February 23, 2010
Backing Losers, Shackling Winners: Obama-Style Industrial Policy
By Jeffrey Folks
Team Obama seems intent on selecting the weakest players to represent the American economy in global markets. The administration's tax and regulatory policies handicap our finest industries while trying to promote others that may never be competitive without government subsidies. At times it seems that this administration wants American industry to fail.
Five million manufacturing jobs have been lost in the last decade as one industry after another has shifted production abroad. Yet America remains the world leader in technology, energy, health care, defense and aerospace, and entertainment. In order to remain global leaders, businesses in these fields must invest in research and development, and to do so, they must be profitable. Why, then, is the Obama administration targeting the profits of nearly all of these businesses? With the burden of increased taxation and regulation, American companies will find it harder to compete with foreign firms. This assumes, of course, that those companies are allowed to continue operating at all.
Obama's tax and regulation proposals for the energy sector are an example of how to kill off a leading American industry, and with it hundreds of thousands of good jobs. The budget that the president submitted this month imposes a ten-year $39-billion tax increase on oil and gas producers. At the same time, it would increase subsidies to currently uncompetitive industries such as solar, wind, and biofuel. This sort of budgeting is a recipe for failure.
While the government is hamstringing the world-class energy companies that we have in this country, China is buying up energy rights around the world -- even offshore in our own Gulf of Mexico. The latest acquisition involves a deal with a British firm in the Lake Albert region of Uganda, which holds an estimated 2.5 billion barrels of oil. At the same time, the Export-Import Bank of China is funding a twenty-year coal-mining operation in Queensland, Australia, and the Australian government has agreed to fast-track its approval process. These are only two of dozens of major energy investments that the Chinese have made in the last year alone.
Perhaps the Chinese are so foolish as to be spending tens of billions on fossil fuels that will be rendered worthless by advanced solar and wind technologies, but I doubt it. Ten years from now, China will control rights to the fossil fuels that it needs to expand its economy. Chinese firms will supplant American ones as the world's leading energy producers. America will be left with some very large and inefficient solar and wind farms, and with very few jobs in the energy sector.
Obama exhibits the same anti-business mentality in the regulation of mining. In addition to mammoth reserves of coal -- enough to power the nation for hundreds of years at current levels -- the United States has the potential to produce much greater quantities of iron ore, nickel, zinc, copper, silver, gold, and other metals. The Kennecott Eagle nickel mine in northern Michigan is a perfect example: the mine would produce a much-needed commodity and create five hundred jobs, but it has been stalled for over seven years by environmental opposition and regulation. New mineral production has come mostly from Canada, Australia, Brazil, Latin America, and Africa -- almost everywhere, in other words, except the U.S. Metals that are abundant within our own borders, and that might be safely extracted using American labor, are shipped in from across the globe. There is a single reason for this insanity: excessive environmental regulation.
As if it were not enough to kill off oil and gas, coal, and mining, the administration is taking aim at financial services, insurance, and even technology. The FTC antitrust action announced against Intel in December 2009 is proof that even the administration's "friends," California's high-tech and entertainment industries, are not safe.
Health care, energy, mining, agriculture, banking, insurance, defense and aerospace -- what will be left when Obama gets finished with the American economy? Does he really believe that everyone in America wants to live the rest of his life on extensions to unemployment insurance funded by mounting government debt? Americans want to work, but Obama is killing off one industry after another. Soon there will be nothing left except make-believe green energy jobs.
Even those who hold "safe" public-sector jobs and those who are already retired are not really protected from a government that seems intent on shrinking the economy. State and local governments are facing unfunded liabilities now estimated at over $1.5 trillion. Jobs and benefits in the public sector will face severe cuts for years to come. Retirees living on fixed incomes face an equally poor prospect. An unproductive economy produces fewer goods and services. Assuming stable demand for necessities such as food, housing, health care, and energy, the price of these goods and services will rise while retiree income remains relatively flat. For both workers and retirees, the effect of inflation is a lower standard of living.
The public finally seems to be waking up, and there is growing opposition to the administration's war on the private sector. Yet even with Congress balking for fear of voter wrath, Obama pushes ahead with talk of health care reform, cap and trade, aggressive EPA enforcement initiatives, and a second stimulus bill. Perhaps the president is not concerned about his reelection chances just yet, but two more years of job-killing policies and he will not even have to worry about running.
Dr. Jeffrey Folks taught for thirty years in universities in Europe, America, and Japan. He has published many books and articles on American culture and politics.
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