The public sector is doing just fine

Besides demonstrating a stunning disconnect with the results of his policies, President Obama’s infamous “the private sector is doing fine” comment last Friday  laid bare the dangerous primacy of the public sector in his world-view.

The Romney campaign hit the “out of touch” angle on Monday, with a brutal new web video called “Jolt”:

Actually, the things Obama is “in touch” with are scarier than what he’s “out of touch” with.  Here’s the full text of Obama’s jaw-dropping statement: “The private sector is doing fine.  Where we’re seeing weaknesses in our economy have to do with state and local government.  Often times cuts initiated by, you know, Governors or mayors who are not getting the kind of help that they have in the past from the federal government, and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in.”

(Emphasis mine.)  It should come as no surprise to any student of this presidency that just last month, President Obama was bragging, “The only time government employment has gone down during a recession has been under me.  I make that point just so you don’t buy into this whole ‘bloated government’ argument that you hear.”

Government spending is included in the broad calculation of Gross Domestic Product, so it’s true that when government spends less, GDP is negatively impacted.  Some economists prefer to use metrics that discount government spending, but that’s really not logical either.  Some private enterprises depend heavily upon government contracts.  Some areas depend heavily upon government installations, such as military bases, to drive the local economy.  When jobs are lost due to federal, state, and local budget trimming, people end up on the unemployment line.

However, this should make us less tolerant of government growth, not more defensive of Big Government priorities.  Just for starters, government uses its very bulk to defend its interests.  If President Obama is not re-elected, brace yourself for much broader, louder versions of the argument he offered on Friday: budget cuts are unthinkable because of all the people who will lose their jobs.  We can never butcher the bloated state and federal government pigs, because too many piglets suckle from their swollen bellies.

Obama, of course, is a statist, so he views all reductions of government as weaknesses to overall growth… even when wasteful programs are trimmed, or growth-killing regulations are shut down.  He views the entire private sector as subcontractors to collectivist central authority.

That’s very bad news, because the Obama world-view stuffs the entire U.S. economy into the cramped cargo hold of a rapidly sinking boat.  Government operations are defined by their ability to ignore feedback.  They actually grow through failure, presenting the expansion of whatever “problem” they were created to “solve” as evidence that larger budgets and more regulatory power are needed.

When “bankruptcy” looms, the government has political resources unavailable to private enterprise.  Taxes can be raised, systemic flaws can be hidden with the kind of accounting trickery that would put private-sector executives in prison, and of course fresh money can be printed up in the basement of the U.S. Treasury.

Furthermore, the government resists budget cuts with moralistic language that would provoke derision at a private-sector Board of Directors meeting.  Threaten a nickel of government spending, and you want to cashier cops, firefighters, and teachers!  The many dependent constituencies of Big Government furnish a ready supply of hostages against insolvency.  The notion of making reasonable trade-offs to finance new spending is treated as an outrage… which, combined with the disgraceful lack of an actual federal budget for the past three years, means there is no real sense of “prioritizing” in Washington.  Everything is simultaneously the “top priority” of our massive government, including mutually exclusive goals, such as job creation versus obedience to radical environmentalist ideology.

Perhaps most dangerous of all, every element of our flabby super-State is connected by lines of obligation.  Insolvent cities expect state bailouts.  State governments demand federal assistance.  The federal government engages in massive deficit spending, and begins bleating for tax increases when further borrowing becomes difficult.  Every hand is thrust into other pockets, in a chain of dependency that Big Government enthusiasts believe is endless.

It’s not endless, though.  CNS News has an article today about who is holding all of the U.S. government’s debt.  It’s not China.  They’ve got $739.6 billion of our paper, but that’s less than half the amount held by Uncle Sam’s top creditor: the Federal Reserve.

That’s right: the top holder of U.S. government debt is the U.S. government.  China and Japan were the top debt holders before Obama arrived, but that’s not true anymore.  The share of Washington’s debt borrowed from Washington has quintupled under Obama, to $1.668 trillion.  It was only $302 billion when Obama took office.

That’s the number deranged pseudo-Keynesians like Barack Obama or New York Times columnist Paul Krugman don’t want to talk about.  They would have us consider mad dreams of borrowing more trillions to “pump up GDP,” fertilize private-sector job creation by carpet-bombing it with “stimulus” dollars, and “reduce unemployment” by simply adding more people to federal, state, and local payrolls.  But those plans would spend money we don’t have, and can no longer borrow, to create jobs that aren’t needed, in service to “markets” that don’t exist.

That’s why it’s so incredibly dangerous to hear our out-of-touch President mumble that he believes the “private sector is doing fine.”  He thinks it offers fresh pockets for him to pick, either through taxation today, or deficit spending to create future obligations.  And when he contemplates the looming insolvency of government at every level, he doesn’t pause to reflect that it was a deadly mistake to create such a towering house of cards.  He just demands more cards.