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The Jewish Press May 18, 2012

Most economists since 2009 have been completely wrong in their forecasts, reminding us that their supposedly data-driven discipline is more an art than a science. After all, a great deal of money is invested and spent – or not — based largely on perceptions, hunches, and emotions rather than a 100 percent certainty of profit or loss.

And the message Americans are getting is that the Obama administration is hostile to investment and business, and thus should be waited out. Despite the stimulus of borrowing over $5 trillion in less than four years, near-zero interest rates, and chronic deficits, the U.S. economy is in the weakest recovery since the Great Depression and mired in the longest streak of continuous unemployment of 8 percent or higher – 38 months since the 1930s. The Mexican economy is growing more rapidly than ours.

Why did the massive annual $1 trillion-plus deficits fail to spark a Gross Domestic Product (GDP) as new public works projects were heralded by the administration? Much of the answer is found in the collective psyche of those Americans who traditionally hire, purchase or invest capital. An economy is simply the aggregate of millions of private agendas, of people sensing and reacting to a commonly perceived landscape. Yet since January 2009, that landscape has been bleak and foreboding.

Take the debt. The problem is not just that Obama has borrowed $5 trillion in less than four years, but also that he has offered few plans to reduce the ongoing borrowing and none at all to pay down the debt. Instead, he has demonized as heartless anyone who opposes his serial $1 trillion annual deficits. That demoralizes the public, who privately know that they cannot buy everything they might wish, and who expect that government will not, either. In the business community, there is the unspoken assumption that, at some point very soon, either taxes will have to rise, the currency will have to inflate radically, or debts will have to be renounced – all equally foreboding for those with capital.

Take energy. We are reminded that the Arctic National Wildlife Refuge (ANWR) oil fields in Alaska, and others far greater there, are still off limits. So too are over 25 million barrels off the California coast. Federal leases have been vastly curtailed in the Gulf of Mexico, off the Eastern Seaboard, and in the American West. The cancellation of the Keystone pipeline, which would have kept billions of U.S. petrodollars inside North America, coupled with Solyndra-like federally subsidized solar and wind boondoggles, sent the message that the government would oppose energy that was profitable and subsidize sources that were not.

Worse still, in less than four years we have now an entire corpus of Obama-administration quotations blasting fossil-fuel energy. The president himself promised skyrocketed energy prices with his now-stalled cap-and-trade proposals. He mused that new regulations might bankrupt coal-burning companies. He ridiculed the idea of increasing oil and gas supplies by more drilling and instead pointed to the importance of proper tire pressure and regular tune-ups and spoke of tapping Americas vast algae resources. (Huh?)

Interior Secretary Ken Salazar, who as a senator had claimed that even $10-a-gallon gas would not prompt him to open up federal lands for oil and gas leases, shrugged that there is no way of knowing whether $9-a-gallon gas is on the horizon. More recently, it was disclosed that an EPA regional administrator had bragged of trying to “crucify” and “make examples” of gas and oil companies in the manner that the Romans did to conquered peoples.

The current renaissance in American oil and gas production is primarily a private effort to drill on private land, despite rather than because of the Obama administration. Obama’s taking credit for private companies* finding new sources of low-priced oil and gas only heightens the sense of private-sector cynicism and pessimism. The result is that “speculators” do not believe oil companies will be given access to enormous energy reserves on public lands — and that, to the degree they drill new wells on private lands, a horde of apparatchiks (government flunkies) will make life difficult for them.

Take also new mandates. The problem with Obamacare is not just that it represents a vast new entitlement at a time of record annual deficits, but that no one knows how much it will cost employers to enroll their employees. Potential hirers instead suspect only that their healthcare expenses will spike, and those who are politically connected, for that very reason, have sought and obtained exemptions from the Obama administration.
The public likewise suspects Obamacare will come to resemble the hated Transportation Security Administration (TSA) they see at airports – lots of employees milling around, little guarantee that the job at hand is done well, and an evident resentment of federal employees toward the public they serve.

Take wealth. Obama has ridiculed those who have done well as fat cats, corporate-jet owners, people who don*t pay their fair share or don*t know when to stop making money. But the problem with this boilerplate populism is that it does not emanate from the muscular classes and is not aimed uniformly at the proverbial rich. The first family vacations in Martha’s*s Vineyard, Costa del Sol, Vail, and Aspen, not at Camp David; and the lieutenants in this class warfare are themselves one-percenters – Al Gore, John Kerry, Nancy Pelosi, etc.

The only thing more discouraging to investors than class warfare generally is a certain type of class warfare: a hypocritical crusade that emanates from the upper classes and selectively targets enemies on the basis not of wealth, but of the degree to which they have failed to buy exemptions with their wealth. If one were to dream up a perfect way to destroy incentives on both the top and bottom ends, one could do no better than what we have seen since 2009.

The net result is that those with capital, even if they are small businesses, do not believe the Obama administration likes them. They feel regulations will increase, taxes will increase, energy costs will increase, and that as they pay more to government and keep less, government will nevertheless become even more arrogant and inefficient and they will become even more demonized.

When people pay over 50 percent in payroll, federal, state, and local taxes and are still caricatured as “not paying their fair share,” a sort of collective shrug follows and bodes ill for the economy at large. One need not be liked to make money, but the constant presidential harangues finally take their toll in insidious ways.

I don’t know whether Mitt Romney’s economic package will bring instant prosperity. But, I suspect the fact alone that it is not what we have seen and heard for the last four years will unleash a pent-up energy of the sort we have not seen in a long time.

Victor Davis Hanson is a senior fellow at the Hoover Institution, and the author of numerous books on military history. He blogs at Pajamas Media (http://pjmedia.com/victordavishanson)

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