President Obama recently said that we Americans have gotten lazy, and that we have lost our creativity. Sadly, he uttered these words on foreign soil. What he should understand but doesn't, is we are not lazy, and we are not stupid. We are just plain frustrated. We have a leadership vacuum. We question our future even though all obstacles to our growth are obvious and controllable.
What will our tax rates be in 2013? What will be the cost of Obamacare if proven constitutional, or not repealed? Will Green energy, which is laughingly uncompetitive with fossil fuels (especially natural gas) still be subsidized by the American taxpayer? Will Dodd-Frank, Sarbanes Oxley, and our cumbersome, inefficient tax code be with us? Will we ever have a financial road map, called a budget, passed by this democratic senate? After all, it has almost been 3 years. How many draconian regulations are imbedded in legislation already on the books that have not seen the light of day? How does one invest, take risks, and create jobs with so many unknowns?
There is a economic theory called The Rational Expectationists Theory that I think explains our current behavior which our President refers to as laziness. The R E believe that it is harmful for the government to try to influence output, employment, and prices through fiscal (gov spending and tax) and monetary (controlling the money supply) policies. Having experienced past policies (mostly Keynesian), we, the R E, have learned what to expect, and we will change our behavior (investing, saving, spending) therefore making these government influences ineffective.
For a basic example, take the Federal Reserve. It has added 3 trillion dollars to it's balance sheet. (I find it interesting that the stock market has recovered about 3 trillion dollars since it's 2008 low). The Federal Reserve is currently funding one half of our 1.4 trillion dollar deficit. With these facts, how does an R E invest? Buying gold might give one some protection from the Fed printing all those falling in value dollars. But what are the negative economic effects of accumulating gold? Franklin Roosevelt once said in one of his "fireside chats" with the American people, that "hoarding had become an exceedingly unfashionable pastime." He was pleading with the people to take their money out of hiding and deposit it in the banking system so that the economy could multiply. To help accomplish this, he created the FDIC. Buying gold has the same negative effects of hoarding because it defeats what The Fed is trying to accomplish, which is to grow the money supply to stimulate growth and jobs.
In my opinion, most of us are Rational Expectationists. We will start taking risks, creating new products, ideas, hiring new workers, and therefore increase our national income when we have the confidence that America will again become Reagan's "Shining City Upon A Hill." When we restore our rightful place in the world as the country with the most economic freedom.
No, the American people are not lazy, and have not lost their creativity, but the same cannot be said for our leaders. Our President and The Bernank have tried the same old tired solutions and their outcomes are obvious. Where is their creativity? Where is Obama's leadership? Who is lazy?
Raising tax rates is not the answer because the problem is to much spending. President Reagan in a similar situation cut tax rates and created 19 million jobs. His rationale was that cutting tax rates "starved the tumor of government." Raising tax rates would only result in more spending.
Barak Obama and Ben Bernanke are considered brilliant academics, but as the great philosopher Forest Gump once said " stupid is as stupid does."
Ray Zimmerman
