My Take on Tuesday

Tuesday’s off-year elections in the United States resulted in Republican control of the House of Representatives, with Democrats controlling the US Senate.  What does this mean for the United States of America in the next two years?

1.     Gridlock.  Without control of the House the Democrats won’t be able to cram down the throats of the American people any additional statist programs.  Gridlock will make it impossible to unravel Obamacare and other wasteful bailouts and stimulus programs passed by the last congress.  On the other hand, for the next two years at least, cap and trade, card-check and other ridiculous Obama agenda items stand no chance of passage.  You hear survivors of the election talk about working together to “get things done.”  That scares me.   Any time the government “gets something done” it is almost always harmful to the economy.  What’s wrong with gridlock?  Nothing!

2.    No Republican Compromise.  Establishment Republicans have usually compromised with Democrats.  If the Democrats want a two trillion dollar deficit, Republicans will “compromise” by passing a budget with a one trillion dollar deficit.  In either case, the country heads down the path to hell, just a bit more slowly.  The problem that establishment Republicans face this time is that there are “tea party” Republicans in Congress who will not compromise on spending.  The dynamics have changed in the Republican Party; those not voting to actually lower spending will be targeted next time by the tea party, and they know it.

3.    Business Conditions.  There will be a slow improvement in business conditions over the next couple of years, largely because of gridlock and the rejection of the Obama agenda.  Feeling “safe” for a couple of years, business will slowly expand capital and employment, although we’ll not get back to full employment (4%) by 2012.  There is a risk in recovering too quickly; Obama will take credit for the new jobs, using relative prosperity to win a second term.  A re-election of Obama in 2012, along with Democratic gains in the house, could put us back into the same hell-fire that has cooked our economic goose since 2008.  Only with an Obama defeat in 2012 and gridlock between the house and senate, will true prosperity return to the United States.

As an economist and businessman, I find it overwhelmingly important to stress to my colleagues and students the terrible, inherent danger of politicians.  Bill Gates and Warren Buffett can get rich only if people voluntarily do business with them.  They must create value to prosper.  The businessman or woman must be competent and knowledgeable to survive.  The politician need only be an idealist and popular.  Reality and practical knowledge need not enter the politician’s world.  A majority of votes from equally uninformed citizens are all that counts for a politician.  Furthermore, the politician has far more power than the businessman.  He can pass coercive legislation that directs the creative activity of the business owner; mostly in directions that hamper, harm, or downright destroy the prosperity of both business owners and their employees.  There is nothing; NOTHING ON EARTH as dangerous as a politician, whether he governs from Chicago, New York, London, or Mumbai.

My friends in India; don’t worry.  While he is currently visiting in Mumbai and Delhi (your snake den of political corruption), Obama will soon be jetting back to the United States.  Bid him a happy farewell!  My friends in the United States; be eternally vigilant.  There is no time to rest or breathe.  In two years the Statists will again try to arise and take control your lives, your property, and your family.

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