Election Reflection

After the 2008 election, many of us felt that the electorate had been duped, mesmerized by a charlatan of hope who would, like the Wizard of Oz, ultimately have his true nature revealed. That happened exactly as predicted. What didn’t happen was the presumed reaction of the populace. We presumed they would react like Dorothy and the citizens of Oz to send the Wizard away. After all, past Wizards of the Left like George McGovern, Walter Mondale, and Mike Dukakis had been banished once their redistributionist , anti-business, anti-growth plans had been publicized. Especially in an economy as bad as ours has been over the past four years, President Obama should have been driven out decisively, as Jimmy Carter was. Shouldn’t he have?

It turns out that American has changed – fundamentally and most likely permanently. Listen to the Talking Heads, and they will tell you it’s about demographics. It’s about blacks and Hispanics. That’s not what this change is about. It’s not about ethnicity. It’s about mindset

There have always been two types of people in this world. One type wants to do things.  The other type wants to receive things. Anyone who has been a parent will tell you that they can see some of these difference at very young ages.

The first type is driven by accomplishment and respect. They are the sorts who, as children, run up to Mom and Dad saying , ”Look what I can do!” Smart parents nurture this spirit with support , but also with challenges. They reward real successes (keeping score at Little League games) and punish bad behavior. They provide allowances in exchange for chores around the house. These are the children that grow up to be independent adults. As adults these children believe that, in the words of our constitution, they have a right to pursue happiness.

The second type is driven by fear and security. They are the sorts who, as children, run up to Mom to have their boo-boos kissed and to have Dad look in the closet for monsters. They get allowances just for being children. Their parents often make excuses for failures (not keeping score at soccer games) and give out “participation ribbons”. As adults these children believe that they have a right to happiness.

There have always been these two types of people in this world. What has changed is the mix. In the past, a sort of social Darwinism prevailed. The Type Ones were rewarded both tangibly and intangibly. They got “stuff”, but only if they earned it. They received approbation, not just for being good people, but for achievement. The Type Twos were punished both tangibly and intangibly. They didn’t get much “stuff”. They were ostracized for being school drop-outs or having illegitimate children (those being the two highest correlations with not getting “stuff”).  As a result, the Type Ones tended to outnumber the Type Twos. But then we changed. Achievement is now portrayed as much a matter of luck or connections as of effort. High-level achievers are regarded with suspicion and resentment. Rather than lauding achievers, we tell them “you didn’t build that.” College students are told by our President that rather than go into the business of producing things that others want to buy, they should consider a “higher calling” in government or the arts. Behaviors that correlate negatively with success are portrayed as “choices” that are just as valid as any other choice. “Judgmental” is now a pejorative word of the first magnitude. Everyone is entitled to feel good about themselves. Everyone is entitled not to be offended. Feelings trump results. But there is an iron rule in economics: That which you subsidize, you will get more of. As a result, Type Twos now outnumber the Type Ones

The Talking Heads tell us that the Type Twos believe that “the system” is stacked against them. It’s not for the most part. What is stacked against them is reality. They desire a shield from reality, and they look to governemnt to provide it for them.

Reality says that economic resources are scarce; that choosing more of something means getting less of something else. Shielders say that unpopular limitations can be removed by legislation that simply declares a “right” to get things.

Reality says that borrowing money for projects that don’t produce cash flow leads to bankruptcy. Shielders say that if a project has a worthy goal, the cash flow can be ignored.

Reality says that diverting resources from high-return activities to  low return activities will results in a lower rate of growth for your portfolio. Shielders say growth will just happen anyway.

Reality says that not finishing school and having children without marriage is highly correlated with being poor. Shielders say you should not be unduly punished for those choices.

Reality says that income is determined largely by how valuable your work is to customers and employers. Shielders say that your income should be determined by “comparable worth standards”.  A degree in women’s studies should be just as valuable as a degree in computer science.

Reality says that when technology expands the accessible global labor supply, wages will fall. Shielders say that they can prevent that through trade protections.

Reality says that if you increase the cost of hiring people (e.g. by mandating more costly benefits), employers will find ways to employ fewer people. Shielders say that they will simply increase unemployment benefits, food stamps and “disability” eligibility.

Reality says that structuring retirement plans so that benefits are paid by the contributions of new participants rather than from invested earnings creates unsustainable Ponzi schemes. Shielders say that they will simply extract more and more money from new participants.

Reality says that the essence of producing wealth is risk taking. Shielders say that they can produce wealth by protecting you from risk.

For most of American history work was highly valued in itself. You were expected to prioritize it over your personal and family life . Parents made sacrifices so that their children would have better lives than they did. You didn’t get paid if you didn’t work. Work was a moral understanding. Enter the “Millenials” (people in their 20s and 30s today).  They are willing to trade higher pay for less overtime, flexible schedules and a better work/life balance. The idea of “paid leave” becomes an entitlement. Work is expected to be “meaningful”, not simply remunerative. They believe that employers should seek to meet their needs as much as the needs of their customers. They judge a leader less by his accomplishments than by how much he “cares about people like me.”

At least half of our populace would read these observations and say, “Yes, and I think these changes are for the best. Isn’t shielding people from risk a good thing? Isn’t paying people who can’t or won’t work a compassionate thing to do? Shouldn’t people be entitled to choose a lifestyle that feels right to them without penalty? Why should some people have so much more “stuff” than others?” In the abstract, some of these things do sound appealing, but we do not live in the abstract. In the abstract "turn the other cheek" is an appealing outlook. In the real world, it may land you in the hospital. The very definition of a Utopian is “someone advocating an impractical scheme for social improvement.”

In the real world of economics, when you tax and stifle activities that create wealth while subsidizing and lauding behaviors that consume wealth, you end up with less wealth. We have chosen an economic path in which a decreasing number of productive, self-sufficient wealth-creators are expected to provide more and more things for the majority. In the abstract this produces a bright new world of "fairness". In the real world, it produces a much darker world of stagnation. America will not founder because Obama was reelected. Obama was reelected because America has already set a course for the shoals.