Obama's War on Prosperity

In my last post I noted that President Obama's current attack on Mitt Romney is predicated on his ability to make profits, as if making profits were evil.  In doing so, I said, Obama appears to have declared war on prosperity.  The more I think of it, the more I think this captures Obama's entire approach to the economy.  Lyndon Johnson declared war on poverty, thinking that large government programs to help the poor would actually help them.  That thinking was quite wrong, as we know now that the Great Society programs destroyed families, increased unemployment, promoted dependency, discouraged self-reliance and self-advancement and exacerbated class division, all while making poverty worse. But at least promoters of the Great Society actually wanted to help someone.

Obama's War on Prosperity, on the other hand, isn't designed to help anyone. It is designed to hurt someone, the many someones variously described as "the rich," "the 1%" and those who "make profits." There isn't anyone who is especially targeted to benefit from this war; just plenty of someones who are targeted to lose.

Consider: Obama never expresses particular concern for those in poverty. He does not identify with their plight or rail about their living conditions, their lack of food or sanitation or their poor education. His attention, rather, is on the "haves," and his true passion is directed at the "unfairness" of their having what others do not. He wants redistribution of wealth, not so much to help the poor, but to stick it to the rich.

Americans should recoil in horror that a sitting president should have these views, because they are contrary to everything Americans believe in.  This land, unique in the world, is the land of opportunity, where getting rich is the American dream, and a dream that anyone, of any race, of any background, of any birth, can achieve.  Anyone can attain as much success as he can, through hard work, smart investment, and virtuous living. And as I point out throughout this blog, the success one attains must result in success for others, as every purchase and every hire one makes makes the other party better off, too.

Can everyone be Warren Buffett?  Clearly not, but success is not defined by having multiple billions of dollars. Success is improving your lot, giving your children a better opportunity than you had, a decent house, time with your family, health, and contentment. Millions of Americans routinely attained success throughout America's history, doing just these things, precisely because government let them live their lives as they wished and stayed out of the way. Today, success, even by these modest terms, is increasingly difficult for anyone to achieve.

Not that long ago striving for success, and the prosperity that went along with it, was taken for granted as the American creed. Obama's War on Prosperity rejects this creed and the commonality it gives us, and it seeks to pit us against each other.  If it succeeds, inevitably we all will be poorer.

Maximizing Profits Is Good for the Economy . . . and for Reducing Poverty

In the course of criticizing Mitt Romney the other day, President Obama said that, with respect to private equity firms like Bain Capital, we must "understand that their priority is to maximize profits. And that’s not always going to be good for communities or businesses or workers."  His comment reveals his own misconception, and a common one among Leftists, that profits can be "bad" for "communities or businesses or workers."  How are profits "bad"?  The unstated premise must be that to earn a profit one has to make someone else poorer, if not steal from them.  As Dwight Schrute might say, "False."

Putting aside situations where profits do result from stealing (or something close to it), profits reflect wealth creation, not only on the part of the corporation that "profits," but also by those with whom it deals--its customers, employees and suppliers.  An article in today's Wall Street Journal seeks to correct the President's misconception regarding the evil of profits, and comes close to making the point I make here.

Professor Paul Rubin, a professor of economics at Emory University, writes:

Consider what contributes to profit maximization. In simple terms, profit maximization means producing the products earning the highest returns, and producing these products at the lowest possible cost. Both are socially useful behaviors that benefit consumers.

His thesis is therefore that profits are good because they benefit not only the "profiter" but also those with whom it trades--consumers.  He concludes:

Consider the converse: What if a business does not maximize profits? Then it is either not making the products that consumers want the most, or it is not producing its products at the lowest cost. In either case, consumers are harmed. Any argument against "profit maximization" is an argument against consumer welfare.

Maximizing consumer welfare is the ultimate justification for an economy.   

"Consumer welfare" is just another way to say "wealth."  So Professor Rubin is saying, correctly, that maximizing wealth is the justification for an economy, and it should be the goal of political economy.  But I wish he and others defending free enterprise would make explicit that profits are good not only because they reflect efficient satisfaction of consumer demand, but also because they are the mirror-image of the "profit" or wealth-improvement that everyone else who dealt with the company must have realized in order for the profit to occur. Profits are good because they expand wealth, make the pie bigger, and destroy poverty.  They are the source of the torrent of prosperity that gushes when markets are free to operate.

By calling into question the good of profits, President Obama declares war on prosperity, as he has for the last four years. Is he winning that war? Look around you. And then decide whether you would rather live in prosperous country that blesses the profit-maker, or a destitute country that snipes at him.

More from AEI President Arthur Brooks

I earlier posted about a speech given by American Enterprise Institute President Arthur Brooks.  Brooks has written a book, The Road to Freedom, elaborating on the theme of his speech, which is the moral imperative of free enterprise.  That point is worth repeating: Free enterprise is desirable because it is fairer,  not just more efficient, than other economic regimes. Brooks is blogging here, and he has much to say about why free enterprise must be defended against government overreach.  A sample from his book:

In his first inaugural address, Thomas Jefferson laid out his vision of “a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.”

President Obama’s vision of government is a bit more expansive than Jefferson’s. The U.S. government, in his view, should be judged on whether or not “it helps families find jobs at a decent wage, health care they can afford, a retirement that is dignified.” In a bit over 200 years, we have moved from a president who believes the purpose of government is to leave you free to live your life as you see fit, to a president who thinks that the state is included in finding you a job, getting you a doctor, ensuring you save for your retirement, and a long list of other things.

We need a philosophy of government that preserves Jefferson’s ethos, while recognizing that the world has changed in dramatic ways. In my view, America would do well to turn to the wisdom of German-born economist and Nobel laureate Friedrich Hayek. Hayek’s classic book “The Road to Serfdom,” written in 1944, is obligatory reading for all advocates of free enterprise — and still provides an excellent guide to the role of government.

More power to him.