years can be attained—not by fixing the trade deficit, curbing abuses on Wall Street, and cultivating industries Germany and China embrace—but by micromanaging business, increasing U.S. dependence on foreign oil and subsidizing windmills and solar panels manufactured abroad with U.S. stimulus money.
The Obama Administration is overrun with inexperienced intellectuals and community activists. Hiring a JP Morgan’s lobbyist won’t fix what’s broke—the President’s mistrust of free enterprise, left-wing notions about a “new economy” that may never materialize, and blind faith in regulation.
Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.