In a recent piece on the presidential campaign in New York magazine, an Obama aide described Mitt Romney this way: “He’s the fifties, he is retro, he is backward, and we are forward.”
Yet President Obama is the one touting his economic vision as a bridge to the 1950s.
Here is what Obama said in Ohio yesterday:
In the decades after World War II there was a general consensus that the market couldn’t solve all of our problems on its own. …This consensus, this shared vision led to the strongest economic growth and the largest middle class that the world has ever known. It led to a shared prosperity.
The 1950s and 1960s — taxes were high, unions were strong, incomes more equal. And the U.S. economy grew by 3.7% a year. So, Obama seems to suggest, let’s just dial up the economic Way Back Machine — raise taxes on the rich, reregulate industry, boost union power – and we can go back to the future.
But there’s no going back, Mr. President. The post-World War II decades were affected by a host of unique factors, not the least of which was that they came right after a devastating global war that left America’s competitors in ruins. A National Bureau of Economic Research study described the situation this way: “At the end of World War II, the United States was the dominant industrial producer in the world. … This was obviously a transitory situation.”
And as former Bain Capital executive Edward Conard notes in his new book, Unintended Consequences, the size of the U.S. labor force was constrained during those decades by both the 1930s baby bust and casualties from the war. So a surge in jobs and a restricted supply of labor produced fat wage growth. Hoping for a return to that era is futile, Conard concludes:
The United States was prosperous for a unique set of reasons that are impossible to duplicate today, including a decade-long depression, the destruction of the rest of the world’s infrastructure, a failure of potential foreign competitors to educate their people, and a highly restricted supply of labor. For the sake of mankind, let’s hope those conditions aren’t repeated. It seems to me anyone who makes comparisons between todays’ economy and that of the 1950s and 1960s without fully disclosing their differences is deceiving their readers.
Demographics, technology and globalization — has Obama noticed how any of these have changed over the past half century? It was hard to tell from that Ohio speech. Instead of modernizing the American social insurance system, regulatory regime and tax code to shift the Welfare State into an Innovation State, the president seems to be doubling down on an obsolete economic model where growth is driven by expanding public sector union employment and a clean-energy version of industrial policy.
Looking backward — and drawing the wrong conclusions — is no way to move forward.