Perhaps because of his popularity, the mainstream media has failed to report on Obama’s audacious array of broken promises and backtracks. Within the same week, he pledged to not raise taxes until the economy recovers and also proposed a massive tax hike on individuals earning more than $125K per year. He pledged his support for 2^nd Amendment rights, but is now working to reinstate the pointless gun bans of the Clinton era. He somehow claims that tripling the budget deficit constitutes spending cuts, and that energy independence is achieved by outlawing shale, wilderness, and offshore oil. In short, Obama has kowtowed, to every far left demand so far put before him. The final betrayal of the capitalist system on Obama’s horizon is protectionism.

The far left dominated Democrats hate free trade, perhaps more than anything. Free trade exposes the failures of their union base and embarrasses the socialist ideologues of academia. Lefties hate free trade so much they smashed a Starbucks in its home town of Seattle. Starbucks has since campaigned for “fair trade,” which takes the sting out of free trade like carbon credits compensate for Al Gore’s mansion – by insubstantial feel good sleight of hand.

During the looting of America, A.K.A. the drafting of the stimulus bill, Obama requested that Speaker Pelosi remove protectionist language. Showing political cunning, she kept the language, but allowed the President to decline to enforce it. Thus, Pelosi threw a bone to her San Francisco liberal base, while hanging the burden of responsible governance on the far more popular Obama. Now Obama must decide if he will keep this promise or continue on his extreme leftward journey.

Free trade is important and valuable, and this time Obama cannot claim that every credible economist thinks otherwise (as he claimed every economist supported his stimulus plan). For example, two economists, Brian Singer and Kevin Terhaar explored the effects of market segmentation (protectionism) on risk premiums (the cost of doing business). Not surprisingly, they found that a country’s cost of financing growth increases as a direct factor of protectionism. Not only does protectionism increase the cost of purchasing protected goods, it increases the cost of doing business for the entire country. Steel tariffs not only increase the cost of washing machines and cars (made of steel), they increase the cost of a mortgage and suppress the value of the entire stock market. Because the US finances its economic growth through debt, a trade war with China will hurt the US far more than China. Conversely, the country that declines to respond to tariffs aimed at it actually benefits overall. Indeed, the body of credible economists supports free trade as improving the lives of all peoples.

Politically, the US’s major trading partners have cautioned Obama against trade protectionism. Still, given Obama’s extreme left policy in other areas, this blog is not optimistic that the President will choose free trade over a protectionist agenda. Obama has no real knowledge of economics; he is a “spread the wealth around” politician. The parallels of today’s recession with the 1930′s are striking – extreme Keynesian spending policies, along with trade protection. Those policies were proven to have turned a normal recession into the Great Depression, which the New Deal only made worse. Let’s hope Obama wises up at least on the free trade issue.

One dreary refrain of the America is failing chorus is that China is taking over. Prompted by the likes of Lou Dobbs, they worry that because toasters, drills, and iPods are made in China, US prominence is ending. While intrusive and expensive labor laws make manufacturing in the US uncompetitive with China, simply losing the advantage in assembly costs is not a major concern for the US. A great economy is based on innovation and entrepreneurship, which the US has had in spades. How the US handles its first real recession since 1982 may shift the innovation advantage to China, and that is a real worry.

The US gets credit for any number of important inventions and industries that were the work of immigrants. The telephone, the atomic reactor, the moon landing, and microprocessors were all invented or heavily advanced by US immigrants. Throughout the 20^th Century, immigrants accounted for twice the rate of US Nobel Prizes, patents, and founding of new public companies than the general US population. These immigrants were drawn to the US because it rewarded innovation, hence the most flattering of monikers “the land of opportunity.” The US is prosperous because the world’s brightest minds choose to live where they can spread their wings.

China, by comparison, is responsible for more inventions throughout history than any other country. No people are more capable of innovation, but the Chinese history of repressive dictators left the benefits of these inventions to other nations. Despite impressive cities like Shanghai, most Chinese are impoverished serfs with few attachments to the modern world. While the US constantly innovates and reinvents, China merely exploits its massive labor force. Under that model, the lion’s share of value flows to the US.

The old formula of US as innovator and China as workshop is changing. Businessmen like Liam Casey (“Mr. China”) profit from integrating US innovation with Chinese efficiency, but they also see the Chinese changing their model to capture the value of product innovation. The Chinese are using the current recession to develop their own brands and products for Asian markets. Factories that innovate and retool will survive the recession and replace those that do not. China is closing the circuit that connects innovation to wealth.

The US, by comparison, is breaking that connection. The US is taking a left turn to the Old European model of choosing stability before growth and innovation. The US is bailing out union shops, but not their open competitors. They are favoring large companies at the expense of smaller ones through oppressive regulation. Lehman is out, while Fanny is in. Where the market once ruled, the government is now choosing the winners.

During the last meaningful recession, 1982, the US chose to deregulate, which combined with lower taxes unleashed the greatest wave of prosperity ever. Inefficient companies and industries were swept away, and the survivors thrived on the resulting opportunities. The current plan to bail out politically connected industries ensures a future of governmentally backed industries, along with permanent high unemployment and stagnant domestic product.

Recessions, while painful, are natural and unavoidable. Each recession, however, can either create new opportunity for innovation or advance government’s death grip on the productive classes. China seems to be generally choosing the former, while the US is choosing the latter. Once the world’s innovators see China as their land of opportunity, the US will be in big trouble. The Obama administration’s socialist agenda of spending, regulation, and labor unions may be the passing of the torch, and if so, the Chinese will not have won the race so much as the US chose to lose.

Readers of the Wall Street Journal may have noticed a front page article this week warning that a group of economists now predict the recession will linger into early 2010. While that may sound like more doom and gloom, it is actually good news.

What the Journal failed to report is that economists are hopeless at forecasting. Economists are so supremely overconfident in their prediction abilities that they always fail to mention that they are nearly always wrong. Not only do economists’ predictions have no correlation with reality, they actually tend to be reliably wrong. In other words, a prediction of a sustained recession probably means that good times are on the horizon.

Thank James Montier, who’s 2005 paper The Folly of Forecasting exposed the sham of economic forecasts. He demonstrated that economists’ forecasts are actually reflections of recent events. Economists, perhaps unwittingly, simply take recent events and assume they will continue. Therefore, the only facts revealed by this week’s Journal article are that the recession has lingered to date, not that it will linger much longer. Better still for America, past predictions of doom have more often predated economic growth.

If economists are almost always wrong, why does the world employ them? Why do Presidents surround themselves with economists who, in fact, know nothing? The Greeks had their Oracles. The ancient Chinese emperors sought advice from astrologers. Times have not changed. These men used popular belief to shroud themselves in legitimacy and to comfort their spirits when forced to decide with incomplete information. Even though most people are unaware, economists serve as contemporary soothe sayers and witch doctors.

Certainly the Journal has no interest in abandoning an endless source of free pseudo-news, and politicians have never abandoned useful nonsense. President Obama latched on these dire predictions to sell his spending bill. Ordinary citizens, however, are always called to a higher standard than politicians. They should ignore economic predictions, and expect future opportunities. Such optimism has rarely been misplaced.