For the record, I don’t assume that the Federal Reserve chairman can ever know exactly what’s happening with the economy. And for the record, I never assume that anybody else can either.
Yet it was extraordinary to hear Federal Reserve Chairman Ben Bernanke acknowledge last week that he has “no idea” why our economy is so “fragile.” This is the man who has overseen the lending of more than $3 trillion American taxpayer dollars to foreign banks; the rapid-fire acquisition of the former giant Merrill Lynch by the gargantuan Bank of America; the multi-billion dollar taxpayer bailout of Wall Street; and the $800 billion “economic stimulus bill” from the Congress and the Obama Administration.
And now, this man with immense power over the entire world’s wealth and yet who has never been elected to any public office, has to admit that he has “no idea” why things aren’t going the way they were “supposed to.” As Trisha, a caller to one of my daily talk shows noted to me last Thursday, “We pay these people in Washington waaay too much money for them to simply ‘not know….’”
I appreciate the outrage of my fellow taxpayers over a government that has spent us into oblivion and now concludes that it has “no idea.” But I also think that this moment in time can be a “teachable moment” – if the agents of our government will be taught.
First, think about the “Obama stimulus spending.” I wonder if Mr. Bernanke has any idea how this money was actually allocated. Among the roster of expenditures was one hundred and twenty million of our tax dollars for the hiring of part time workers at senior citizen’s community centers. $87 billion for Medicaid “family planning services” (contraception). And $650 million to “assist” Americans in buying digital TV converter devices. And then there was one of my favorites from the Obama stimulus plan,the $335 million allotted for the “Booty Call” sexually transmitted diseases education program.
Free condoms and converter boxes do not spell “wealth creation.” And we can all imagine what gets stimulated when you participate in the “Booty Call” program - - but it is certainly not the economy.
The lesson here – for Mr. Bernanke, and everybody else– is that politicians and government bureaucrats DO NOT use our money as wisely as private individuals and organizations. Nobody with their wits about them would believe for a moment that doling-out “free” stuff from the government would expand the economic pie. Yet “stimulus funds” – money allocated by the Congress and President Obama specifically for the purposes of “stimulating” the economy – were spent on things like birth control and TV gadgetry, while the promised “shovel ready” infrastructure projects remain a mystery.
When private individuals and groups are left to handle their own money – and allowed to feel the pain if they fail to manage it properly - then they usually manage it in a wise way. But when politicians and bureaucrats spend our money, they’re spending somebody else’s money – and when it’s somebody else’s money, it too easy to spend it in foolish and self-serving ways.
And here’s another lesson: Even the smartest of government “leaders” often cannot handle our money better than we can individually. I still remember the Obama-Biden campaign’s “mixer” for young professionals that I attended back in September of 2008. I was a “fly on the wall” at the Phoenix, AZ hotel suite, as lots of MBA’s and JD’s and VP’s mingled around, buzzing about candidate Obama’s intellect and all the “super smart” people he would bring with him to Washington to fix the economy. By then it was apparent that Phoenix, the second-most rapidly rising real estate market in the U.S. was in nosedive mode. But Obama had a “mortgage bailout plan” that was going to fix everything – or so the party-goers told me.
Today people with late payments and bad credit scores get loan modifications, while those with current payments and good credit can’t get a return telephone call from their bank. The “super smart” people who went to Washington intent on “helping those who are hurting” have transformed the financial system into a structure that coddles the reckless, while punishing the productive.
And I wonder if Mr. Bernanke – or anybody else in the Obama Administration – has ever thought of this: In order for an economic system to function, every participant in the system has to be treated like they are fully human. From the poorest entry-level worker, to the wealthiest executive and business owner, we all must be treated like the free, grown-up, fully dignified human beings that we are meant to be. This means we must be “free” to succeed, “free” to fail, and incentivized to do the right thing.
Yet in the Obama economy, the poor are told “you can’t accomplish it on your own.” The rich are told “you’ve accomplished too much.” Business owners are told what they can and cannot do with their operating capital.
All these “lessons” really amount to matters of human character, and no amount of central bank tinkering can render them unimportant. These lessons are available to all of us, right now. Even to the man with “no idea.”