Why Risk Threatens Obama

Kevin McCullough
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Posted: Apr 05, 2009 12:00 AM

President Obama has dug himself into an even deeper hole in his attempt to deliver on key campaign promises. Just in February and March alone (two months solely on his watch) he has presided over a record breaking nearly 2 million additional unemployed persons than when he took office. The national unemployment rate now surging well past 8.5% (double that of the majority of Bush’s two terms), Obama's unemployment percentage is the highest in 25 years, and his total of unemployed persons at over 13 million is a gross number that exceeds the 11 million plus of the depression era.

If President Obama inherited the greatest recession since the Great Depression, his policies, lack of action, and wrong headed decisions have now surged the nation passed it.

In pointing this out, a commenter on my blog this past week chided me, "it might take more than 72 days to fix it."

No one doubts that.

But fundamentally I can assert to you that Obama's policies have worsened the matter, and we are still only at the tip of the iceberg in terms of where his Titanic-type view of the economy is leading us.

You only need to understand a single word to be able to grasp the full concept: elasticity.

It is what Obama's policies lack, and without it there will be no foreseeable recovery for the economy for some time. Without it, Obama's trends on unemployment, consumer confidence, and economic recovery will stagnate--and that isn't going to help anyone.

But what do I mean?

Elastic is this fantastic quality found in rubber. Those who use rubber bands for anything as small as bunching things together or as large as bungee jumping from a bridge at several hundred feet understand its value. It is able to stretch, sometimes to the point where other substances would easily break, and as quickly as it had stretched it is able to recoil and return to its original state.

It is precisely the lack of elasticity in America's economy that will continue to give us high unemployment, low production, and poor quality.

But why is that important?

Pay attention here.

Elastic “conditions” (federal tax policies) encourage business owners, patent holders, and idea generators--to engage in risk, set up companies, hire people, and attempt to create, produce, or distribute goods and services. The economic elasticity comes in the form of sacrifice the individual idea generator, patent holder, or business owner is willing to engage in. Sometimes they will mortgage their home, sell off all their goods, and risk everything on the confidence of their idea. Understanding that the onus of their success rests upon their own shoulders they engage in the level of risk or sacrifice that they are comfortable with, in the hopes of producing far more than what they originally put at risk in the first place.

Risk is the currency in an elastic economy. It says to someone who has an idea for a product, "Do you think you can actually pull this thing off?"

Traditionally in economies where America has thrived, we have made it our business as a society to reward those who take the risk. We do this through tax incentives on invention, business development, hiring workers, and increasing production.

Engaging in risk does not benefit everyone who engages in it, and many lessons have been learned by society and the individuals who have failed to become the success their original idea had given them the hope of.

But it is resolutely true that without many risk takers undergoing the lumps in their throats, the sinking in the pit of their stomachs, and the massive sacrifice of much--the American economy would have dried up long ago.

The problems with Obama's entire approach to economic development is that he replaces risk with status quo, limited outcomes, and static conditions for all.

For what it’s worth, static conditions do exactly the opposite of risk.

I was with a CEO of a company in Virginia (several actually) last weekend and the thing he blurted out in the middle of breakfast was, "When conditions are bad get your arms around the cash."

In other words, hold on to resources, become miserly, take less risk, and attempt less or even no growth. When risk is looked at as suspect, success is punished as criminal, and taxes force the productive to no longer be motivated to achieve more, things grind to a painfully ugly halt. And that's exactly where we find ourselves in 2009.

Elastic economies create, produce, thrive, and teach lessons. Static ones stunt, inhibit, block, and eventually shut down.

Jobs are not created in a vacuum. If there is no benefit to the corporation hiring them, then they should not be given a job, plain and simple. No one has a Constitutional right to a job.

But everyone should be given the same chance at success or failure, risk or reward, responsibility or consequence.

President Obama has chosen instead to spend money we haven't yet printed. He also insists on creating jobs that serve no economic purpose in "greening" the most environmentally conscious nation on earth. On top of that he stifles the risk-takers from creating new products, developing growth, or starting businesses. And that money he's photocopying in the basement of the White House, when it is printed, will be nearly worthless because of the lack of securities behind it.

So to sum up...

Obama is shrinking the pie, AND simultaneously filling it with devalued currency.

Doing so alone would be harmful enough, but doing so while suffocating the breath out of the only elements of the economy that could allow us to recover (elastic risk) verges on arrogant, maniacal, or criminal.

I'll let you decide which you believe it to be.