We're not stupid, Mr. President

When the president and vice president visited Kokomo recently to tout the alleged success of the auto industry bailout and other policies, I was a bit exasperated.

I already knew, of course, that President Barack Obama and many others were alarmingly susceptible to overlooking the secondary and unseen effects of his administration’s economic policies, but I suppose I was more put off than usual because an entire campaign-style trip seemed to have been built around this elementary mistake.

This mistake, to one who has been made aware of it, appears as obvious as the most embarrassing mistakes politicians make when analyzing policies, from the mistake of ignoring the prevalence of divorce while crusading for the sanctity of marriage to the mistake of assuming that the latest problem could probably be solved if we would only devote more funding to the bureaucracy tasked with solving it.

It is all the more embarrassing when you realize the mistake was identified explicitly by the economic journalist Frédéric Bastiat more than 150 years ago in his essay “What is Seen and What is Not Seen.”

In the essay, Bastiat wrote, “There is only one difference between a bad economist and a good one: The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”

Although a number of Mr. Bastiat’s insights have taken hold among even the most economically senseless politicians, it appears his basic insight about unseen effects has yet to penetrate the minds of those who look at a new government program and see only sunshine and daisies.

In the case of President Obama’s recent trip, Bastiat would surely be alarmed if he knew that, a century and a half after the publication of his famous essay, the leader of a prosperous nation could say with a straight face that a policy such as the auto bailout was a success simply because he can point to one city that would be worse off without it.

Bastiat would probably want to know how none of the president’s advisers realized, either before or after the bailout was implemented, that the money that would finance the measure would necessarily come from the wealth-generating — that is, private ­— sector of the economy in one form or another, either directly through taxation or indirectly through inflation caused by printing money or crowding out caused by borrowing.

He would probably be astounded that Obama and his administration would have the audacity to tell people the auto bailout was a success while anyone who realizes the government’s money must come from somewhere also realizes that it came from other sectors of the economy that have shed jobs and reduced output as a result.

The most sickening part of this whole spectacle, of course, is that we can be almost certain that the president isn’t really stupid enough to believe Kokomo’s comeback came at no one’s expense.

He just seems to think we are and is willing to exploit that perceived
advantage.


E-mail: jarlower@indiana.edu