Obamanomics is the real threat to economic growth

Conn Carroll

Making the case for his Buffett Rule tax hike last week, President Obama told a crowd in Boca Raton, Fla., "What drags our entire economy down is when the benefits of economic growth and productivity go only to the few."

"What makes us weak is when fewer Americans can afford to buy the products that businesses are selling, when fewer people are willing to take risks and start their new business, because if it doesn't work out they worry about feeding their families," Obama explained.

But as National Journal's Jim Tankersley noted later that same day, the Buffett Rule does nothing to put more money into average Americans' pockets. "If the Buffett Rule was a serious pitch to help the jobless, it would deal with one of those main drivers of unemployment. It would boost persistently weak aggregate demand or incentivize business investment. It does neither," Tankersley wrote.

Tankersley is right. By the Keynesian economic standards Obama has embraced, the Buffett Rule does nothing to help economic growth. But maybe Obama has another theory of how economic inequality can lead to weak economic growth.

Attacking the House budget the previous week, Obama claimed, "Research has shown that countries with less inequality tend to have stronger and steadier economic growth over the long run." What research is he talking about?

He can't be talking about the work of economist Stephen Knowles. Knowles found that while inequality is bad for growth, that is because income inequality has a history of leading to politicians who win elections by promising higher tax rates, which, in turn, slow growth. Higher taxes are exactly what Obama is proposing. So that can't be it.

Obama is probably referring to the work of MIT economist Daron Acemoglu, who argues in his book "Why Nations Fail" that some forms of inequality do hurt prosperity. Acemoglu recently wrote in The Huffington Post: "Any discussion of inequality should distinguish economic inequality from inequality of opportunity and from political inequality. ... The real danger to our prosperity lies in political inequality. When politics gets hijacked, inequality of opportunity follows, for the hijackers will use their power to gain special treatment for their businesses and tilt the playing field in their favor and against their competitors."

Acemoglu is right. The real danger to our economy is not income inequality, per se. The real danger to our economy comes from wealthy special interests who use government power to squelch competition and enrich themselves.

Speaking of wealthy political donors using government power to squelch competition and enrich themselves, let us peruse Obama's signature economic policies.

Obamacare: The drug industry spent millions of dollars promoting Obamacare in exchange for keeping foreign drugs out of the U.S. market, and billions in subsidies for Americans to buy their products.

Energy: Of the $20.5 billion in loans granted by Obama's Energy Department and funded by Obama's stimulus, 80 percent of them went to companies that were either run by or primarily owned by Obama financial bundlers.

Auto bailout: At the behest of auto unions that gave millions to his campaign, Obama interfered in the bankruptcy process, violating the property rights of Chrysler's secured creditors, all so he could sell the firm to a foreign auto company.

There is a threat to our country's history of strong bottom-up economic growth. But it is not from a tax code that takes too little money away from hard-working Americans, or even from the rich. It is from politicians who want to reorganize the economy from the top down as they see fit.

Conn Carroll is a senior editorial writer for The Washington Examiner. He can be reached at

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