Presidents Can't Manage the Economy
Determining What Trade-Offs to Make in a World of Scare Resources Is Best Left to the Free Market
APRIL 01, 2008 by JOHN STOSSEL
The presidential candidates have been repeatedly asked how they would “manage the economy.” With the exception of Ron Paul, every candidate has accepted the premise that this is something the president of the United States should do. Or can do.
Democrats act like the president is national economic manager. Republicans pay lip service to free markets, tax and spending cuts, and less regulation—before proposing big programs to achieve “energy independence,” job training, and a cooler climate.
John McCain says it’s important for government to do something “to sustain our leadership in manufacturing.” Why? Manufacturing jobs are no better for America than other jobs. Some argue that they are worse. How many parents want their children to work in factories rather than offices? Increasing service jobs in medical, financial, and computer sectors while importing manufactured goods doesn’t hurt America. It helps America.
The candidates see the global economy as an arena in which countries compete against one another—an economic Olympiad with winners and losers. Politicians love to promise they will keep America No. 1, as if that matters in a worldwide marketplace.
America as a nation does not compete against China or South Korea or Japan. American companies compete against companies in other countries, but that’s something else. The purpose of production is consumption, and American consumers prosper when foreigners compete successfully with American companies.
Ignorance and Intervention
A president who sees the global economy as a competition among nations will be tempted to intervene on behalf of the “United States” and create “good American jobs.” That’s how governments mess up economies.
McCain says, “It is government’s job to help workers get the education and training they need for the new jobs.” Mike Huckabee (who glories in public-works projects as a job-creation machine) and Barack Obama talk in similar terms.
That hardly shows confidence in the free market, which, if allowed, would train and educate workers just fine. But it shows misplaced confidence in the federal government, which, as journalist Jim Bovard has shown, has an unbelievably bad track record at doing it. The endless list of programs, like the Manpower Development and Training Administration, Comprehensive Employment and Training Act, Job Training Partnership Act, STIP, BEST, YIEPP, YACC, SCSEP, HIRE, etc., wasted billions and “distorted people’s lives and careers by making false promises, leading them to believe that a year or two in this or that program was the key to the future. Federal training programs have tended to place people in low-paying jobs, if trainees got jobs at all.”
Sen. Hillary Clinton told the New York Times recently, “I want to get back to the appropriate balance of power between government and the market. You try to find common ground, insofar as possible. But if you really believe you have to manage the economy, you have to stake a lot of your presidency on it.”
Notice that she equates government power and market power. That is absurd. “Power” in a free market means success at creating goods and services that your fellow human beings voluntarily choose to buy. Government power is force: the ability to fine and imprison people.
Politicians who talk about managing the economy ignore the fact that, strictly speaking, there is no economy. There are only people producing, buying, and selling goods and services. Keep that in mind, and one realizes that government action more often than not interferes with the productive activities that benefit everyone. When politicians propose regulations to fix some problem, they should ask if some earlier intervention created the problem and if the new regulations will make things worse. The answer to both questions is usually yes.
The economy is far too complex for any president—no matter how smart—to manage. How can politicians and bureaucrats possibly know what hundreds of millions of individuals know, want, and aspire to? How can government employees fathom what trade-offs to make in a world of scarce resources?
They can’t. That’s why free people are more prosperous than unfree people.
Presidential candidates should promise to keep their hands off the economy.